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China Cuts Unemployment Insurance Premium Rate to 1%

China has decided to further lower the unemployment insurance premiums paid by enterprises and individuals on the basis of the downward adjustment made two years ago in a bid to reduce the burdens of enterprises, thus lifting the curtains for the lowering of fees paid by enterprises after the Spring Festival.

On 17 February, the Ministry of Human Resources and Social Resources (MOHRSS) and the Ministry of Finance jointly issued a circular on issues concerning the progressive lowering of unemployment insurance premium rate (see circular in Chinese). It was decided that provinces (autonomous regions and municipalities) still paying unemployment insurance at a gross premium rate of 1.5% will be allowed to lower their premium rate to 1%. This new rate shall take effect no later than 30 April 2018.

Unemployment insurance is a social security system whereby a compulsory national fund is set up to provide workers who lost their wage income due to the involuntary suspension of employment with monetary assistance and re-employment service for a period of time. The State Council promulgated the Regulations on Unemployment Insurance in 1999. The system has played its role as a “safety net” in promoting employment, maintaining stability in the employment situation, and safeguarding and improving people’s livelihood after nearly 30 years of implementation.

According to the MOHRSS, about 180 million people were enrolled in the unemployment insurance scheme as at the end of November 2016, with contributions to the unemployment insurance fund reaching RMB104.85 billion and expenses amounting to RMB80.48 billion.

Against the backdrop of downward economic pressure and declining corporate earnings, the MOHRSS and Ministry of Finance decided to lower unemployment insurance premiums from 3% to 2% in 2015 to lessen the burdens of enterprises. The two ministries further reduced the premiums to 1%-1.5% at the discretion of the local governments in May 2016. Sichuan and some other provinces directly lowered the premium rate to 1% at that time. The above circular calls upon those provinces that still retain the 1.5% premium rate to lower the rate to 1% in 2017.

The circular underscores the importance of fully considering the effects of factors such as the need to pay unemployment benefits on time and in full, increase unemployment benefits, promote the re-employment of those who lost their job and implement the policy of subsidies for stabilising employment when lowering the unemployment insurance premium rate. Concrete plans must be formulated on the basis of conscientious calculations made in the light of reality. These plans should be put into action with the approval of the provincial people’s government and reported to the MOHRSS and Ministry of Finance for the record.

Content provided by Picture: HKTDC Research
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