Are you considering adding Chinese talent to your team? Before initiating the recruiting process, we urge you to learn all you can about employee benefits in China. This knowledge will help you attract quality talent and comply with Chinese labor laws.

Read on as we discuss all the mandatory Chinese employee benefits, penalties for labor law violations, and tips for formulating a winning benefit plan for Chinese workers.

The Rundown on the 5+1 System for Employee Benefits in China

If you’re new to China’s labor laws and regulations, “5+1” may not mean much. But, in a nutshell, it refers to the benefits Chinese employees are entitled to under Chinese law. There are “5” state-provided social insurance types and “1” housing fund contribution. The “5+1” phrase applies to all of these benefits simultaneously.

Below, we’ll cover each of these benefits in detail.

*The information in this guide does NOT apply to independent contractors.

The Five Types of Social Insurance for Chinese Employees

Any business that employs Chinese citizens will have to contribute to the following five social insurance types:

  • Pension Insurance
  • Medical Insurance
  • Work Injury Insurance
  • Unemployment Insurance
  • Maternity Insurance

The facts to come are based on legislation from the Social Insurance Law of the People’s Republic of China. This law covers benefits for employees in China in great detail.

1

Pension Insurance

Average Employer Contribution Percentage: ~16% of the employee’s salary

Pension insurance kicks in after your employee retires, and it’s profoundly important, given that one in five Chinese citizens is over the age of 60. The pension is paid out in small increments regularly to help the employee cover expenses later on in life.

The basic pension insurance is both employer- and state-funded. The state determines the amount you’ll put aside.

To get more information about pension insurance employee benefits, look under Chapter II Basic Old-Age Insurance in the Chinese Social Insurance Law.

2

Medical Insurance

Average Employer Contribution Percentage: 5%-12% of the employee’s salary

In China, basic healthcare is provided to citizens free of charge. However, to access this care, Chinese citizens need a publicly funded health insurance plan. That’s where employee benefits come into play.

As an employer, you must put aside a set amount of money to fund your employee’s medical insurance plan – the state determines how much. The employee must also contribute to this plan.

Get more information about medical insurance employee benefits under Chapter III Basic Medical Insurance in the Chinese Social Insurance Law.

3

Work Injury Insurance

Average Employer Contribution Percentage: 0.5%-2% of the employee’s salary

What happens if your Chinese employee gets hurt on the job? Ideally, they’ll receive care covered by their medical insurance and use their work-related injury insurance to obtain their full salary and benefits while they recover.

Employers of Chinese citizens are legally required to purchase work injury insurance (also called workers’ compensation insurance) for this reason. Here are the rules to keep in mind:

  • The employee is entitled to up to 12 months of their salary and benefits after a workplace injury.
  • Disabled employees may qualify for extra benefits depending on their situation (like living arrangements).
  • A social insurance agency will set the employer contribution amount.

Get more information about work injury employee benefits under Chapter IV Work Injury Insurance in the Chinese Social Insurance Law.

4

Unemployment Insurance

Average Employer Contribution Percentage:  0.5%-1% of employee’s salary

Every Chinese employee is entitled to an unemployment insurance benefit by law. Employees can use this benefit in limited situations, including:

  • They were terminated due to uncontrollable circumstances.
  • They have been paying toward their unemployment insurance plan for at least a year.

*There are other requirements the former employee must meet.

The employment contributions you pay as an employer go to a variety of benefits for the employee, including salary and occupational training. The unemployment insurance minimums are very low compared to the other insurance contributions you’ll make as an employer.

Get more information about unemployment insurance benefits under Chapter V Unemployment Insurance in the Chinese Social Insurance Law.

5

Maternity Insurance

Average Employer Contribution Percentage: 0.5%-1% of employee’s salary

In most Chinese cities, maternity insurance isn’t treated as a standalone benefit. It’s automatically covered under basic medical insurance. Under the labor law, females are entitled to:

  • 98 total days of maternity leave.
  • 15 to 30 extra days of maternity leave for delivery complications.

Here are a couple of additional things to keep in mind:

  • Employees don’t make maternity leave contributions.
  • The worker should be paid the mean wage of the prior-year of the employees from the unit where the beneficiary works.

The rules regarding this specific benefit may vary depending on the Chinese province.

Get more information about maternity insurance employee benefits under Chapter VI Maternity Insurance in the Chinese Social Insurance Law.

+1

Housing Fund

Average Employer Contribution Percentage: 5%-12% of the employee’s gross salary

We’ve gone over the five mandatory insurance benefits for Chinese employees. Now, let’s get into the “+1” portion. This is the mandatory housing fund for which the employer is partly responsible.

The funds will help the employee save for a house purchase.

See the table below for a big-picture look at your employer contributions.

Benefit TypeAverage Employer Contribution (Percentage of Employee Salary)
Pension Insurance16%**
Medical Insurance5%-12%
Work Injury Insurance0.5%-2%***
Unemployment Insurance0.5%-1%
Maternity Insurance0.5%-1% or rolled into medical insurance benefit***
Housing Fund (+1)5%-12%
Total Employer Contribution27.5%-44%*

*Includes the maternity insurance benefit.

**May vary based on the Chinese province.

***Workers don’t typically make contributions to this insurance account.

Do Chinese Labor Laws Apply to Foreign Companies?

Chinese labor laws do apply to foreign companies that employ Chinese citizens. So, in addition to abiding by domestic laws, employers are also expected to follow the employee’s local laws. That is if they want to avoid legal issues and financial consequences (among other things).

How Employer Contributions Are Done

Within 30 days of hiring a Chinese employee, you’ll contact the employee’s nearest Social Insurance Bureau and Housing Fund Bureau to open their benefit accounts (or reopen existing ones). The staff there will help you through the process. Since benefits are provided on the state level, there’s no single national system to use for benefit contribution setup.

