28 Sept 2018
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 and the premiums are collected by the local taxation authority.
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.
According to relevant laws and regulations, foreigners and Hong Kong, Macau and Taiwan residents employed on the mainland shall participate in social insurance and enjoy social insurance benefits in accordance with law. For foreigners and Hong Kong, Macau and Taiwan residents participating in social insurance for the first time, the employer shall present the valid documents and employment certificates of the person (Permanent Residence Permit for Foreigners for employees with permanent residence status in China) together with the labour contract or dispatch service contract and other proofs to the local social insurance agency to complete registration formalities.
Social Insurance Responsibility
All enterprises must register with the local social insurance agency to participate in social insurance within 30 days of the date of their establishment on the strength of their Business Licence, Registration Certificate or official seal and pay social insurance premium on a monthly basis. The social insurance agency shall make verification and issue the registration document within 15 days of the application being received. The portion of premium payable by individual employees shall be withheld and deducted from their salary and paid to the relevant authorities by the enterprises.
If an enterprise changes its social insurance registration particulars or ceases to operate in accordance with the law, it must amend or cancel its social insurance registration with the social insurance institution within 30 days of such change or cessation of business.
Reporting and Payment of Social Insurance
Enterprises must put in the application to register for social insurance for their employees at a social insurance agency within 30 days of commencement of employment.
An enterprise must submit its social insurance report, detailed report on social insurance premiums withheld and deducted from its employees, and other relevant information to the local social insurance agency before the 5th day of each month. The agency concerned will check and approve the report within two days. Upon receipt of the approved report, the enterprise should make full payment of social insurance premiums through its bank or by cheque or cash within three days.
The application particulars include:
(1) The employer’s name, organisation code, address and contact information;
(2) The employer’s deposit bank, account name and number;
(3) The types of insurance that the employer pays premiums for, payment base, rate and payment amounts;
(4) List of employees and employees' payments; and
(5) Other matters required by social insurance agencies.
During the same year, after the employer has completed the first declaration, it may simply declare changes to any particulars prescribed in the preceding paragraph for the remaining months. It does not have to declare anything if there is no change.
Social insurance premiums to be paid by an employee shall be declared by the employer on behalf of the employee. Matters to be declared on behalf of the employee shall include: Employee's name, social security number, type of employment, address, itemised withholding and payment information, and other matters. An employee shall sign and acknowledge the itemised payment information and relevant changes that the employer declares on his behalf, which shall be kept by the employer for future reference.
Social Insurance Premiums
(a) Basic old-age insurance: Payment is made according to a given percentage of the wage subject to payment of insurance premium, which is based on the average monthly income of the employee in the previous year. In general, the contribution of the employer shall not exceed 20% (including the portion entered under the individual’s account) of its total payroll. The actual percentages are determined by provincial governments and may vary from place to place. The contribution of the employee to old-age insurance premium is 8% of his salary.
(b) Basic medical insurance: This is jointly contributed by the enterprise and the employee. In general, the premium paid by the enterprise equals to about 6% of its total payroll, while the employee contributes 2% of his salary.
(c) Unemployment insurance: The enterprise contributes a certain percentage of its total payroll (the percentage varies from place to place), while the employee contributes about 1% of his salary.
(d) Work-related injury insurance: Premiums vary with the risk category of the injury, the work-related injury insurance funds, and the frequency of occurrence of the work-related injury and occupational disease concerned. Actual premium rates are set by the social insurance administrative department of the State Council. Where an employee suffers a work-related injury or contracts an occupational disease, he or she shall, upon work-related injury staff verification, be entitled to specific work-related injury insurance benefits. Of such cases, those who lose their work ability shall, upon verification by the work ability assessment staff, receive disability benefits.
Where an employee is injured from an accident or is diagnosed or assessed in accordance with the Law on the Prevention and Treatment of Occupational Diseases to have contracted an occupational disease, the employer shall, within 30 days of the day when the accident or injury occurred or when he is diagnosed or assessed to have contracted the occupational disease, file an Application for Ascertainment of Work-Related Injury to the local administrative department for labour security (place where the labour relations with the employer occur or place where the employee takes the insurance). If the employer fails to file the application, the work-related injury insurance benefits and other expenses that conform to the Work-Related Injury Insurance Regulations incurred during this period shall be borne by the employer.
Documents required for application for ascertainment of work-related injury:
(1) Completed Application Form for Ascertainment of Work-Related Injury;
(2) Documents proving the existence of labour relations (including de facto labour relations) with the employer; and
(3) The Certificate of Medical Diagnosis or the Certificate of Diagnosis of Occupational Disease (or the Assessment Report on the Diagnosis of the Occupational Disease).
The Application Form for Ascertainment of Work-Related Injury shall give the time, place and reason of the accident as well as basic information such as the extent of the work-related injury.
(e) Maternity insurance: Premiums are based on a certain percentage of an enterprise’s total payroll. Maternity allowance is calculated and issued based on the current average monthly payment of wages at the employer.
The Social Insurance Law also stipulates that:
Where an employer fails to declare the social insurance premiums payable in accordance with regulations, the social insurance agency shall determine amounts to be paid according to 110% of the premiums it paid in the previous month for the time being. Where payment amounts in the previous month are not available, the social insurance agency shall determine amounts to be paid according to the employer’s operation status, number of employees, average salary of local employees in the previous year, and other relevant information for the time being. After the employer completes relevant declaration information, the social insurance agency shall settle payments as required.
Where an employer fails to make social insurance contributions in full and on time, the social insurance agency may order rectification within a specific time frame. Beginning from the day of delinquency, the employer shall be charged an additional late fee of 0.05% per day. If the contribution continues to be unpaid past the due date, the administrative department shall assess a penalty of 100% to 300% of the owed amount.
Where an employee with work-related injury becomes eligible for old-age insurance benefits, the disability insurance benefits shall be replaced by old-age insurance benefits. Where the old-age benefits are less than the disability benefits, the difference shall be compensated by work-related injury insurance funds. Where a work-related injury results in death, a lump sum compensation shall be paid at 20 times the average per capita disposable income of urban residents in the whole country in the previous year in addition to a funeral subsidy equivalent to six months of the average local monthly wage of employees in the previous year. The standards for bereavement payments for family members are: 40% per month for the spouse and 30% per person per month for other family members, with an additional 10% on the basis of the afore-mentioned standards per person per month in the case of an elderly living alone or an orphan.