ON SOCIAL SECURITY POLICY IN TIANJIN

Our guest speaker, Mr. Li, once worked in the Department of policy and regulations, has been the Department Chief of Pension Insurance Department, Social Security Bureau since 1999. Without doubt, his professional background is quite relevant to our member companies. He covered three issues in his speech.

Firstly, he made a brief introduction about the role that social security played in social progress. China has been transferring from planned economy to market economy since 1978. Tianjin Municipal Government has taken steps to establish social security system and to improve it. As is known, social security system is very important to market economy. First, it provides protection for those who lose their jobs in the fierce competition. By taking over the burdens of providing for the retired employee, social security is a great help to the enterprises. In turn all the enterprises can compete on an equal footing and in a fair-play environment. Second, it guarantees the fairness in society. By guaranteeing basic living standard for those who are in a weak position in the job market, it keeps the balance between the incomes of different people. Third, it safeguards the stability of the whole society, and in turn promotes the economic development.

Secondly, he talked about the characteristics of social security. Social security system is an indispensable part in the national law system. First, compared with commercial insurance, social insurance is compelling. The types and rates of social insurance are decided by the national law. Second, it is featured with mutual-help in that all the payments go to those needy. Take pension insurance for example, younger generation pays to help the older generation and the same thing happens when younger generation get old themselves. Third, it is not profit-oriented. For example, Tianjin Municipal government gives subsidy of over one billion to the pension insurance every year.
Lastly, he introduced in detail the current pension insurance policy that had been carried out since 1986. The current policy in Tianjin was set down in 1996 by the People's Congress of Tianjin. The whole system consists of several parts. The first part is the payment rate. Each employee pays as much as 7% of his salary. Payment by the company should be as much as 20% of all its employees' payment, and foreign-invested company should pay as much as 30%. Why more? Half of this redundant 10% acts as medical care for the retired. Another half functions as other subsidies except the pension insurance. This policy had been in act until November 2001, when the medical care began to go down ( When the medical insurance policy was published, the half of this redundant 10% acts as medical care for the retired was cancelled). So foreign-invested company only needed to pay 25%. Since May this year, foreign-invested company needs to pay only 20%, which is in accordance with the WTO agreement. For companies who don't have retired employee, 5% is saved. For companies that have retired employee, companies distribute other subsidies except pension insurance, including subsidy for transportation, subsidy for magazines, subsidy for housing, price compensation and so on. The maximum is 300%( From Jan., 2002)of previous year's average salary for local employee. And the minimum is 60% ( From Jan., 2002 )of that amount. For this year, the minimum is 600 RMB. The second part is personal account. As regulated by Tianjin government, 11% of the total amount paid by enterprises and individuals goes to personal account. If the employee transfers to other company, the personal account goes with him. The third part is how to pay the insurance. For those who started working after January 1,1998, his pension is made up of two parts-basic pension and individual account pension. For those who started working before 1998, his pension is made up of four parts-basic pension, individual account pension, transition pension, and supplemental pension. The idea is that people who started working earlier have not much self-paid founds, and therefore, they are given more support from the government. He then went to detail on how to calculate them each. This aroused much interest among the audience.
After his expert introduction was the Q&A section. The first question was about the early retirement age and its relations with the social security. This problem is closely related with the macroeconomic situation in China. The second question was about the current social insurance. Pension, medical, and unemployment insurance are now carried out in Tianjin, while injury-during -work and maternity insurance will be carried out next year or the year after next year. Mr. Li patiently explained how to pay each for both companies and individuals. Some attendees discussed with Mr. Li on how much they could be paid themselves. The last question was quite interesting, "Who will pay the pension ( for the retired ), the last employer or all the employers?" Mr. Li's explanation to this question satisfied all the present managers.

Obviously, such speech was very helpful to every company. We are looking forward to having you here and be a part of our discussion next time.