Social Insurance and Housing Fund Base in 2020: Updates
Considering the impact of COVID-19 on the city's economy and society, the adjustment of social insurance and housing fund ‘base’ which used to be started in April, was postponed to July this year. According to statistics, this year in Shanghai, the maximum ‘base’ will be increased, and the minimum, like most other cities in China, will maintain the same as last year.
What is the ‘base’?
The social insurance includes: ‘Endowment Insurance’, ‘Medical Insurance’, ‘Unemployment Insurance’, ‘Maternity Insurance’, and ‘Industrial Injury Insurance’ with different ratios. Both employee and enterprise have their proportion to declare and pay for each item, as well as the housing fund.
The ‘base’ is the reference for each ratio to calculate social insurance and housing fund.
Generally speaking, the ‘base’ of employees is confirmed according to the average income in the previous natural year. If the employee is newly recruited, their gross salary will serve as this base. That is, the higher the salary, the higher the base will be, and vice versa, but the ‘base’ has a maximum and minimum limit.
What are the effects on employees/enterprises?
At present, according to the 2019 average income of urban employees released by the statistics department of Shanghai, a new range of the ‘base’ from July 1, 2020, has been determined:
Employee=Net pay: If an employee’s average income increased, the intuitive effect would be that the monthly net pay would go down.
Enterprise=Monthly cost: The monthly cost of the enterprise for employees is generally the gross salary plus the enterprise’s part of social contribution. Therefore, the increase in the base also directly affects the cost of the enterprise.
What is the welfare of the enterprises during the epidemic?
On June 30, 2020, Shanghai Security Bureau promulgated by No.14:
[Notice on issues for extending the implementation period of the municipal policy of periodic reduction and exemption of enterprise social insurance premium].
In response to pressure from micro, small and medium enterprises (MSMES), the periodic reduction policy of social insurance, which was scheduled to expire on June 30, 2020, will be extended to December 31, 2020.
That is, the proportions of the enterprise will be:
- Endowment/Unemployment/Industrial-Injury Insurances = Zero(0)
The social insurances for individual employees remain unchanged.
Other possible effects of the average income
- Determine the upper limit of economic compensation
The economic compensation is closely related to the employee’s gross salary. However, if the gross salary is over 3 times the average income in Shanghai for the previous year, this average will be used as the basis for calculation.
- Determine the upper limit of maternity subsistence allowance
The ‘average income’ involved here refers to the monthly average income of all employees of the enterprise in the previous year.
If you have any questions, feel free to contact us for further clarification.
