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China to Lower Enterprise Annuity Contribution Cap to 12% of Payroll

The Ministry of Human Resources and Social Security (MOHRSS) has recently issued the Provisions on Enterprise Annuities (Draft for Comment) (for details in Chinese, please see: http://www.gov.cn/xinwen/2016-06/08/content_5080387.htm) to gauge the public’s views on lowering the contribution limits of enterprise annuities.

The Draft for Comments adjusted the limit of contributions by enterprises from 1/12 of payroll for the previous year to 8% and adjusted the combined contributions of employer and employees from 1/6 of payroll for the previous year to 12%. It also made clear that the specific ratio of contributions will be agreed upon between the employer and its employees through consultation.

The Trial Measures for Enterprise Annuities first came into force in May 2004. As many as 75,000 enterprises had set up their annuity fund, with 23.17 million employees joining the scheme and the accumulated balance of the fund reaching Rmb952.6 billion, by the end of 2015. In spite of the significant progress, there is still plenty of room for improvement in view of the huge number of enterprises and employees.

As stipulated in Article 16 of the Draft for Comments: After the establishment of enterprise annuity, if an enterprise is unable to pay contributions for the current period due to operational losses, reorganisation, merger and acquisition and other matters, it may suspend contribution upon consultation with its employees. After the enterprise and its employees resumed their payment of contributions, they may make up for the contributions due in the light of the actual conditions of the enterprise and the annuity plan at the time of the suspension of payment of contributions. The time limit and amount of makeup contributions may not exceed the time limit and amount of the actual suspension of contributions.

Content provided by Picture: HKTDC Research
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