In Chinese employment law, workers’ compensation contributions must be made by the employer in accordance with local social security regulations for each employee. The national Workers’ Compensation Administrative Regulations requires that local governments collect worker’s compensation contributions approximately equal to their expenditures. That is, the outflows from the local government workers’ compensation fund determines how much they are entitled to require. The national government establishes guidelines for rates for each industry to be applied by local governments, which it bases on work injury statistics.

In Beijing, the labor regulatory ministry, which is currently the Ministry of Human Resources and Social Security, will hold meetings with ministries for finance, health, and safety to establish different rates and grades for each industry, which are then submitted to the State Council for approval. The local government labor department will apply the central government guidelines to local data about how much workers’ compensation contributions are being spent per year and what the rate of injury is to then calculate the social security contribution to be applied to each industry. The reason China gives each industry a different rate based on their own injury rates, is to financially incentivize each industry to reduce work injury.

Setting higher rates for dangerous industries ensures that these businesses are making workers’ contributions sufficient to account for the outflows from the local government’s workers’ compensation fund. Industry in China has also been responsive, adopting improved safety technology, closer supervision, and worker protection, to reduce their overall workers’ compensation contributions liability. Concurrently, industries that have a strong safety track record will be deterred from attempting to cut costs by reducing safety measures, as the national government will quickly set a higher contribution ratio for their industry.

Learn more about Chinese social security contributions here.