五险一金 (five insurances one fund)
五险一金 wu3 xian3 yi1 jin1 (five insurances, one fund)
For everyone working in China this means something - but I am unsure exactly what it means. At a simple level, deductions to your pay will be made by your employer, ostensibly for workplace injuries/illness, unemployment, retirement, health, and maternity. I have been told that it will be 11% of your pay, and foreigners will have deductions made for all five insurances. There has been some talk about foreigners being able to recover payments where they are not legally able to benefit from the insurance. In my experience employers are saying they have not been told how it will work.
There is a lot of talk about it and I am hoping some poddies have something to share.
It will affect both Chinese citizens and foreigners, but the impact will not be the same for everyone. I would be interested to hear anything anyone knows about this government initiative.
tvanJuly 05, 2012, 02:04 AM
Hello Bodawei, I know that the mandatory retirement age for China is 60 for men and 55 for women. Obviously, this is "flexible," since you see oldersters doing all sorts of jobs in China, most notably keeping up the shrubbery alongside roads. There was a proposal to raise the retirement age to 65; however, I understand that it died a quick death. It will probably come up again after the leadership transition.
The 11% of pay deduction also includes a matching contribution of roughly 22% by the employer; so, the total cost of "social insurance" is roughly 33% overall. It's quite a burden. Where I live, most Chinese companies do not pay this for foreigners or their employees. I don't understand the mechanics (probably "contributions" to local officials), but enforcement is obviously weak. Obviously, a system with weak enforcement and a super-low retirement age is actuarially unsound.
Re: a foreigner actually recovering benefits, that probably depends upon the country. For example, Germany has a tax treaty with China that grants reciprocity, so Germans have some rights here. The U.S. does not have a treaty covering this, but I am not sure what the practical effect is.
Anyway, interesting topic.
Thanks for your comment - nice to hear from someone with first-hand experience. Yes, we have heard from our employers about the obligations on them, and how expensive staff are becoming. One of my ex-employers lowered the hourly rate of pay to compensate for higher on-costs.
In my city of Chengdu it is all the talk because it is actually being enforced from the new tax year, on all workers, Chinese citizens and foreigners alike.
'actually recovering benefits'
My original post was a reference to recovering contributions that are not applicable to foreigners - eg. unemployment, maternity benefits. I heard that you can apply before you leave the country but no-one knows the process, or how you get your money back.
Your comment about tax agreements is interesting - Australia too now has a tax treaty with China. I have only heard the implications from Australia's side - and it is rather technical. In brief I was told that if you are resident of China (there is a definition that includes 'intentions' as well as objective information like how many days a year you reside in China) then there is no need to declare your Chinese income in Australia. On the other hand, if you are a resident of Australia but earn money in China the Chinese earnings have to be declared in Australia. One problem I pointed out is that I have never yet received a pay slip, or an annual statement of earnings, in China.
I agree with your comments about problems if it is not generally enforced - this next year is worth watching closely. From what I have heard so far locally there is a lot of work to do - even the employers are not sure of their responsibilities.
I look forward to the implementation of 五险一金 to foreigners because I believe that it will force employers to provide pay slips. I may finally get to check what I am being paid, how much is being taken out in tax, etc.
Hello @Bodawei, I hope you get your pay stub. My guess is that your employer has one somewhere or other. Try asking for a 工资单; that is the Chinese name for a pay stub, and it is required in China. (Yeah, yeah, and they're all supposed to stop at red lights too!).
Re: foreigners paying tax, I agree that this is a good thing. Anyone coming to the U.S. has to pay Social Security and Medicare, regardless of whether or not they will eventually collect benefits. I heard a lot of whining when this law was passed, but China is simply adopting a worldwide norm. What foreigners do need to do if their employer withholds this tax is insist on a benefits card (社保卡). This entitles you to medical treatment at a local hospital. If your employer refuses to provide you with this or a pay stub, then there's a good chance that they are pocketing your 11%.
Re: Australians having to declare Chinese income,my government insists that Americans declare all foreign income and bank accounts, regardless of tax treaties, etc... Bureaucrats full employment act and all that.