Circular of the General Office of the State Council on the Issuance of the Comprehensive Social Insurance Rate Reduction Plan (Guo Ban Fa [2019] No. 13) (Mainland China)

Yanting Pei

The State Council recently issued a circular to release the Comprehensive Social Insurance Rate Reduction Plan (the “Plan”).  It mainly makes framework provisions on the premium rates for endowment insurance, unemployment insurance and work injury insurance, the social insurance base, social insurance premium collection reforms and others.  The Plan is expected to come into force on May 1, 2019.  For details, please see below:

1. Reduction of insurance premium rates

Under the Plan, the premium rate for endowment insurance unit will be reduced on May 1, 2019, where rates that are higher than 16% shall be reduced to 16%; for rates below 16%, each province and municipality shall submit their interim measures to the Ministry of Human Resources and Social Security and the Ministry of Finance for recordation.

As far as unemployment insurance is concerned, starting from May 1, 2019, provinces with a total unemployment insurance premium rate of 1% will extend the period of periodic reduction of the unemployment insurance premium rate to April 30, 2020.

With respect to work injury insurance, starting from May 1, 2019, the phased reduction of the work injury insurance premium rate will be extended to April 30, 2020.  In regions where the cumulative surplus of the work injury insurance fund is sufficient to pay for 18 through 23 months, the current rate may be reduced by 20%; if the cumulative surplus can cover for at least 24 months, the current rate may be reduced by 50%.

2. Adjustment to the social insurance contribution base

The Plan will adjust the how the average wage of workers is calculated.  Each province shall determine the upper and lower bounds of the social insurance contribution base through taking the average wage of city workers at non-private entities and the average wage of city workers at private entities to make a weighted a calculation of the average wage for workers in the overall city area, thereby reasonably reducing the social insurance contribution base for a portion of insurance participants.  Meanwhile, the Plan also provides that a flexible contribution base policy for individual business units and flexibly-employed persons shall be improved, and they shall be entitled to choose an appropriate contribution base anywhere between 60% and 300% of the average wage of workers in the overall city area when enrolling in basic endowment insurance for enterprise employees.

3. Reforming the collection of social insurance fees

Pursuant to the Plan, the current system for collecting the basic enterprise employee endowment insurance premiums and other types of enterprise employee insurance shall be basically maintained for the time being, with the payment method stabilized so that once it is fully developed in one province, it can be setup in another.  The social insurance premiums contributed by agencies and business units and the responsibility for managing and collecting social insurance premiums for urban and rural residents shall be transferred as scheduled.  On the other hand, the Plan requires the human resources and social security, taxation, finance and medical insurance authorities to step up their efforts in the construction of information sharing platforms, thoroughly strengthen information sharing and ensure orderly transition of the collection work.

For enterprises that are habitually in arrears in premiums, the Plan stresses once again that the relevant government agencies shall not collect premiums owed by those enterprises during the collection system reform period, nor shall they take any measure that will increase payment burdens on small and micro enterprises in order to avoid causing them production and operational difficulties.

In general, the release of the Plan sets a basic framework for reducing social insurance premiums, while the final rates will depend on the specific regulations of the provinces.  If necessary, enterprises may continue to keep abreast of this development so as to take advantage of policy benefits at the earliest time and ease operation al stress.