Introduction

With the social insurance system reform, both employees and employers would be obligated to contribute to the system much like other countries such as the United States. In line with article 15 of China's Social Insurance Law, it is illegal for any employer not to contribute towards the insurance scheme of its employees.

Employees' contribution is deductible from their monthly earnings by the employers.

In addition to the employer's contribution, the fund is remitted to the appropriate body. Therefore, an organization must set up a good system to ensure these funds' effective collection and remittance into the particular social insurance scheme account.

In China, there are important parts of the system that require the contribution of both employers and employees: medicals, pensions, unemployment, housing, and injury that is work-related. Although the central government established the laws supporting the insurance scheme, local authorities are in charge of its administration. Consequently, the contribution rates between all local jurisdictions may not be similar. Moreover, these rates are subject to potential change every year.

The Various Kind of Insurance Schemes

Medical insurance

This scheme covers part of the medical expenses incurred by an employee in the event of illness. Also, both employer and the employee are expected to contribute to this scheme every month. The insurance company has an affiliation with designated hospitals which an employee can receive treatment. Upon receiving the treatment, the insurance company directly pays part of the cost incurred to the hospital.

Unemployment insurance

Upon job loss due to redundancy or other factors, an individual can file for unemployment insurance. An individual must satisfy the following criteria before being qualified to draw from this scheme.

- Both the employer and the applicant must have made insurance contributions to the scheme for a period not less than a year.

- The unemployment status occurred against the applicants' volition

Unemployment insurance is paid to a beneficiary for a period not less than 12 months but not exceeding 24 months. The length of time a beneficiary can be paid depends on the duration contribution was made while employed.

Pension Fund

Upon retirement, an individual is entitled to the pension depending on the amount contributed to the individual fund. To qualify for a pension in China, an individual is expected to have contributed a certain percentage of their monthly earned income for a period not less than 15 years. Retirement age in the country differs depending on the industry. In blue collars jobs, men are expected to retire at 55 years while women are at 50. On the other hand, men and women retire at age 60 and 55 respectively in a white-collar job.

Work Injury Insurance

An employee is entitled to be paid from this scheme upon sustaining an injury during working hours. Only an employer contributes in this instance. An employee can still benefit from this scheme even when an employer has failed to contribute. Where treatment has been paid using an insurance fund, the insurance fund manager would request a refund from the employer.

Housing Fund

The goal of this insurance scheme is to enable people to save towards owning a house. Just like other cases, the contribution is also made by the employee and the employer.

Challenges for the Social Insurance System

Recently, there has been a significant increase in the average age of China's population, especially those over retirement age. This may lead to an additional strain on the pension insurance system. As a result, the government has considered delaying the legal employees' retirement age slowly, although it has not provided many details about this policy.

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