Nowadaus, contributing to China’s social insurance has become a legal compliance requirement for foreigners working in China when extending their work permit. In this blog, we will introduce social insurance system to foreigners who may not be familar with this!
In our previous blog, ‘Integration of Work Permit and Social Insurance Card – Remember These!’, Hongda discussed the integration of foreigners’ work permits and social insurance cards, effective from December 1, 2024. Foreign employees will no longer receive a physical work permit. Instead, they will be able to access an electronic social insurance card through a mobile app displaying their work permit information. This also means that contributing to social insurance for foreign employees has become a mandatory legal requirement for those working in China.
Prior to this, you may not have been familiar with China’s social insurance system, nor may you have been required to contribute to it. In this blog post, Hongda will provide a detailed introduction to China’s social insurance system. After reading, you’ll gain a comprehensive understanding of it.
Section 1: What Items are Included in Social Insurance System?
Before reading this blog, you might have heard of the “Five Insurances and One Fund” (五险一金), where the “Five Insurances” represent the five types of social insurance contributions, including: Pension Insurance, Medical Insurance, Unemployment Insurance, Work Injury Insurance, and Maternity Insurance. These five items will be paid based on a certain percentage of your income, with contributions from both your employer and yourself.
Pension Insurance
Pension insurance is the basic life security for employees after retirement. Once a worker reaches the legal retirement age (usually 60 for men, 50 to 55 for women) and completes retirement registration with their employer, they can apply to receive a pension.
- Employer’s Contribution Ratio: Around 16% (varies by region)
- Employee’s Contribution Ratio: Around 8%
Medical Insurance
Medical insurance is the protection that allows insured individuals to enjoy healthcare benefits when they need daily medical services or incur medical costs. Typically, medical insurance covers the following:
- Hospitalization and Outpatient Expense: When insured individuals require hospitalization or receive medical services at outpatient clinics, the health insurance will cover a portion of the medical expenses.
- Critical Illness: For treatments resulting in high costs, health insurance provides additional coverage for medical expenses.
- Maternity Expenses: Female employees can have their medical costs related to pregnancy, childbirth, and maternity leave reimbursed through the health insurance.
- Employer’s Contribution Ratio: Around 6% (varies by region)
- Employee’s Contribution Ratio: Around 2%
Unemployment Insurance
Unemployment insurance provides financial support and basic living security for insured individuals who lose their jobs due to reasons beyond their control. In some regions, unemployment insurance also offers services like reemployment training and job placement assistance to help the unemployed find new work as quickly as possible.
- Employer’s Contribution Ratio: approximately 1% (specific rate may vary by region)
- Employee’s s Contribution Ratio: approximately 0.5% (based on local policies)
Work Injury Insurance
Work injury insurance is designed to provide medical treatment and financial compensation to employees who suffer injuries or occupational diseases due to their work. In addition to injuries sustained during regular work hours, injuries from occupational diseases, accidents during work-related travel, accidents while commuting (if not the employee’s fault), injuries during public service activities (such as disaster relief), or injuries during company-organized activities and training are all covered under work injury insurance. Employers are responsible for paying for this insurance, and employees do not contribute. If an employee unfortunately passes away due to a work-related injury, work injury insurance will cover funeral expenses and survivor benefits.
- Employer’s Contribution Ratio: 0.5% – 2% (depending on industry risk level)
- Employee’s Contribution Ratio: 0%, fully paid by the employer
Maternity Insurance
Maternity insurance covers two main benefits: maternity medical expenses and maternity allowances. Maternity medical expenses cover costs such as checkups, surgeries, hospitalization, medications, and family planning surgeries related to pregnancy and childbirth for female employees. The maternity allowance compensates female workers for income loss during maternity leave. In some areas, maternity insurance also includes benefits for breastfeeding, such as breastfeeding allowances.
- Employer’s Contribution Ratio: approximately 1% (specific rate varies by region)
- Employee’s Contribution Ratio: 0%, fully paid by the employer
You can see the table below for a summary of the contribution ratios of each social insurance items.
|
Items |
Employer’s Share |
Employee’s Share |
|
Pension Insurance |
16%-20% |
8% |
|
Medical Insurance |
6%-10% |
2% |
|
Unemployment Insurance |
0.5%-2% |
0.5%-1% |
|
Work Injury Insurance |
0.5%-2% |
0% |
|
Maternity Insurance |
0.8%-1% |
0% |
Section 2: How is the Payment Standard Determined?
From the previous content, you may wonder the question that how the amount of social insurance that my employer or I need to pay is determined? The answer comes as the social insurance contribution base.
The average monthly salary of an employee for the preceding year serves as the social insurance contribution base, including base pay, bonuses, allowances, and subsidies.
The Chinese government also establishes minimum and maximum contribution caps based on the region’s average wage. For example, in Shenzhen, the minimum limit is set at ¥4,492/month, while the maximum base standard is ¥27,501/month.
Section 3: What Happens to My Social Insurance If I Leave China?
If you’re a foreigner who plans to leave China after working here for a few years, you may be wondering what will happen to your social insurance. Nowadays, there are two options for you to manage your contributions under the current Chinese social insurance regulations:
- Maintain an active account: You have the option to keep your social security account open. You can continue to contribute and take advantage of the benefits based on your prior contribution years if you ever return to China.
- One-time withdrawal: You can apply to terminate your social insurance account. In this case, you’ll receive a lump-sum payment equal to the balance of your personal social insurance account.
Additionally, it’s worth noting that China has signed agreements with 12 countries, including Japan, Luxembourg, Spain, the Netherlands, Switzerland, South Korea, Germany, Finland, Canada, France, Denmark, and Serbia. If you’re a citizen of one of these countries, you may be exempt from paying social insurance contributions in China for a certain period, in line with the agreements.
Conclusion: Paying Social Insurance Won’t Be a Burden!
Under current laws, for foreign employees, paying social insurance is an essential legal requirement for successfully renewing a work visa. Whether you’re an employee or an employer, it’s important to pay close attention to social insurance contributions and compliance management. Additionally, if you don’t have a long-term plan to stay in China and will go back to your home country, be sure to contact Honogda to assist you with withdrawing the funds from your personal social insurance account. Remember, this could be a significant amount of money!
