7, hereinafter referred to as "Announcement No. In addition to Announcement No. [5] The reduced social security contribution rate will be implemented until 30 April 2020. Furthermore, in some cities, such as Shenzhen, Changsha, and Xi’an, restrictions on applying for refunds of unemployment insurance have been relaxed to lessen the burden on enterprises. For example, Guangdong’s average salary in 2018 was RMB 6,338 (US$894.04). The KPMG name and logo are registered trademarks or trademarks of KPMG International. In most industries, men retire at about age 55 and women retire at about age 50. The following table outlines some of the local policies announced to date. And the minimum contribution base is usually decided either by the local minimum wage or certain percentage of the average local wage. From April 1, 2019, the social insurance contribution base lower and upper limits have been increased to RMB 4,699 (US$700.14) and RMB 23,496 (US$3,500.86), respectively. © 2021 KPMG Huazhen LLP, a People's Republic of China partnership, KPMG Advisory (China) Limited, a limited liability company in China, KPMG, a Macau partnership and KPMG, a Hong Kong partnership, are member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. Before the periodical reduction or exemption of the employerâs contributions to social security schemes by the Standing Committee of the State Council, some local governments have announced the relevant policies, including: No increase for enterprises which are otherwise subject to increment 4. [1] Reduced rate of employer contribution to medical insurance temporarily by 0.5% for 2020. © 2021 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and KPMG Huazhen, a Sino-foreign joint venture in China, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Click anywhere on the bar, to resend verification email. KPMG International and its member firms are legally distinct and separate entities. In China, provinces generally administer the social security system and set specific social tax rates and thresholds but the basic guidelines are set by the federal government. Fill-in your email below to receive a PDF with detailed results. Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. Zhejiang Province also announced refunds of 1 to 3 months’ employers’ social security contributions to enterprises based on the specific situation of each location within the province. Social Security Rate in China is expected to reach 48.00 percent by the end of 2021, according to Trading Economics global macro models and analysts expectations. Announcement No. (US$1 = RMB 7.09). The measures facilitate extensions of contribution payments and reductions/waivers of employer contributions to the PRC social security schemes so as to help ease enterprises’ cash-flow constraints. Please take a moment to review these changes. Companies that are used to a standard national system of contribution rates may find it difficult to adjust to all of the calculations required. All rights reserved. In the long-term, the China Social Security Rate is projected to trend around 48.00 percent in 2022, according to our econometric models. On 30 January 2020, the Ministry of Human Resources and Social Security of the People’s Republic of China issued an announcement regarding the administration of Chinese social security contributions that should help local social security bureaux devise and implement appropriate measures in light of the COVID-19 outbreak. Contributions are made on a monthly basis, but rates differ per city and province. In particular, allowing enterprises to make catch-up employer social security contributions within a period of 3 months following containment of COVID-19 outbreak without adversely impact the employeeâs rights to social security benefits. In March 2019, China cut the employer contribution rates to the pension insurance from up to 20% to 16% across all provinces in an effort to support businesses and easing the social security burden for SMEs. The contribution to Chinas social security system is mandatory for Chinese employees and their employers as well as foreigners employed in China, except for foreigners in Shanghai. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. There is a ‘maximum monthly earnings’ for calculating some categories of insurance, in other words, the contribution calculation will be capped at that amount. In addition, many local authorities have introduced policies in accordance with the outbreak situation in their respective cities/provinces in order to support local enterprises during the outbreak. 2 The rate of work-related injury insurance is reduced by 50% until 30 April 2021. You will not receive KPMG subscription messages until you agree to the new policy. People’s Republic of China – New Social Security Polici. 5 The reduced social security contribution rate will be implemented until 30 April 2020. The change should have no effect on the overall employer or employee contribution rate. Find out how KPMG's expertise can help you and your company. 1 Reduced rate of employer contribution to medical insurance temporarily by 0.5% for 2020. Generally, employers in China contribute social security premiums and housing provident funds for their employees pursuant to the law. Furthermore, in some cities, such as Shenzhen, Changsha, Xiâan, restrictions on applying for refund of unemployment insurance have been relaxed to lessen the burden of enterprises. Employer Implications. Between February and April 2020: Large enterprises may reduce employer contributions to pension, unemployment, and work-related injury insurance schemes by 50 percent. For example, employer and employee contribution rates and caps for each benefit vary according to local jurisdiction and are subject to annual changes and reforms. China is further reducing social insurance burdens on employers according to a national notice and its implementing rules issued in April 2019. 7"), to help ensure appropriate measures are stipulated by local Social Security Bureaux (“SSBs”). employers to contribute social insurance for their foreign employees. 7. Social security and housing fund contributions are mandatory in China for both the employee and the employer. Some locations have already reduced social insurance contribution rates: For the enterprises whose rate of work-related injury insurance shall be increased under floating rate policy, the rate will not be increased for now. