1.Previous Year’s Average
Recently, the Shanghai Municipal Bureau of Statistics and Municipal Human Resources and Social Security Bureau, announced Shanghai’s average salary for the previous year (2019): RMB 114,962 per year, or RMB 9,580 per month.
What does the announcement mean？
“Local Average Social Salary of the Previous Year” serves as one of the factors in calculating economic compensation for severance in accordance with China’s Labor Contract Law, which states that:
If an employee’s average monthly salary for the 12 months prior to the termination date of his/her employment is higher than three times the local average monthly salary of the previous year (“High Income Group”), the economic compensation to be paid shall be calculated based on the three times of local average monthly salary of the previous year.
Based on this announcement, for the High Income Group, if the employer needs to pay economic compensation, it would be calculated as follows: RMB 28,740 per month (RMB 9,580 x 3) multiplied by the number of years he/she has worked for the employer (a final period longer than 6 months but shorter than 1 year shall be counted as 1 year, and a final period shorter than 6 month shall be counted as 0.5 year).
2.Social Insurance and Housing Fund Contributions
Because of COVID-19, in order to reduce the burden of enterprises, a “3-year Transition” plan for social insurance contributions has been implemented as follows:
From July 1, 2020, the maximum calculation basis for social insurance contributions has been adjusted to RMB 28,017 per month (RMB 9,339 x 3); the minimum calculation basis remains RMB 4,927 per month.
From July 1, 2020, the calculation basis for the maximum for housing fund contributions has been adjusted to RMB 28,017 per month; the minimum is RMB 2480 per month.
Additional note: Extension for Deduction of Social Insurance Contributions (by Enterprises)
Because of COVID-19, the allowance for deducting half of large companies’ contributions to the three major social insurances will be extended until the end of June 2020; meanwhile, the exemption for small and medium-sized enterprises’ contributions to those three major social insurances will be extended until the end of December, 2020.
Da Wo Law Firm will of course keep you up to date on labor issues such as this. If you have any specific questions, please do not hesitate to contact us.