The new Chinese Social Insurance Laws (‘SIL’) has been enacted since October 28, 2010, but it only came into effect on July 1st, 2011. Even then, the law is subjected to local decision from one city to another.

As of June 2013, only Beijing, Suzhou, Shenzhen and Guangdong have implemented the law. And it is a matter of time that the law will be enforced all over China thus it is important for expatriates and companies to understand the impact that it will have on their coverage and staff costs.

To the Chinese employees, this new law brings substantial improvement to their social benefits. However, this is not the case for expats working in China or employers hiring expats. For expats earning RMB 12,993 and above, the incremental tax is significantly higher. That means that their take-home pay is much lesser and the cost incurred by the company increases significantly.

How to Estimate Cost

Cost varies between cities.
Base for calculation = Average Monthly Wage (AMW)
Contribution = Up to 3 times of AMW

Example: In Shanghai,
AMW = RMB 4,692 (2013 figure)
Contribution = maximum of RMB 14,076.
Employer’s Contribution (37%) = 37% x RMB 14,076 = RMB 5,208/month = RMB 62,496 p.a.
Employee’s Contribution (11%) = 11% x RMB14,076 = RMB 1,548/month = RMB 18,576 p.a.

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Health insurance
Work related accident
Beijing - 北京Employee - 雇员8%2%0.20%N/AN/A10.20%
Company - 雇主20%
Shanghai - 上海Employee - 雇员8%2%1%N/AN/A11.00%
Company - 雇主22%12%2%0.50%0.50%37.00%
Guangzhou - 广州Employee - 雇员8%2%0.10%N/AN/A10.10%
Company - 雇主20%7%0.20%0.85%0.40%28.45%

Example: Comparison of contribution before and after the implementation of SIL (expat working in Shanghai with a gross salary of Rmb 20,000)

Screen Shot 2013-08-09 at 9.39.20 AM

For both employers and employees, the additional cost is very high. For the employer, Mr. X costs 26% more and to Mr. X, his net pay is reduced by a further 7%. Thus, it is important for companies to plan and prepare, especially when the law can be retroactive. Such was the case in Suzhou where the SIL was implemented on January 18, 2012, but applicable from October 2011 for expats who have been working there before this date.

What are the benefits?


It is necessary to have contributed for a minimum of 15 years to be able to claim anything under this benefit (which represents the highest cost for both employees and employers).

Thus, for most expats living and working in China, very few will ever be able to realize this benefit unless they pay for the difference that is possible under the law.

For the rare few who have spent 15 years contributing to this system, they would be able to receive the retirement fund even abroad after contacting the Chinese Embassy in his country of residence.

Health insurance

“The social insurance only allows me to go to local public hospitals that are noisy, with a long queue at each counter, zero privacy, poor hygiene, bad service”, says Heather Miles.

Medical expenses at private clinics and VIP hospitals can also be claimed but the coverage provided is far from sufficient.

Also, the overall limit of local social insurance is estimated to be no more than Rmb 100,000, which is nothing compared to the limits of Private Medical insurance that is usually around Rmb 6,000,000 per year.

For the moment, it is only possible to claim in the city of residence, so it might be an issue if you are based in a small city. Not all diseases are covered, and cancer is excluded from the social insurance.


Only employers are required to pay for this insurance and only working women are eligible. However, to enjoy this benefit, the employer must contribute for at least 6 months.

Maternity benefit (including prenatal, delivery and postnatal) is capped at Rmb 3,000. Mothers will enjoy 3 months of paid maternity leave and an additional month if she breastfeeds.

It is unlikely that this regulation will be extended to the 2nd child as it will be discriminating against local mothers.

Unemployment benefits

To claim this benefit, the insured must present a letter from his former employer stating that he was fired against his own will.

For an expat, should he be fired, he will be required to leave the country immediately as his visa, that is tagged to his employment contract, will expire as soon as the contract ends. Thus, this benefit is redundant to an expat.

The compensation amount is based on the city’s AMW and will be paid for a period of 12 months only if the insured has contributed for more than five years. The period of indemnity will increase according to the years of contribution.

Work Related Accident

This contribution is only paid by employer and it covers work related accidents, including traveling to and from work place.

International Health Insurance

“I will still keep my International Health Insurance in China as the portion allocated to medical expenses under the new Chinese Social Security system is very low, only 2%. This is nothing!”, says Glenn King.

“It is very important for me and my family to have access to quality healthcare in Shanghai. Having said that, medical cost at international hospitals or local VIP is very high. Cost of giving birth in Shanghai is exorbitant! Whatever I contributed to the Chinese social security will not gain me access to these facilities. So yes, I am keeping my expat health insurance for as long as we are in Shanghai”, says Melanie Ping.

Nearly all expats that Orix Insurance spoke to expressed no interest in giving up their International Health Insurance. One thing for sure, the expat staff cost for employers will increase significantly and this will definitely have an impact on expat staff recruitment in Mainland China in the long run.

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