Social Security
The social security in China includes basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. Employers in China shall contribute social security premiums and housing provident funds for their employees pursuant to the law, national regulations and local regulations.
The Chinese government has advanced the nation’s social security systems to include the basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to protect the basic rights of employees. These systems enable participating individuals to obtain assistance from the state (according and subject to certain conditions and procedures) in special circumstances such as when they reach old age, suffer certain illnesses, suffer a work-related injury, become unemployed, undergo maternity, etc. Additionally, employers and employees both participate in a housing provident fund system in accordance with national regulations and local regulations.
Employers in China are required to contribute social security premiums and housing provident funds for their employees pursuant to the law. Employees themselves also contribute their own social security premiums and housing provident funds pursuant to the law. Employers typically withhold a portion of their employees’ monthly salaries to help them complete their social insurance and housing provident fund contributions. The employer’s obligation to contribute to social security premiums and housing provident funds, cannot be exempted by mutual agreement with employees.
Expatriate employees hired by Chinese employers are also required to participate in the social security system when they complete the employment formalities required by law. However, expatriate employees may be exempt from social security contributions under a treaty or convention. Expatriate employees are not required to participate in the housing provident fund system. However, those with permanent resident status may choose to contribute to the housing provident funds at their own discretion.
Healthcare and Insurances
Employers are required to contribute insurance premiums of basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance pursuant to national law and regulations, as well as local regulations. Employees shall contribute insurance premiums of basic pension insurance, basic medical insurance, and unemployment insurance. Both parties are required to contribute to the housing provident fund.
Employers and employees must both contribute basic pension insurance premiums pursuant to national law and regulations, as well as local regulations. Currently, employees who have contributed basic pension insurance for 15 cumulative years and have reached the statutory retirement age, may receive a pension monthly. According to the Measures, the minimum number of years required of contribution for employees to receive a basic pension monthly will gradually increase from 15 years to 20 years, by six months each year, starting from 1 January 2030. The exact amount of the pension depends on factors such as the employee’s cumulative contribution period, their wage, the average monthly wage of employees in their locality, the total amount in their pension account and the average life expectancy of the urban population.
Employers and employees both must contribute basic medical insurance premiums pursuant to national law and regulations, as well as local regulations. The costs of employees’ prescription drugs, medical treatments, medical services and use of other healthcare facilities for emergencies or rescue operations will be covered by the basic medical insurance fund pursuant to national law and regulations, as well as local regulations, as long as such costs are consistent with basic medical insurance policies and incurred at approved medical institutions.
- Work-related Injury Insurance
Employers are required to contribute work-related injury insurance premiums according to the combined wages of all staff and a fee rate determined by the social security agency. Employees do not need to contribute to work-related injury insurance. Employees who suffer an accidental injury or contract an occupational illness while at work will be entitled to the benefits of work-related injury insurance scheme, provided that the injury or illness is verified as work-related. If these employees are also evaluated and determined to have a disability grade, they will be entitled to the benefits of disability scheme.
Employers and employees must both contribute unemployment insurance premiums pursuant to national laws and regulations, as well as local regulations. An unemployed person who has contributed unemployment insurance premiums for at least one year before becoming unemployed, and has completed unemployment registration, may collect unemployment insurance benefits from the unemployment insurance fund.
Employers are required to contribute maternity insurance premiums pursuant to national law and regulations, as well as local regulations. Employees are not required to make such contributions. Maternity insurance benefits cover medical costs for childbirth and provide a maternity allowance to compensate female employee’s salary during maternity leave. Most cities in China have combined the maternity insurance with the basic medical insurance for unified collection.
In China, female employees whose employers have paid maternity insurance contributions on their behalf may apply for maternity allowance after giving birth, the allowance is equal to the employer’s average monthly salary filed with the social insurance authority. If the maternity allowance received by the employee is lower than their normal salary, the employer must make up the difference.
