Employee Benefits in China
With is rapidly expanding economy, China has continued to be a hotspot for manufacturing products at lower costs. Yet understanding the HR structure is essential in capturing these cost-savings. What is a standard benefits package for Chinese employees?
Social insurance is a mandatory, non-profit social security system established by law in China. It is administered by the labour and social security departments.
There are five types of social insurance in China: old-age, medical, unemployment, work-related injury and child-bearing. Among these, the premiums for old-age, medical and unemployment insurance are jointly contributed by the enterprise and the individual, whereas work-related injury and child-bearing insurance premiums are the sole responsibility of the enterprise.
A. Social Security
China’s Social Security Scheme consists of different programs, including retirement, medical care, unemployment, maternity, industrial injury, etc. aimed at meeting the basic needs of urban employees. Currently, rural residents are not covered by a systematically designed Social Security Scheme nationwide. It is compulsory for all employers and their employees. The self-employed participate voluntarily.
1. Retirement Benefit:
Contribution:
A total of 28% of the insured salary, whereby about 22% is contributed by the employer, and the rest (6%) is contributed by the employee.
The employer contribution rate will be gradually reduced to 20%, with the employee contribution rate gradually increasing to 8%.
Different regions may have somewhat different contribution rates for employees and employers.
Note: Insured salary refers to employee’s monthly salary subject to a lower limit and an upper limit of 60%-300% of the local social average monthly salary of the preceding year.
Normal Retirement Age: 60 for males and 55 for females.
2. Medical Care Benefit:
Contribution:
Employer: 6-8% of the total insured salary according to the local medical cost level.
Employee: 2% of the individual insured salary.
Benefits:
3. Unemployment Benefit:
Contribution:
Employer: 2% of the total insured salary.
Employee: 1% of the individual insured salary.
Benefits:
- Unemployed monthly salary subject to local governmental regulation standard.
- Medical care according to social medical insurance policies.
- Lump-sum death benefits to the employee’s dependents.
- Occupational training allowance, job introduction allowance, etc.
- Time Limit: Two months’ benefit for each year of membership, up to a maximum of 24 months’ benefit.
4. Industrial Injury and Disability Benefit:
Contribution: Employer: 0.5 - 2% of the total insured salary according to the risk of industry. Three classes are defined as: lower risk industry (0.5% contribution rate), medium risk industry (1% contribution rate), and high risk industry (2% contribution rate).
Coverage: Injury, disability or death as a result of performing official duties or work-related illness.
Eligibility: Subject to governmental appraisal
Benefits:
a) Medical benefits during treatment period:
Reimbursement of medical expenses
Medical rehabilitation expense reimbursement
Allowance for room and board
Allowance for medical care expenses
b) Sick leave monthly salary during the medical treatment period:
Paid by employer; same monthly salary as earned during employment.
c) Disability benefits after disability appraisal:
- Lump-sum disability benefit according to schedule of disability appraisal grades
- Monthly salary allowance before retirement age, or retirement monthly salary allowance after retirement age
- Monthly living allowance if needed
- Other allowances, such as occupational training allowance, job introduction allowance, etc.
d) Death benefits:
- Lump-sum funeral allowance
- Monthly dependent living allowance
- Lump-sum death benefit
5. Maternity Benefit (only available in certain cities):
Contribution: Employer: 0.5% - 1% of the total insured salary according to local governmental regulation.
Benefit:
a) Maternity Leave: normally 90 days, additional 15-30 days in case of complicated delivery.
b) Maternity Leave Monthly Salary: Actual monthly salary jointly paid by maternity pooled funds and employer.
c) Medical Care Expenses/Allowance: used for medical expenses associated with the delivery and/or related birth control treatment and/or related female illness treatment, in the form of medical allowance (such as RMB 2,500 in Shanghai) or medical expense reimbursement (such as in Guangdong).
B. Private Benefits
Eligibility: Employees are provided with coverage for death, health, disability, and old-age benefits when they are enrolled.
Normal Retirement Age (legal): Age 60 for males and 55 for females.
Benefits:
1. Retirement Benefits:
In addition to the mandatory contributions, many employers offer voluntary contributions, which are:
a) Accumulated in the employee’s individual retirement account;
b) Paid as a lump-sum amount or monthly annuity at the time the member retires;
c) Dependent on the employee’s position, age, years of service, etc., for determining the amount.
2. Death Benefits:
Lump-sum benefits upon an employee’s death for any reason, range from two to five times annual salary or are based on a scheduled level for employees in special positions or some flat level for all employees. AD&D benefits are also provided in many cases.
3. Disability Benefit:
Lump-sum scheduled benefit payment according to the level of disability (dismemberment), ranging from 10% to 100% of the amount insured.
4. Medical Care Benefits:
Topped-up clinical benefits and hospitalization benefits are commonly provided to supplement the inadequacy of the Social Security Medical Care benefit. Other benefits, such as critical illness, hospitalization allowance, and the supplementary pooled funds are also available in some of the medical schemes. However, some benefits are in form of a lump-sum subsidy rather than covering full expenses, such as critical illness benefits.
Published: 14th January 2011