How to Determine the Social Insurance Contribution Base for Employees

1、For new employees of an employer:

1.If an employee has worked full-time for the entire month in a new company the monthly contribution base is determined based on the total income earned during the first full month.

2.If an employee has worked less than a full month in the first month in a new company, the monthly contribution base is determined based on the actual income earned for that month, but from the second month onwards, the employer should still determine and adjust the payment base according to the employee's full-month income.

3.Of course, with the mutual agreement between the employer and the employee, the monthly Contribution base can also be determined based on the full-month income in the first month. This is the general practice adopted by most enterprises.

2、For existing employees of an employer:

1.According to relevant regulations, the social insurance contribution base for employees in the current year should be determined based on the employee's average monthly wage income in the previous year.

2.According to current regulations, the "current year" refers to the period from July of the current year to June of the following year. "The employee's average monthly wage income in the previous year" corresponds to the total wages paid by the employer to the employee during the previous natural year, from January to December, averaged over the number of months. For employees who have worked for less than a year, it is calculated by dividing the total wages by the actual number of working months (≤12).

Employee's average monthly wage income = Total wage income of the employee in the previous year ÷ Actual number of months (≤12).

a) The employee's average monthly wage income includes items that are included in the total wage statistics according to the regulations of the National Bureau of Statistics, such as hourly or piecework wages, bonuses, allowances and subsidies, overtime pay, wages paid under special conditions, etc. The total wage is pre-tax income, including personal income tax, social insurance premiums, housing fund, occupational annuity, and other personal deductions directly paid by the employer on behalf of the employee.

b) It should be noted or often problematic that the following should also be included in the "employee's average monthly wage income" of the previous year. For example, the amount of supplementary commercial insurance purchased by the enterprise for employees, the cash equivalent of unpaid annual leave, and misc. payments in kind.

3.It should be noted that there are upper and lower limits for social insurance contribution bases. If the employee's average monthly wage income in the previous year is lower than the announced lower limit of the contribution base in the current city, the payment base will be based on the lower limit. If it is higher than the upper limit of the contribution base, the excess amount will not be included in the contribution base.

4.The reporting period for wage income in 2023 is from May 1, 2024 to June 25, 2024. It's pretty much the same time of year

5.The new social insurance contribution base will be implemented from July 1, 2024.