Both employers and employees both must contribute to the housing provident fund in according with national and local legislations. The housing provident fund is intended to help the employees to purchase, construct, renovate or rebuild personal dwellings. National legislation gives local governments broad flexibility in regulating social insurance and the housing provident fund, so the precise contribution requirements may vary across different provinces or regions in China. Therefore, it is important to confirm the exact contribution rates required by the local governments for social security and housing provident funds in the area where the employer is registered.
- Supplementary Commercial Insurance
Apart from the abovementioned mandatory insurances, employers are free to purchase supplementary commercial insurance for their employees at their own discretion. For example, some employers provide a comprehensive health insurance plan (covering medical and dental expenses as well as accidental death and severe bodily harm) for employees and their dependents. However, this is entirely optional.
Required Leave
Employees in China can have national holidays (13 days), annual leave (5-15days), maternity leave, parental leave (5-15days), and other statutory leaves.
Holidays and Annual Leave
At the beginning of each year, the State Council announces a holiday schedule indicating 13 national holidays, including one day for New Year’s Day, four days for Chinese New Year, one day for Tomb Sweeping Day, two days for Labour Day, one day for Dragon Boat Day, one day for Mid-Autumn Day, and three days for National Day.
According to the Regulations on Paid Annual Leave of Employees, employees with between one and ten years’ service are entitled to five days’ annual leave. Those who have worked for between ten and twenty years are entitled to ten days. Those who have worked for twenty years or more are entitled to fifteen days. For the purposes of this clause, length of service includes both the length of service accumulated with the current employer and the length of service accumulated with all previous employers
If an employer fails to arrange annual leave for employees due to business reasons, they must pay employees an encashment for any accrued but untaken annual leave. This should be total 300% of an employee’s daily salary for each day of leave that has been accrued but not taken (as 100% has already been included in the monthly salary, only an additional 200% should be paid). For the purposes of this provision, ‘monthly wage’ refers to the employee’s average monthly wage for the 12 months preceding the payment by the employer of the encashment for unused annual leave, excluding overtime pay. Where the employee has been employed by the current employer for less than 12 months, the average monthly wage shall be calculated on the basis of the actual number of months worked.
Maternity and Parental Leave
On 20 August 2021, the PRC Standing Committee of the National People’s Congress issued the new Population and Family Planning Law of the People’s Republic of China (the New “Family Planning Law”) which formally abandoned China’s decades-long one-child policy and allows all couples to have three children. Late marriage and late childbearing are no longer encouraged under the new Family Planning Law. A female employee is entitled to a 98-day maternity leave for childbirth, including 15 days that may be taken before childbirth. The maternity leave may also be prolonged according to local regulations.
For example, the local regulation in Shanghai prolongs the maternity leave to 158 days in total. In cases of difficult birth, the maternity leave may be extended for an additional 15 days. In the event of multiple births (such as twins), maternity leave will be extended by 15 days for each additional childbirth. If a female employee undergoes an abortion within the first four months of pregnancy, she will be entitled to a 15-day maternity leave. If a female employee undergoes an abortion after the first four months of pregnancy, she will be entitled to a 42-day maternity leave.
China’s parental leave policy varies by region. Article 25 of the new Family Planning Law authorizes local governments to establish paid parental leave for eligible couples. Most provinces grant both parents 5 to 15 days of paid leave annually until the child turns three. Some areas like Anhui and Chongqing extend the coverage until the child is six.
Sickness and Disability Leave
During an employee’s sick leave period, his or her salary will be determined and paid based on the standard of sick pay and sick benefits during the medical treatment period according to state laws and local regulations. If an employee suffers from a non-work-related illness or injury and needs to stop working as a result of medical treatment, a medical treatment period between 3 and 24 months will be granted according to local regulations in the place where the employee works, and based on the employee’s years of service with the current employer and all previous employers (e.g. the employee’s entire employment history). If an employee cannot perform his or her original work and other work arranged by the employer after their statutory medical treatment period expires, the employer has the right to terminate the employment contract and pay severance upon giving the employee a 30-days’ advance written notice or one month’s payment in lieu of notice. In addition, subject to local regulations in different cities, employer may pay medical treatment subsidies equivalent to 6 to 12 months of employee’s salary based on the seriousness of their sickness.
