In order to further support the work of Trade Unions in small and micro enterprises, according to the "Notice of the General Office of the All-China Federation of Trade Unions on Continuing the Implementation of the Policy on Supporting Trade Union Funds in Small and Micro Enterprises" (Ting Zi [2021] No. 38), small and micro enterprises will be fully refunded trade union funds in 2022， with the trade union funding support policy extended to December 31st, 2022.

The original notice (Ting Zi [2019] No. 32) stipulated that the validity period for such full refund policy of trade union funds was to be from January 1st, 2020, to December 31st, 2021.

Regardless of whether an enterprise establishes a trade union or not, it shall pay trade union funds in accordance with the relevant regulations. The funds paid by enterprises with trade union organizations are referred to as “trade union funds”, and those without trade union organizations are referred to as “trade union preparatory funds”, however they are sometimes collectively referred to as “trade union funds”. 

Companies that establish trade union organizations shall firstly calculate and pay the trade union funds in full to the trade union organization based on 2% of the total monthly wages and salaries of all employees. The higher-level trade union organization will then transfer it to the trade union of the paying enterprise according to a prescribed proportion (usually 60%).

For a company that has not established a trade union organization, 2% of the total monthly wages and salaries of all employees shall be calculated and paid in full to the higher trade union organization, but no funds shall be returned.

Trade union funds are mainly used for employee services and union activities. Specifically, it includes expenses incurred in activities such as employee education, culture and sports, and publicity, as well as employee welfare expenses accrued by trade unions.

Trade union funds represent a cost for an enterprise, regardless of whether the enterprise has established a labor union. However, there are also some regions that have rolled out certain preferential policies in such regard. For example, Hunan Province has formulated a policy of completely exempting certain small and micro enterprises from trade union fund contributions.

At PHC Advisory, our team is constantly monitoring the most recent developments and incentives accessible to businesses in China. Feel free to reach us at info@phcadvisory.com to find out more about preferential policies in China that your company could benefit from.