Skip to content
DWT logo
People Expertise Insights
About Locations Careers
Search
People
Expertise
Insights
About
Locations
Careers
Search
Advisories
Employment, Benefits & Immigration

Shanghai Issues Implemental Rules for the New China Social Insurance Law That Becomes Effective July 1, 2011

By  Jay Si
07.01.11
Share
Print this page

The Social Insurance Law of the People's Republic of China (Social Insurance Law), adopted by the Standing Committee of the National People's Congress of the People's Republic of China on Oct. 28, 2010, will come into effect on July 1, 2011. To implement the Social Insurance Law, the Shanghai municipal government has issued several notices at the end of June 2011 (Implementation Notices).

Employees in Shanghai are currently enrolled in three different social insurance systems:

  1. Social insurances for local urban residents with Shanghai Hukou1 (Urban Social Insurance);
  2. Township social insurances for local rural residents with Shanghai Hukou (Township Social Insurance); and
  3. Comprehensive insurances for non-local residents without Shanghai Hukou2 (Comprehensive Insurance).

The rates of insurance premiums and insurance benefits under each social insurance system are different. However, the Implementation Notices require that, upon the effectiveness of the Social Insurance Law, employees enrolled in the Township Social Insurance system and Comprehensive Insurance system should be transferred to the Urban Social Insurance system.

Insurance premiums before July 1, 2011

Among the above three social insurance systems, Urban Social Insurance system is the most favorable to employees, which provides five social insurances to employees. Comprehensive Insurance system is the least favorable, only requiring employers to pay one comprehensive insurance for employees. Before July 1, 2011, the rates of insurance premiums under the said social insurance systems can be illustrated as follows: 

Type of Insurance

Calculation Basis3 

Contribution Rates
(paid by employers)

Contribution Rates
(paid by employees)

Urban Social Insurance

The employee’s monthly
average salary in the preceding year.

Pension: 22%
Medical: 12%
Unemployment: 2%
Work-related Injury: 0.5%
Maternity: 0.5%

Pension: 8%
Medical: 2%
Unemployment: 1%
Work-related Injury: 0%
Maternity: 0%

Township Social Insurance

60%

Pension: 17%
Medical: 5%
Unemployment: 2%
Work-related Injury: 0.5%
Maternity: 0.5%

No need to pay

Comprehensive Insurance

60% 12.5% or 5.5% No need to pay

Insurance premiums starting from July 1, 2011

Immediate Transfer

The Implementation Notices provide that an employee currently enrolled in the Township Social Insurance system or Comprehensive Insurance system should be immediately transferred to the Urban Social Insurance system starting July 1, 2011, if:

i. The employee has reached an agreement with his/her employer about the immediate transfer; or
ii. The employee enrolled in the Comprehensive Insurance system has an urban Hukou, regardless whether an agreement has been reached with his/her employer.

For easier understanding, this can be illustrated as follows:

 Agreement

Township Social Insurance

Comprehensive Insurance

 

Urban Hukou

Rural Hukou

Agreement Reached

Immediate Transfer 

Immediate Transfer

Immediate Transfer

No Agreement

Transition Period

Immediate Transfer

Transition Period

Under the immediate-transfer circumstances, the employee and his/her employer will be immediately subject to the Urban Social Insurance system starting from July 1, 2011.

Transition Period

Other than the immediate-transfer circumstances, the Implementation Notice also provides Transition Periods for non-immediate-transfer circumstances. There is a three-year Transition Period for the transfer from Township Social Insurance system and a five-year Transition Period for the transfer from Comprehensive Insurance system.

