How many mandatory social insurance schemes are implemented in the PRC?
The PRC Social Insurance Law requires that both an employer and an employee (including any non-PRC nationals and cross-border secondees) are legally required to contribute to the social insurance schemes so that the employees are able to enjoy social insurance benefits when they (i) retire, (ii) are sick or injured, (iii) suffer from a work-related injury or occupational disease, (iv) are unemployed, or (v) (in the case of female employees) give birth to a child.
As such, the following five schemes are mandatory and apply throughout the PRC (subject to local practice in respect of the contribution percentage):
- Basic pension scheme;
- Basic medical insurance scheme;
- Unemployment insurance scheme;
- Work-related injury insurance scheme;
- Maternity insurance scheme.
How are social insurance contributions in respect of an employee made?
Social insurance contributions in respect of an employee are made by both the employer and the employee on a monthly basis. The employee's contributions are withheld by the employer from his or her monthly salary before tax, and are contributed by the employer to the local social insurance centre (which is an entity affiliated with the local labour department and which is in charge of the fund) together with the employer's contributions (generally via a bank transfer).
Subject to local practice, the total amount of the employer's contributions is generally around 33 percent (subject to local practice) of the employee's monthly salary (i.e., the contribution base, which is generally capped at three times the local average monthly salary during the previous year). The total amount of the employee's contributions is generally around 10 percent (subject to local practice) of the employee's monthly salary (also with a cap as above).
By when do I need to make social insurance contributions?
Pursuant to the PRC Social Insurance Law, an employer must start to contribute social insurance for an employee within 30 days of the commencement date of his or her employment. The contribution base of the social insurance shall generally be calculated based on the average monthly salary, calculated using the actual total payroll for the previous year for the employee (including basic pay, overtime pay, bonus, allowance and subsidies, etc.).
If an employee does not want to be enrolled in the social insurance schemes, can the employer avoid having to make social insurance contributions for such employee with his or her wavier or agreement?
No. The payment of social insurance contributions is a statutory requirement for both the employer and the employee and therefore cannot be avoided by any agreement between the parties.
Is a penalty imposed on the employer if it fails to make full contributions to the social insurance schemes in respect of its employee?
Pursuant to the PRC Social Insurance Law, if an employer fails to pay the required social insurance premium on time, the employer will be ordered to rectify this non-compliance within a prescribed time limit, together with a daily late fee of 0.05 percent of the outstanding amount from the due date. If the employer still fails to pay the premiums within the prescribed time limit, the relevant authority may impose a fine of 1 to 3 times the outstanding amount.