Many places across the nation have started to lower social security premiums, echoing the plan brought forward at this year’s “two sessions” to ease enterprises’ burden.
Provincial regions, including Beijing, Shanghai, Guangdong, Zhejiang, and Tianjin, have issued documents on reducing social security premiums, generally focusing on work-related injury insurance, unemployment insurance and maternity insurance.
So, will the move really lower costs for enterprises?
At the press conference on this year’s “two sessions”, Premier Li Keqiang noted that space remains to adjust social security premiums and situations differ in different regions. The social security funds are abundant and local governments can be given more authority to moderately and gradually lower social security premiums.
According to Shanghai’s estimation, if the social security premiums paid by enterprises are lowered by 2.5%, financial burden that amounts to 13.5 billion yuan ($2.07 billion) will be reduced in 2016.
Guangdong province said that by the end of this year, all of its enterprises will save a total of 35 billion yuan on social security premiums.
“Enterprises are major players of market economy and main income sources for social security funds. At a relatively difficult time, lowering social security premiums for enterprises will be a significant measure to lower their costs,” Shi Guanghui, deputy mayor of Shanghai said.
Indeed, lowering social security premiums paid by enterprises will ease their burdens. But will this be at the cost of people’s benefits? The answer is no.
According to local governments, the decision of lowering social security premiums is based on precise calculation. Some regions have previously lowered social security premiums, and it turned out that such a move did not cost people their social benefits. On the contrary, social benefits, including pension, keep increasing.
Taking an insured individual’s pension for example, the social benefits mainly depend on the social average wage a year before retirement, salary level, number of premium payment years and amount in a savings account.
According to past experiences, government will provide subsidies to ensure full payment of pension and medical insurance when social security funds lack money, a researcher at Shanghai Academy of Social Sciences said.
In fact, Premier Li Keqiang has put forward in his government work report this year that the basic pension standard will continue to rise, which means people’s pensions will see a rise for the 12th consecutive year.
In the future, social security benefits will expand with economic development, average wage improvement and increasing living costs, said Jin Weigang, head of the Institute of Social Security Research under the Ministry of Human Resources and Social Security.
Lowering social security premiums is based on strict study and precise calculation. Social security funds will be secured and within an affordable range, said Zhao Zhuping, head of the bureau of human resources and social security in Shanghai.
Statistics show that in 2015 in Shanghai, 10 items of social security funds income amounted to more than 300 billion yuan and the expenditure was about 280 billion yuan. Thus, the balance of social security funds was more than 40 billion yuan.
To cope with potential risks, experts advise that some mechanisms of social security funds could be further improved, such as early warning, funds collection and management, and value increase. Experts also suggest that social security funds should cover more people and receive more financial support.
The pension system now covers 850 million people across the country, 15 percent less than the target of one billion people, according to Yin Weimin, minister of human resources and social security.