Disability can be caused by either a non-work-related or a work-related injury. If an employee’s disability is caused by a non-work-related injury, they could receive the same benefits (sick pay, medical leave and subsidies for medical treatment) as they would if they were ill. If an employee needs to suspend their work in order to receive medical treatment for a work-related injury or occupational disease, their wage will be calculated based on their average monthly wage over the previous 12 months, and their welfare benefits will remain unchanged during the treatment period. The suspension period is generally no longer than 12 months. However, where the injury is severe or the circumstances are exceptional, the local Work Capability Assessment Committee may extend the suspension period by up to 12 months. Once the disability grade has been determined by the local Work Capability Assessment Committee, the employee’s original wage and welfare benefits may be changed depending on the degree of the injury, and will be entitled to the following disability benefits:
- If an employee is assessed as having a disability in the first to fourth grade, the employment contract shall remain unchanged and the employee shall withdraw from their post. They shall receive a one-off disability allowance and a monthly disability subsidy, both of which are paid by the work-related injury insurance funds and are calculated according to the disability grade.
- If an employee is assessed as having a disability between grades five and six, they shall receive: (a) a lump sum disability allowance from the work-related injury insurance funds according to their disability grade; (b) retain their employment; and (c) receive a monthly disability subsidy from the employer according to their disability grade if it is difficult for the employer to arrange work for them, which shall be no lower than the local minimum salary.Should the employee decide to terminate the employment relationship, they shall receive a lump sum work-related injury medical allowance paid by the work-related injury insurance funds, as well as a lump sum disability employment allowance paid by the employer, based on the standards prescribed by local governments. This is in addition to statutory severance pay.
- If an employee is assessed as having a disability between grades seven and ten, they shall receive a disability allowance in a lump sum, paid by the work-related injury insurance funds, according to their disability grade. If the employment contract expires, or if the employee decides to terminate the contract, they shall receive a work-related injury medical allowance in a lump sum, paid by the work-related injury insurance funds, as well as a disability employment allowance in a lump sum, paid by the employer, based on the standards prescribed by the local governments. This is in addition to the statutory severance pay.
- If an employee with a work-related injury has been assessed as having a disability grade and confirmed by the work capability assessment committee as requiring daily life care, expenses incurred for daily life care shall be paid monthly by the work-related injury insurance funds.
Pensions: Mandatory and Typically Provided
Currently in China, mandatory and typically provided pensions only include the basic pension insurance. On 1 May 2019, the government decided to reduce the employer’s pension insurance contribution rate to lower the cost of private businesses. The Circular of the General Office of the State Council on the Comprehensive Plan for Reducing Social Insurance Contribution Rate requires that, if the employer’s contribution rate for the basic pension insurance in any province (city, district) is higher than 16%, it can be reduced to 16%.
In addition to the basic pension insurance, staff working in government departments and public institutions are also entitled to an occupational pension, whilst employees of certain state-owned enterprises and centrally administered state-owned enterprises are also entitled to an enterprise pension. The government is currently encouraging all companies to set up corporate pension scheme for their employees, and is also encouraging individuals to join the ‘personal pension’ scheme. Since 15 December 2024, the personal pension scheme has been rolled out nationwide from its pilot cities.
- Any Other Required or Typically Provided Benefits
In addition to the statutory leave mentioned above, employees in China can also take marriage leave. The length of this leave ranges from 3 to 30 days depending on national and local regulations.
The length of marriage leave is stipulated by local population and family planning regulations, ranging from three to 30 days in different cities in China. When an immediate family member (parent, spouse or child) of an employee passes away, the employee may take one to three days of compassionate leave with the employer’s approval, under specific circumstances. According to the PRC Labour Law, both marriage leave and compassionate leave are considered paid leave.