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. Save what resonates, curate a library of information, and share content with your network of contacts. China Tax Alert - Issue 15, February 2020, Updates on China Social Security Policies during the Coronavirus Outbreak, Deferring adjustment to social security contribution base, Adjusting employer contribution rate for certain social security schemes, Payment extension on employer social security contribution, Nanjing, Suzhou, Xiamen, Chengdu, Qingdao, Will be deferred for 3 months and adjusted on 1 July 2020 (instead of 1 April 2020), Pension contribution base for year 2020 remains the same as that for year 2019, Reduce the coefficient from 0.6 to 0.4 or from 0.8 to 0.6, Qingdaoï¼except for medical insurance which can be extended for 6 months at maximumï¼. Our calculator provides a detailed cost breakdown including the Individual Income Tax deductions and the employee and employer’s social security and housing fund contributions. Announcement No. The Standing Committee of the State Council also determined that it was appropriate to reduce or waive employer contributions to pension, unemployment and work-related injury insurance schemes for enterprises in the following areas: In addition, many local authorities have introduced policies in accordance with outbreak situation in the respective city/province in order to support local enterprises during the outbreak. Several local SSBs also released their own local practices for the administration of social security contributions in response to Announcement No. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. In addition, the employer has to make contribution to the housing provident funds for the employee. Generally, the contribution base is capped at 300 percent of the average local salary. Employer contribution to housing provident funds should stay below 12%. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Also, the Standing Committee of the State Council decided on policy that reduces or waives employer obligations on social security contributions for a specified period of time to ease the burden on enterprises during this difficult time. KPMG International provides no audit or other client services. So, the maximum possible aggregate employee contribution is 14.35-15.69%, and for employers, it is 14.685-16.63%. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. In general, when an employer in China employs a foreigner, the employer and the foreigner shall pay the premiums of (1) basic endowment insurance for employees (pension), (2) basic medical insurance for employees, (3) unemployment insurance, (4) maternity insurance and (5) work-related injury insurance. Employees themselves also contribute their own social security premiums and housing provident funds pursuant to the law. Employers and employees are both required to contribute, but companies bear the heavier burden. 7. 7 is instrumental in providing local SSBs with a framework on ministering social security contributions during the outbreak of COVID-19. Employee benefits in China can increase the total labor cost. [7] Due to the Coronavirus epidemic, enterprises that are unable to pay the minimum wage of the employees or unable to operate normally for more than 3 months and only pay the living expense for the employees may apply for an extension of not more than one year. The employer's Social Security payroll tax rate for 2021 (January 1 through December 31, 2021) is 6.2% of each employee's first $142,800 of wages, salaries, etc. Many local authorities and SSBs also announced additional policies to alleviate the burden of enterprise. The maximum monthly contribution base for an employee who works in Guangdong is three times this amount – RMB 19,014 (US$ 2,682.11) and the minimum contribution base is 60 percent of this amount – RMB 3,803 (US$ 536.45). The KPMG logo and name are trademarks of KPMG International. On 30 January 2020, the Ministry of Human Resources and Social Security (“MHRSS”) of the People’s Republic of China issued an announcement regarding the administration of Chinese social security contributions during the period of prevention and containment of the spread of COVID-19 (Renshetingmingdian [2020] No. They should also analyse the relevant implications and procedures so that they may benefit from any relevant relief. 3 Adjustment on the rates of unemployment insurance until the end of December 2020. 4 The rate of work-related injury insurance shall be reduced by 20% or 50% respectively on the basis of the actual rate before the periodic reduction in 2018 for the enterprise with an accumulative balance of the work-related injury insurance fund ranging from 18 (inclusive) to 23 months and above 24 months (inclusive). The following table outlines some of the local policies announced to date. Browse articles, set up your interests, or Learn more. Other Provinces & Cities (except Hubei) We also welcome companies and individuals to contact us for the latest information and practices. China’s Social Security System consists of 5 mandatory insurance schemes, social insurances + housing fund. FDI China helps foreign companies hire local and foreign employees in China. Reducing the rates of social security contributions for employers will have a direct impact on the cost of employment and extending payment timelines will help ease some of the burdens on said employers. For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance. KPMG will pay close attention to the latest tax and social security policies and announcements. Find out how KPMG's expertise can help you and your company. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. On 30 January 2020, the Ministry of Human Resources and Social Security (âMHRSSâ) issued an announcement regarding the administration of Chinese social security contributions during the period of prevention and containment of the spread of COVID-19 (Renshetingmingdian [2020] No. All rights reserved. KPMG International entities provide no services to clients. On 6 September 2011, the PRC Ministry of Human Resources and Social Security issued the Tentative Measures on Participation in PRC Social Insurance of Foreigners Employed in China ( the "New Rules"), which will take effect from 15 October 2011.. The employer or payroll agent needs to report to the local Social Security Bureau during the … © 2021 Copyright owned by one or more of the KPMG International entities. For more detail about our structure please visit https://home.kpmg/governance. To subscribe to GMS Flash Alert, fill out the subscription form. 7 along with the decision of the Standing Committee of the State Council on administration of social security contributions during their meeting on 18 February 2020 emphasize the importance of stipulating appropriate measures to administer social security contributions during the COVID-19 outbreak, in order to facilitate extension of contribution payments and reduction/waiver of the employer contributions to social security schemes to ease enterprisesâ cashflow constraints. Chinas social security law was promulgated by the central government but its administration and specific details are governed by local authorities. In addition to Announcement No. Member firms of the KPMG network of independent firms are affiliated with KPMG International. We want to make sure you're kept up to date. Employer Action Code: Act. For example, Guangdong’s average salary in 2018 was RMB 6,338 (US$894.04). In March 2019, the government of China released social insurance policies that reduced the employers’ contribution to basic pension insurance from 20% of an employee’s salary down to 16%. The maximum monthly contribution base for an employee who works in Guangdong is three times this amount – RMB 19,014 (US$ 2,682.11) and the minimum contribution base is 60 percent of this amount – RMB 3,803 (US$ 536.45). (This amount is identical to the employee's Social Security tax that is withheld from the employee's wages, salaries, etc.) 7"), to ensure appropriate measures are stipulated by local Social Security Bureau (âSSBâ). Please note that your account has not been verified - unverified account will be deleted 48 hours after initial registration. Money is accumulated in the employee’s individual fund. Employer retirement contributions to social security are reduced from a maximum of 20% of covered wages to no more than 16%. Typically, employees must make 15 years’ worth of contributions in order to receive a pension in China. Our privacy policy has been updated since the last time you logged in. You will not continue to receive KPMG subscriptions until you accept the changes. 7 Due to the COVID-19 epidemic, enterprises that are unable to pay the minimum wages of their employees or unable to operate normally for more than 3 months and only pay the living expenses for their employees may apply for an extension of not more than one year. On February 20, 2020, the Ministry of Human Resources and Social Security, the Ministry of Finance, and the State Taxation Administration of the People’s Republic of China jointly released the Notice regarding Provisional Reduction and Exemption of Social Insurance Contributions Borne by Enterprises (the Notice). On 1 April 2019, the State Council issued the notice on Comprehensive Plans for Reducing Social Insurance Contributions. Employer contribution: 1%, Employee contribution: Not required. We recommend enterprises stay abreast of applicable policies proactively and timely. KPMG International Cooperative (“KPMG International”) is a Swiss entity. This article is excerpted, with permission, from “Updates on China Social Security Policies during the Coronavirus Outbreak” in China Tax Alert (Issue 15, February 2020), a publication of the KPMG International member firm in the People’s Republic of China. Our privacy policy has been updated since the last time you logged in. In our article, we show you the impact of benefits and taxes on your costs. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. Between February and June 2020: Micro-, small- and medium-size enterprises are exempt from making employer contributions to pension, unemployment, and work-related injury insurance schemes. Employer input will be lessened in move to reduce business burden. 2.Reform to China’s Social Insurance System. Zhejiang Province also announced to refund of 1 to 3 monthsâ employer social security contributions to enterprises based on the specific situation of each location within the province. Background Amounting to 39.5% of payrolls on average, China’s mandatory social security rates are as high as in Northern European countries. Please take a moment to review these changes. This is an adhoc newsletter each covering new issues affecting businesses in China. Additional Policies from Local Authorities, Updates on China Social Security Policies during the Coronavirus Outbreak, Deferring adjustment to social security contribution base, Adjusting employer contribution rate for certain social security schemes, Payment extension on employer social security contribution, Nanjing, Suzhou, Xiamen, Chengdu, Qingdao, Will be deferred for 3 months and adjusted on 1 July 2020 (instead of 1 April 2020), Pension contribution base for year 2020 remains the same as that for year 2019, Reduce the coefficient from 0.6 to 0.4 or from 0.8 to 0.6, Qingdao (except for medical insurance which can be extended for 6 months at maximum). Housing Fund; Employer contribution: 7%, Employee contribution: 7% (Equal contribution by both) Such services are provided solely by member firms in their respective geographic areas. Since the start of 2020, people across China have been working together to fight against outbreak of Coronavirus Disease 2019 (COVID-19). Last year, the lower limit was RMB 4,279 (US$637.56) and the upper limit was RMB 21,396 (US$3,187.96). Employers also contribute to these funds. Get the latest KPMG thought leadership directly to your individual personalized dashboard. Trading Economics members can view, download and compare data from nearly 200 countries, … Subscribe to get more insights like this. Summary. [6] Due to the Coronavirus epidemic, enterprises that have difficulties in regular production and operation and are unable to pay the social insurance premium temporarily can apply for an extension, which is subject to approval for the maximum of 6 months. [2] The rate of work-related injury insurance is reduced by 50% until 30 April 2021. Hence, the required contributions can vary by province. Reducing the rates of social security contributions for employers will have a direct impact on the cost of employment. During the extension period, the surcharge will not be imposed. Most employers are expected to benefit from the reduction in social security costs, which is estimated to lower the financial burden on companies by CNY 300 billion in 2019.
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