1.  Township Social Insurance

The insurance premiums under the Township Social Insurance system during the three-year Transition Period are as follows:

i. Pension Insurance

 Term

 Calculation Basis

Contribution Rates
(paid by employers) 

 Contribution Rates
(paid by employees)

7/2011–3/2012 

 60%

 17% 

 5%

4/2012–3/2013  

 60%

 19%

 8%

4/2013–3/2014  

 60%

 22%

 8%

ii. Medical Insurance

 Term

 Calculation Basis

Contribution Rates
(paid by employers) 

 Contribution Rates
(paid by employees)

7/2011–3/2012 

 60%

 7% 

 1%

4/2012–3/2013  

 60%

 9%

 2%

4/2013–3/2014  

 60%

 12%

 2%

iii. Unemployment Insurance, Maternity Insurance, and Work-related Injury Insurance

 Term

 Calculation Basis

Contribution Rates
(paid by employers) 

 Contribution Rates
(paid by employees)

7/2011–3/2012 

 60%

 Unemployment: 2%
Maternity: 0.5%
Work-related Injury: 0.5%

Unemployment: 1%
Maternity: 0%
Work-related Injury: 0%

4/2012–3/2013  

 60%

 Unemployment: 2%
Maternity: 0.5%
Work-related Injury: 0.5%

Unemployment: 1%
Maternity: 0%
Work-related Injury: 0%

4/2013–3/2014  

 60%

  Unemployment: 2%
Maternity: 0.5%
Work-related Injury: 0.5%

Unemployment: 1%
Maternity: 0%
Work-related Injury: 0%

2.  Comprehensive Insurance

Since employees with Urban Hukou will be directly transferred to the Urban Social Insurance system starting from July 1, 2011, this five-year Transition Period is only applicable to employees with Rural Hukou. During the Transition Period, employers and employees only need to pay for the Pension Insurance, Medical Insurance and Work-related Injury Insurance. The rates of insurance premiums are as follows:

Term

Calculation Basis 

Contribution Rates
(paid by employers)

Contribution Rates
(paid by employees)

7/2011–3/2012

40% 

Pension: 22%
Medical: 6%
Work-related Injury: 0.5%

Pension: 8%
Medical: 1%
Work-related Injury: 0%

4/2012–3/2013

45%

Pension: 22%
Medical: 6%
Work-related Injury: 0.5%

Pension: 8%
Medical: 1%
Work-related Injury: 0%

4/2013–3/2014

50%

Pension: 22%
Medical: 6%
Work-related Injury: 0.5%

Pension: 8%
Medical: 1%
Work-related Injury: 0%

4/2014–3/2015

55%

Pension: 22%
Medical: 6%
Work-related Injury: 0.5%

Pension: 8%
Medical: 1%
Work-related Injury: 0%

4/2015–3/2016 

The employee’s monthly
average salary in the preceding year.

Pension: 22%
Medical: 6%
Work-related Injury: 0.5%

Pension: 8%
Medical: 1%
Work-related Injury: 0%

Upon the expiration of the Transition Periods, the Urban Social Insurance system will apply to all the employees working in Shanghai.

FOOTNOTES

1 “Hukou”, which means residence registration, refers to a family register system to control the movement of people between urban and rural areas in China. People living in urban areas are usually registered with urban Hukou and people living in rural areas are usually registered with rural Hukou. A Shanghai Hukou usually is an urban Hukou.

2 These employees are registered either with urban Hukou or with rural Hukou.

3 Unless otherwise defined, “calculation basis” herein refers to a percentage of the average monthly salary of Shanghai in the preceding year.

Related Articles

DWT logo
©1996-2022 Davis Wright Tremaine LLP. ALL RIGHTS RESERVED. Attorney Advertising. Prior results do not guarantee a similar outcome.
NAVIGATE
Home People Expertise Insights
About Locations Careers Events Blogs
STAY CONNECTED

Subscribe to stay informed.

Subscribe
Employees
DWT Collaborate
EEO
Affiliations
Legal notices
Privacy policy
©1996-2022 Davis Wright Tremaine LLP. ALL RIGHTS RESERVED. Attorney Advertising. Prior results do not guarantee a similar outcome.
Close
Close

CAUTION - Before you proceed, please note: By clicking “accept” you agree that our review of the information contained in your e-mail and any attachments will not create an attorney-client relationship, and will not prevent any lawyer in our firm from representing a party in any matter where that information is relevant, even if you submitted the information in good faith to retain us.