In China, Social Insurance (also called social security) is a mandatory government system, and comprises of five different kinds of insurance: pension, medical, maternity, work-related injury, and unemployment; in addition to these, there is also a Housing Fund, which only employees of Chinese nationality are required to contribute. However, foreign employees working in China must participate in China’s social insurance program.

Social insurance contributions are imposed on both employer and employee, and it is the employer’s responsibility not only to calculate but also to withhold both parties’ payments. 

The premiums paid monthly are calculated as a percentage of the previous year’s average monthly gross salary of the employee in the company.

Despite being a nationwide scheme, each city on the mainland has its own slightly different ratios. Taking pension insurance as an example:  In Shanghai and Beijing, the employer currently bears a 16% rate, while in Guangzhou it is only 14%. For unemployment insurance, in Shanghai and Beijing, the employer contributes 0.5% while it is 0.2% in Guangzhou; for work-related injury insurance the employer pays a fixed rate of 0.2% in Beijing and Guangzhou, while in Shanghai,  a variable rate of 0.16%-1.52% is paid according to the specific situation.

The social security system's pension insurance portion grants a monthly pension to those employees that have contributed to the plan for a specific number of years and which amount is determined by the individual's average monthly wage and the number of years they have contributed to the program. To enjoy the program, it’s necessary to contribute for at least 15 years; those who leave China before reaching the 15 years of contribution can request the reimbursement of the individual part before leaving the country (PHC Advisory also provides this kind of assistance).

Chinese medical insurance includes 2 categories: basic medical insurance (mandatory) and supplementary medical insurance (optional). The first type includes hospitalizations, outpatient care, and prescription medicine; the second type comprises of dental and oculist treatments as well as other expensive treatments.

To use medical insurance funds, it’s required for a person to have a social security card (she bao ka 社保卡) issued by a bank authorized by the social security center after an application process. Once obtained, it can be easily used in hospitals or pharmacies by swiping it over the counter instead of paying a fee. This card can be obtained both by Chinese and foreign individuals; if you are regularly paying for social insurance and still haven’t received this card, you may ask us for help. 

Unemployment insurance guarantees support to those that have lost their jobs for causes beyond their control, such as a company’s bankruptcy, restructuring, or downsizing. 

Work-related injury insurance provides compensation to employees who suffer work-related injuries or diseases. 

A Maternity insurance plan is in regards to medical treatment during pregnancy and childbirth, maternity leave, and maternity allowance. The allowance varies according to the individual’s average salary and the number of years of work contributed.

The last part of the Social Security System is the Housing Fund, normally governed by the Ministry of Housing (or other local offices). It differs from other social schemes due to the fact there is no social pool for the Housing Fund because all funds flow directly to the employee's personal account. The accumulated housing fund can be withdrawn but only to be used to buy/rent a house in China. After the request, the employer must validate it and provide the withdrawal certificate to the employer who can finally submit the application to the Housing Fund Bureau which will approve or reject it within 3 days.

For foreigners working in China, it is important to know the list of countries that have signed social insurance agreements with China which govern certain conditions. Feel free to connect with us at info@phcadvisory.com if you want to know if your country is placed on this list or if you need assistance with social insurance and other China tax-related matters.