Growing a business in China allows you to form strategic ties and take advantage of a range of new opportunities. However, a business must attract top talent and maintain an engaged workforce to succeed in this tough market. Because of this, many bosses are happy to offer better employee benefits in China. These may include higher wages, extra health insurance, paid leave, and retirement benefits.
However, knowing who gets employee benefits in China, which are required or extra, and how to safely fulfill your role as an employer in China requires expert knowledge of every local law.
Understanding the Need for Employee Benefits in China
There are many reasons for giving better employee benefits in China to your local employees. Job seekers see the overall package you will provide as a major factor when applying for a job. So, a good benefits package helps you attract top talent in the most competitive markets.
At the same time, better benefits also add to employee satisfaction and are key for keeping talent and boosting high work moral. In fact, according to a study by SHRM, 60% of those who answered placed benefits among the biggest factors for job satisfaction.
Along with more direct benefits like the above, employee engagement and well-being benefits can improve your worker’s overall health, resulting in time and cost savings.
Finally, certain employee benefits in China comply with local legal needs and are crucial for avoiding fines and penalties. The dangers of not being able to meet your responsibilities as an employer are great, as failing to meet your duties typically means big problems and even criminal charges.
Mandatory Employee Benefits in China: China’s 5+1 System
In China, social security payments made by employers and employees fund all local benefits. As of 2023, Chinese social security uses what’s called the 5+1 system, where boss and workers must both pay towards housing, pension, work injury, unemployment, maternity, and medical insurances.
The exact amount that both parties pay depends on the city and region a worker is in and is calculated as a percentage of a worker’s monthly salary.
In Shanghai, total amounts are 10.5% for employees and 26.66-28.02% for employers (up to a limit of CNY 34,188).
In Beijing, it’s 10.5% for employees and 26.5% to 28.2% for employers (up to CNY 31,884).
The following are required employee benefits in China. We’ll go into detail for each of them below:
– Retirement benefit
– Medical care benefit
– Unemployment benefit
– Housing benefit
– Work-Injury and disability benefit
– Maternity benefit
Retirement Benefits in China
The current retirement age in China is 60 for males and 55 for females. Retirement benefits are divided into 3 parts:
- Base pension: This is a national social security benefit for all retirees provided by the government. It is based on an employee’s years of service and average salary. It also includes contributions from employees and employers. In 2023, the average basic pension provided to urban Chinese was CNY 3,326 (about $461).
- Individual account pension: This is a second mandatory pension plan which operates along with the base pension. A portion of each employee’s social security contributions is allocated to their pension account, which works like a personal savings account. The balance in the individual account at the end of an employee’s time in work adds to their base pension, providing more retirement income.
- Transitional pension: Generally, individuals must pay 15 years of social security contributions before receiving either of the 2 pensions discussed above in China. However, for should an individual not accumulate enough years of contributions before reaching retirement age, a transitional pension provides a lower income than the base pension, helping individuals meet basic financial needs.
Medical Care Benefits in China
Employers and employees contribute to China’s medical insurance system, which provides basic universal coverage. Medical insurance covers the cost of employees’ prescription drugs, medical treatments, medical services, and the use of other healthcare facilities at approved medical institutions.
Unemployment Benefits in China
An unemployed person who has contributed unemployment insurance premiums for at least a year before becoming unemployed may collect unemployment insurance benefits from the unemployment insurance fund.
Work-Injury and Disability Benefits in China
Employers in China must contribute to each employee’s work-related injury insurance according to the combined wages of all staff and a fee rate determined by the social security agency.
Employees who suffer an injury or illness resulting from work will be entitled to work-related injury insurance benefits. Injured employees who have a disability will be able to receive disability benefits.
Maternity Benefits in China
Female employees in China can take maternity leave for childbirth, the exact amount of which depends on the city or region. For example, Shanghai and Beijing both increased the maternity leave requirement to 158 days in 2022, while in Hainan and Henan provinces, maternity leave is as long as 190 days. Employees can also prolong maternity leave in cases of a difficult birth or multiple births.
