China Employment Law Update April 2018

Executive Summary

1. New agencies are established amid the State Council overhaul.
2. Shanghai unveils its minimum wage and social average salary.
3. New measures are issued to lower enterprise costs by RMB 300 billion.

In March 2018, the National People's Congress (NPC) approved the State Council Institutional Reform Plan of 2018. Amid the overhaul, three newly-established departments, the Ministry of Veteran Affairs, the State Medical Security Administration and the State Immigration Administration, are of particular relevance to employment in China.

Ministry of Veteran Affairs

This cabinet-level body has been established to "protect the legitimate rights and interests of military personnel and their families and improve the service and management system of demobilised military personnel ". It takes over the relevant functions of the Ministries of Civil Affairs (MCA) and Human Resources and Social Security (MHRSS) and the Political Work Department and Logistic Support Department of the Central Military Commission. According to the official document issued by the State Council, "the new ministry will be in charge of making and implementing policies and regulations related to demobilised military personnel and dealing with related affairs such as their reemployment and training."

State Medical Security Administration

This body will be directly under the State Council and will be responsible for "formulating policies, plans and standards on healthcare systems in terms of medical insurance, maternity insurance and medical assistance, and ensuring their implementation". The new agency takes over certain functions of MCA, MHRSS, the National Development and Reform Commission (NDRC), and the former National Health and Family Planning Commission (NHFPC). Meanwhile, the tax authorities will be responsible for levying basic medical insurance premiums and maternity insurance premiums in an effort to improve the efficiency of levying and administering medicare funds.

State Immigration Administration

This body will be responsible for "coordinating and formulating immigration policies and their implementation, border control, administering foreigners' stay, management of refugees and nationality, taking the lead in coordinating the administration of foreigners who illegally enter, stay or are employed in China, and the repatriation of illegal immigrants." It also takes over the exit-entry administration and immigration inspection functions of the Ministry of Public Security (MPC).

Shanghai unveils its minimum wage and social average salary

From 1 April 2018, the statutory minimum wage of Shanghai has increased by 5.2 % to RMB 2,420 per month. The hourly rate has been increased from 20 yuan to 21 yuan per hour.

In addition, the average monthly salary (used for the purposes of calculating social insurance and severance payments) has been adjusted. The figure now is RMB 7,172, and accordingly, the minimum monthly contribution to social insurance is RMB 4,279 (comprising RMB 449.4 for the employee and RMB 1,347.9 for the employer), and the maximum monthly contribution is RMB 21,396 (RMB 2,246.7 for the employee, RMB 6,739.8 for the employer). The Employee and the Employer contribute 10.5% and 31.5%, respectively, to the social insurance.

New measures are issued to lower enterprise costs by RMB 300 billion

On 4 April 2018, the State Council executive meeting decided on measures to further lower enterprise costs, among which, the following are employment related:

• The interim policy of reducing enterprises’ payment rates for employees’ pension insurance, unemployment insurance and employment injury insurance will be extended to 30 April 2019, and similar policies on public housing accumulation funds will be extended to 30 April 2020. Starting 1 May 2018, eligible regions might lower work-related injury insurance premium rates by another 20% or 50%. The disabled employment security fund payable by employers will also be reduced, from a maximum of 300% of the average local social salary to 200%; and
• The charge for construction fund of major water conservancy projects will be cut by 25% starting 1 July 2018; internet data roaming charges will be cancelled starting 1 July 2018; the cost of mobile internet services and household broadband will be cut by 30 %, and internet services for small and medium-sized enterprises will be reduced by 10 to 15 %; electricity costs for general industries and businesses will be lowered for 10 %; the nominal fee for initial application of identity cards will be cancelled starting 1 April 2018; and patent registration fees will be cancelled starting 1 August 2018.

These measures are expected to collectively lower enterprise costs by RMB 300 billion (USD 47.6 billion) annually.