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In this issue: 

• Mandatory Benefits in China: Employer Obligations
• FESCO as a Tool for Payroll and Labor Dispatch
• Figuring Mandatory Benefits into the Payroll Process

When the Interim Measures for Participation in the Social Insurance System by Foreigners Working within the Territory of China came into effect last October, the inner workings of the social insurance system became even more relevant to the average foreign investor. 

While social insurance is based on such guidelines issued by the central government, implementation varies geographically, and the inclusion of foreigners in the social insurance system is a key example of this. As we discuss here, Dalian currently requires only pension payments to be made on behalf of foreign employees, while Shenzhen requires payment of three insurances and Beijing, Suzhou, Tianjin, and Xiamen require payment of all five insurances. Shanghai’s participation is voluntary (for now). Such variation and the frequent changes in mandatory benefit requirements make this an area easy to be caught out of compliance.

So in this issue, we take a “back to basics” approach to China’s mandatory benefits. Where, exactly, is that extra ~35-40 percent on top of an employee’s salary going? What are social insurance contribution rates, base amounts, and tax exemptions? How does all of this figure into the payroll process? We next look at mandatory benefits as a piece of the larger payroll puzzle, with highlights on two very China-specific pieces: FESCOs and hukou, China’s “domestic passport.”