In Chinese labor law, the workers’ compensation fund is a social security fund that employers must pay into, so that injured workers may receive financial assistance.

The workers’ compensation fund is run by the government and contributions are made by the employers; funds may only be used for workers’ compensation disbursements. Workers’ compensation contributions are mandatory, and failure to pay can result in fines, and employers are liable to make up workers’ compensation payments if they fail to correctly enroll a worker who is later injured.

The funds operate as a mutual insurance scheme; therefore an individual employer’s mandatory contribution ratio will not change if they did not have any workplace injuries or conversely had many injuries. Under the law, the social security collection agency in the local government is not empowered to make adjustments.

The central government sets fixed rates for the entire industry but on an industry, and not for individual employers. Moreover, there is no fluctuating rate mechanism in the workers’ compensation contributions ratios, rather the local government’s social security department will report inflows and outflow statistics to both the local and central government, which will be used to determine future rate adjustments.

Special liability can occur if using an employer of record service to hire workers, which we cover more in an article here.