Employers in China must contribute maternity insurance premiums that cover the medical costs of childbirth and provide a maternity allowance. Many Chinese cities combine maternity insurance with basic medical insurance for unified collection.
Vacation and Leave Policies
All employees in China are eligible for paid leave on the country’s 7 nationally recognized public holidays, as well as any additional public holiday days announced each year. Employees who work on a Chinese National Holiday should also receive 3 times the standard rate according to Chinese Labor Law. However, most Chinese companies use a system of replacement days around national holidays, meaning it’s normal for employees to work on weekends surrounding holidays in exchange for a longer holiday.
Employees also have annual vacation days in China based on the number of years that they have worked for a company as follows:
– 5 days for employees with 1 – 10 years of service
– 10 days for employees with 10 – 20 years of service
– 15 days for employees with 20+ years of service
Common Additional Employee Benefits in China
Overall, in addition to the mandatory benefits described above, many business owners offer employee benefits in China in the following ways:
Extra Healthcare Coverage
In addition to mandatory medical insurance, many Chinese or foreign employers offer extra health insurance as part of their employee benefits. This private health insurance can cover dental or vision care more extensively. It’s particularly important to consider this type of benefit if you employ foreign staff in China who may be more used to a higher quality of care available with Chinese public healthcare services.
There are a variety of companies offering private healthcare insurance in China, but it’s worth considering taking an insurance plan via an HR outsourcing provider that can offer group plans or lower insurance rates.
Performance-based Incentives
Employers can use performance-based incentives to reward employees based on individual or team performance. Popular performance metrics include meeting sales targets, reaching project milestones, or positive customer feedback.
These incentives include cash bonuses, gift cards, or other non-monetary rewards. Such incentives motivate employees to excel in their roles, align their efforts with the company’s objectives, and recognize outstanding contributions.
Innovative Employee Benefits in China Trends You Can Employ Today
As a way to improve employee morale and show themselves to be competitive employers, some businesses have brought in the following employee benefits in China:
- Flexible working options – Since the COVID-19 pandemic, companies are adopting policies that allow remote work or flexible working hours so that employees can enjoy a better work-life balance.
- Worksite wellness facilities – Some companies invest in on-site wellness facilities, such as gyms and yoga studios, to promote overall employee health and fitness. Offer employee discounts to popular local stores that also provide wellness boosts.
- Personal development opportunities – It’s now normal to offer upskilling opportunities to talented employees through training programs, workshops, and access to online learning platforms.
Employee Benefits in China in 2023
Historically, Chinese employees cared less about medical insurance and work-injury benefits, and instead stressed the importance of wages and bonuses. However, demand for better conditions has increased as more benefits became the norm, especially in ‘white collar’ positions.
Due to budget problems and economic stress, 2023 has seen large reductions in non-mandatory employee benefits. This has led to anger among many employees and elderly pension recipients.
This situation is likely to continue in the coming years and may get worse. However, it does leave you with an opportunity to use benefits to attract talent away from some of China’s biggest companies.
How INS Global Ensures You’re Covered and Competitive in China
The right employee benefits in China will help you attract, retain, and motivate your workers in China. However, companies unfamiliar with Chinese labor laws may need help navigating the country’s complicated legal framework. This is more true than ever when managing employee benefits in China.
In 2016 China ranked 5th among 95 countries in terms of business complexity and has ranked among the worst since then. Because of this, companies prefer to outsource the administration of employee benefits in China to an Employer of Record in China.
Such arrangements can streamline and guarantee your operations, allowing you to focus on core business activities like product development or marketing.
As you pursue your business targets, your Employer of Record (EOR) partner assumes responsibility for your employee benefits in China.
This simplified approach eliminates the need to establish a branch office or legal entity in China or 100+ countries worldwide. Save yourself time and overheads while boosting your international expansion effort with INS Global.
Contact our specialist INS Global advisors today for a free consultation and begin your expansion journey.
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