Non-compliance Penalties

For businesses that don’t provide the above mandatory benefits to their Chinese employees, the penalties run the gamut from fines to legal issues:

  • Order for repayment
  • Confiscation of illegal gains
  • Damages if employees are harmed
  • Fines
  • Back payments
  • Legal actions

You could also be banned from employing Chinese workers or doing business in China.

For full language on penalties, read Chapter XI Legal Liabilities in the Social Insurance Law of the People’s Republic of China.

Extra Employee Benefits to Consider

Hard-working, skilled employees often know their worth, and securing talent in today’s landscape can be likened to war. If you want to satisfy the minimum requirements and pique the interest of qualified candidates, here are a few additional benefits you can offer Chinese employees:

  • Performance bonuses
  • Supplemental health insurance
  • Higher base pay
  • Advancement opportunities
  • Flexible work schedule
  • Training and development opportunities
  • Healthy PTO allowance
  • Wellness programs/gym memberships
  • Profit-sharing plans
  • Childcare

*Check local laws before adding these benefits.

Although these add-ons require a monetary commitment, going above and beyond with your employee benefit plans makes your company much more desirable to quality candidates. But that’s not all – offering good benefits sends the message that your company cares and values its workers. When employees feel supported beyond the basics,  they are more likely to stay committed and drive your organization to the next level in your industry.

Employee benefits are just one aspect of hiring in China. Learn more about other key considerations when hiring Chinese talent in this video by Horizons EOR.

How to Build a Winning Chinese Employee Benefits Plan

Building a winning benefit plan for Chinese workers is by no means a walk in the park. There are several reasons why companies may fall short when creating their benefit packages for workers from China. Inadequate research, poor planning, and other factors can derail your efforts quickly. Read on for some helpful tips on successfully offering employee benefits in China.

Do Your Research and Seek Out Help If Necessary

Chinese labor laws are sometimes intricate; they can trip you up if you’re not careful. So, be thorough in your research on this topic. If you’re not well-versed in international labor law (especially Chinese labor laws), delegate the task elsewhere.

A lawyer with experience in Chinese labor laws can sift through the Chinese legislation and give you actionable insights and advice. Be sure to ask targeted questions about mandatory contributions, how benefits differ by province, registration deadlines, and more. Chinese HR and payroll professionals may also be helpful, provided that they’re bilingual or you can speak the language.

Start With the Minimum Requirements and Build

The 5+1 benefits mandated by China’s government are non-negotiable. So, plan to include all of those contributions in your Chinese employee benefit plans.

Once all of the obligatory benefits are accounted for, consider beefing your packages up with a few of the extra benefits we mentioned earlier (performance bonuses, supplemental health insurance, etc.).

Get Your Hands on the Right Benefit Management Tools

Run-of-the-mill benefit management tools can be helpful, but those with international capabilities will fit your business like a glove as you expand. They can track your contributions and deadlines, calculate your benefits accurately, and enable your Chinese employees to view their benefits online (and that’s only part of it). Securing the right backend tools now can make it easier to administer your benefit plans later.

Here are a few options to consider:

BambooHR

Bamboo HR platform homepage showing key features and pricing

BambooHR is a user-friendly HR platform with international capabilities, making it a strong choice for managing employee benefits in China. It simplifies tracking contributions, meeting deadlines, and administering benefit plans, ensuring compliance with local regulations as your business expands.

Read our in-depth review: BambooHR Review

Remote

Remote homepage new feature dashboard and interface

Remote specializes in global payroll and benefits, offering China-specific solutions that ensure compliance with local labor laws. It simplifies benefit tracking and provides transparency, making it a great option for businesses hiring Chinese employees and managing complex benefit structures.

Read our in-depth review: Remote Review

Rippling

Rippling homepage new feature dashboard and interface

Rippling unifies HR, payroll, and benefits administration, making it a valuable tool for businesses with Chinese employees. Its automated processes track contributions and ensure compliance with local regulations, while its online portal simplifies benefit management for employees across multiple countries.

Read our in-depth review: Rippling Review

Deel

Deel Homepage new feature dashboard and interface

Deel offers tailored solutions for managing global teams and benefits, ensuring accurate calculation and tracking of benefits in China. Its flexibility and ease of use make it an excellent choice for businesses scaling in China, ensuring compliance with local benefits laws.

Read our in-depth review: Deel Review

Review and Update

Labor laws are always subject to change, especially in China, where there’s a relentless focus on benefit-based protection for vulnerable workers. So, try to stay on the cutting edge of the labor laws in China. Then, periodically revisit and update your employee benefit plans. Doing so will help you maintain legal compliance and remain competitive in the eyes of Chinese applicants.

Consider an EOR, PEO, or Payroll Provider for More Hands-On Assistance

If the information we’ve delivered to you above feels like more than your company can handle, there are lifelines out there. Employers of record (EORs), Professional Employer Organizations (PEOs), and payroll providers can all assist in simplifying Chinese employee benefits planning and management.

Employee Benefits in China – Our Take

Navigating employee benefits in China can be a complex task, but understanding the “5+1” system is essential for ensuring compliance and creating a competitive and appealing benefit package.

Whether you’re hiring your first employee in China or expanding your existing team, staying informed and proactive is key. If you feel overwhelmed by the details or need more hands-on support, leveraging resources like an Employer of Record (EOR) or HR professionals can simplify the process.

We hope you found the information you were looking for regarding benefits for employees in The Middle Kingdom. We wish you the best as you welcome Chinese workers onto your team!

For further guidance and support, you may explore our comprehensive Employer of Record Guide for China, which offers detailed insights into hiring solutions tailored to your business needs.