An employee benefits package contains all benefits that are provided by an employer to an employee that are not his or her wage. They vary greatly from a company to another and may include health insurance to additional paid holidays. In China, some employee benefits are mandated by law by the government, such as basic social insurance coverage. Other employee benefits which companies are not required to offer typically cover allowance, yearly bonuses and additional healthcare coverage. In this article we will see how employee benefits work in China and why it is important for companies to offer a competitive employee benefits plan in China.

How do employee benefits work in China?

There are two types of Employee benefits in China, mandatory benefits imposed by Chinese regulations and optional benefits.

Mandatory benefits are paid both by the employer and employee and vary depending on local regulations but always cover two types of benefits: social insurance and Public Housing Fund (PHF). Social insurance covers workplace insurance, basic medical insurance, pension insurance, unemployment insurance and maternity insurance. The PHF is a contribution imposed by the Chinese government dedicated to the purchase of a residence by the employee. They work similarly to a home buyer’s plan except that they are compulsory and that both the employee and employer contribute to the fund. Note that foreign employees do benefit from Chinese social insurance, although some cities allow employers can contract out employees from these benefits. In addition, Chinese employees are entitled to 10 paid holidays per year according to the Chinese public holidays calendar. Furthermore, some employees can benefit from additional paid leave like women benefiting from half a day leave for the International Women’s Day, youngsters aged 14 to 28 during Chinese Youth Day or military personnel during the Chinese Army Day. 

On top of those mandatory benefits, companies can and often do offer optional benefits. The most common form of additional benefit in China is a yearly bonus, often paid as a 13th month for the Chinese New Year. Although most companies in China pay some amount of yearly bonus for their employees, it is not mandated by law to do so. Food and transports allowance are also commonplace. Note that there is no legal threshold as how big the share of allowance can be in employee’s salaries, although it is recommended to employers to keep it reasonable to avoid tax fraud inquiries.

Another type of benefits widely appreciated by Chinese employees are complementary medical insurance as basic social insurance coverage tends to be lackluster. Chinese employees are also often offered 5 to 15 paid vacation days depending on their seniority in the company in addition to the mandatory 10 days imposed by the government. Finally, larger companies may provide fancier benefits like gym memberships and trips. Overall, working conditions and pay has greatly improved in China over the last decade, especially in large cities, and employees’ expectations both in salary and benefits has greatly increased.

Why are employee benefits plans important in China?

Several studies have tied employees’ productivity to their motivation and working conditions. It should come to no surprise that employees benefiting from better working conditions tend to be more productive. Thus, employees’ benefits contribute to a more productive workforce and reduce employee turnover. A study published by the IZA Institute of Labor Economics shows that the expectation gap between what Chinese employees expect from their job and what the job really is is a strong determinant for employee dissatisfaction which can in turn impact productivity. In 2017, only 46% of Chinese workers declared they were satisfied with their job. To go against this trend, employers in China can use benefits plans, which are today a strong determinant for Chinese employees in choosing which company to work for.

Takeaways about employee benefits in China

• Employee benefits have a positive impact on employees’ satisfaction which in turn have a positive impact on their overall productivity and reduces labor turnover significantly.
• As they are often dissatisfied with their work, Chinese employees are more and more sensible to employee benefits, especially among young employees in large cities.
• Part of employees’ benefits in China are mandatory and directly taken from the employee’s paycheck.
• Additional employee benefits beyond those mandatorily required are commonplace, the most common ones being yearly bonuses and food and transports allowance.
• Business insurance and additional healthcare plans for employees are also common place.

Looking for an employee benefits plan for your company in China? Don’t hesitate to reach out!

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