When you set up a WFOE in Ningbo and hire some employees to work for you. If you are paying CNY 6,000 pre-tax salary per month to an employee, have you ever thought about the real labor cost for a hiring staff？Today, we will analyze the real cost of the recruitment.
Before the analysis, you have to understand the term so called “Five insurances and One Fund”, which refers to Pension Insurance, Medical Insurance, Unemployment Insurance, Maternity Insurance, Work related Injury Insurance and Housing Fund. It consists of employer’s contributions and employee’s contributions.
When we calculate the costs, you’d better know the following basic ideas.
l The base of the contribution: the previous year’s monthly average remuneration (inclusive of any kind of salary and bonus, grants etc.) of the employee.
l The minimum and maximum level of the base: according to the China social insurance law, the base amount must fall into the min and max range, if the remuneration gained by an employee is out of the range, the minimum and maximum threshold rule will apply. At the same time, the threshold amount will vary from year to year according to the whole social average salary level. For example, in year May 2014 – April 2015, the minimum base amount is CNY2, 447 and the maximum is CNY12, 231. Note that the housing fund base is from CNY 1,470 to CNY26,315 (July 2014-June 2015)
i.e.
A. an employee, his or her actual monthly remuneration is CNY 6,000, so the base amount is CNY6, 000.
B. an employee, his or her actual monthly remuneration is CNY 1,200, the base amount is CNY 2,447(for housing fund is CNY1, 470).
C. an employee, his or her actual monthly remuneration is CNY 28,000, the base amount is CNY 12,231(for housing fund is CNY26, 315).
l The social insurances must be paid by the employer and the employee respectively, the percentage is set out as follows
Item | Employer’s contribution | Employee’s contribution |
Pension Insurance | 14% | 8% |
Medical Insurance | 11% | 2% |
Unemployment Insurance | 2% | 1% |
Work related Injury Insurance | 1% | - |
Maternity Insurance | 0.7% | - |
Housing Fund | 8% | 8% |
Sum | 36.7% | 19% |
Note: For Maternity insurance and Work related Injury insurance, only the employer pays.
Now we could calculate the real labor costs, take an employee paid CNY6, 000 per month as an example. The company has to bear the total cost CNY8, 202 (6000*136.7%), the extra insurances and fund cost is CNY 2,202.
In the next article we will talk about how the social insurances and housing fund affects the individual income tax in China.
Keywords: Ningbo accounting, Ningbo Auditor, Ningbo accountants, Ningbo CPA
关键词：宁波会计，宁波审计，宁波会计师，宁波涉外会计，宁波注册会计师
Victor & Truman，CPAs 宁波纬度会计师事务所（普通合伙）
