The complete guide to offering employee benefits in China

Are you ready to start hiring in China? If so, then it’s crucial to offer your new employees the right benefits package. This isn’t just essential for retaining talented Chinese employees and nurturing a happy workforce—it will also help you stay compliant with Chinese labor laws.

This guide will walk you through everything you need to know to offer benefits that meet statutory requirements under Chinese labor laws, plus how to go above and beyond for your employees in China to help them feel truly valued. 

What employee benefits are mandatory in China?

Certain benefits are required by Chinese labor laws. Fail to offer these employee benefits and it’s considered a labor violation—you could be fined or banned from operating in China. Keep in mind that these are statutory minimums. Employers often offer more than what’s mandatory. Additionally, these are only mandatory benefits for employees. Independent contractors in China aren’t entitled to employee benefits and giving them benefits may put you at risk for misclassification. 

Be sure to outline all of your employee benefits (both statutory and optional) in your employment contract.

Social security

In China, many required benefits are part of the social welfare system, administered by the Chinese government through the social insurance system. Both employees and employers make contributions to these benefits based on percentages of the employee’s salary. Employers typically withhold a portion of their employees’ monthly salaries for both social insurance as well as housing fund contributions. All employers, including foreign employers, are obligated to contribute to social security and can’t get out of this by any kind of agreement with their workers. Here’s what social security includes:

Pension

In China, pension plans, also known as pension insurance or retirement plans, are part of the social welfare system. The typical retirement age is 55 for women in blue-collar jobs, 55 for women in white-collar jobs, and 60 for men. Pension contribution rates vary for employers per region. For example, employees typically pay 8%, whereas the employer pays 16% in Shanghai and Beijing, but just 15% in Guangzhou.

Medical insurance, often including maternity insurance

This is another part of the social welfare system of the People’s Republic of China (PRC). China’s State Medical Insurance Administration oversees basic medical insurance programs and catastrophic medical insurance. While employees pay 2% of their pay to medical insurance, the employer contributions range per region. In Beijing, it’s 9.8%, in Guangzhou it’s 6.85%, and in Shanghai, it’s 10%.

China has two main kinds of health insurance: 

• Employee hospitalization insurance covers urban employees, retirees of state-owned enterprises, and employees of some private businesses. This type of insurance is used by 25% of China’s residents and consists of an employee insurance pool that can cover hospitalization and other expenses. Those with these kinds of employee plans often have personal health accounts, which cover normal clinical expenses and outpatient treatment.
• Urban or rural residents’ insurance, which is used by 75% of the population, is for those who do not have private-sector employers making contributions on their behalf, including children, farmers, and migrant workers.

For employee hospitalization insurance, the threshold of pooled public medical funds reimbursement is 10% of the local social average annual salary, while the maximum benefits from pooled public medical funds are four times the local average yearly salary.

Maternity insurance is lumped under basic medical care insurance in most Chinese cities. Maternity leave typically lasts 98 days for female employees, with an additional 15 to 30 days granted if the delivery had complications. However, local regulations may call for longer maternity leave. The mother should be paid her monthly salary from the maternity pooled funds and get medical care covered through allowances and reimbursements. 

Unemployment

Terminated employees are entitled to unemployment benefits if their termination was out of their control, they have participated in the unemployment insurance scheme under social security, they have paid unemployment contributions for more than a year, they have registered as unemployed, and they have actively sought new employment.

Social security unemployment contributions from employers are very small, around just .16% to 1.9% of their employee’s paycheck, depending on the local government. Those who qualify for unemployment get two months of benefits per year of contributions, for a maximum of two years. Unemployment benefits come with monthly salaries (paid according to local standards), medical care, occupational training, lump-sum death benefits for dependents, and a job introduction allowance. 

Workers’ compensation

Work-related injury insurance, death benefits, and disability benefits are lumped under workers’ compensation and are covered by social insurance. Employees who experience a work-related injury or occupational disease are entitled to their full salary and benefits paid each month during their medical treatment period, normally not to exceed 12 months. Social insurance will cover medical expenses, rehabilitation, and room and board. Employees may be covered for up to a year of leave at full pay.

Those who qualify for disability benefits get monthly salary and living allowances, plus allowances for job training and introduction. 

Death benefits include funeral allowances, lump-sum death benefits for dependents, and living allowances on a monthly basis for dependents. However, these benefits may not cover someone who dies or is disabled due to illness (more on that below).

Housing fund

Both employees and employers contribute to the housing fund, which helps employees purchase, build, or renovate homes. The contribution rates vary across different regions of China. 

Vacation entitlements/paid time off

Paid time off is not as robust in China as compared to some other countries. The amount of time off full-time employees are owed is based on the length of their employment at your organization as well as their time in the workforce at large:

• > One year: No annual leave entitlement
• One to 10 years in your organization, but fewer than 10 years of total working time: five days of paid leave per year
• 10 to 20 years in your organization, but less than 20 years of total working time: 10 days of paid leave per year
• 20+ years of working time: 15 days of paid leave per year

Sick leave

This is for illnesses and injuries not obtained during the course of work. The amount of paid sick leave is based on the employee’s tenure with the company. Employees who have worked for fewer than 10 years and have worked for their current employer for fewer than five years get a minimum of three months of sick leave. However, workers who have been in the workforce for 20 years and have been with their current employer for at least 15 years get unlimited leave.

For employees who are gone for more than six months due to sickness, they should be paid as follows:

• > One year of employment: 40% of wages
• One to three years: 50% of wages
• Three or more years: 60% of wages

Note that sick pay should never drop below 80% of the minimum wage for that region. Employers also can’t terminate employees during their sick leave.