During the period from June to August every year, various provinces in mainland China will announce the local average monthly wage (social insurance wage), which determines the social security payment base. As of September 4, many provinces in mainland China have still not yet announced the new year’s data. Experts believe that the delay may be related to various issues involving adjustments to the lower limit of the base.
Social insurance has a “payment base” determined by an individual’s average monthly salary in the previous year. The upper and lower limits of the “payment base” are determined by the local average monthly wage (social insurance wage) each year. If the lower limit of the social security payment base increases, the social security contributions paid by enterprises will also increase.
In the past few years, from mid-June to mid-August, provinces nationwide would successively announce the upper and lower limits of the social security payment base for the year. The local human resources and social security departments determine the latest upper and lower limits of the social security payment base for the current year based on this information – the upper limit usually being 300% of the previous year’s social insurance wage, and the lower limit usually being 60% of the social insurance wage.
According to a report by the Economic Observer, as of September 4 this year, many provinces in China have not yet announced the social security payment base, with only four provinces including Hebei, Inner Mongolia, Heilongjiang, and Fujian disclosing the previous year’s social insurance wages.
An expert who has studied and participated in the reform of the social insurance system for many years mentioned that the delay in the introduction of the social security payment base in various provinces this year may be due to the adjustment of the lower limit of the base which involves various issues. Initially, the social security payment base was set at 60% of the social insurance wage mainly targeting a small portion of the low to middle-income groups, and in recent years, the pressure of social security payment increases has mainly focused on this group.
The establishment of upper and lower limits for social security payment base is influenced by two factors: the local social insurance wage and the proportion of the upper and lower limits to the social insurance wage.
Due to the influence of these two factors, the lower limit of the social security payment base has been increasing over the past five years. From 2020 to 2024, the lower limit of the social security payment base in Beijing increased from 3613 RMB per month to 6821 RMB per month, a growth of 88.8%; while in Shanghai, it increased from 4927 RMB per month to 7384 RMB per month, a growth of 49.9%.
As the payment base continues to rise, different groups and types of enterprises experience different pressures. Among them, the low to middle-income groups whose monthly income is consistently lower than the lower limit of the payment base and private enterprises face more noticeable pressures.
According to a report released by the Legislative Affairs Commission of the National People’s Congress of the Communist Party of China last year, with the annual increase in the social insurance wage, the social security contributions of low-income groups also increase, leading to an increase in their payment burden, which is also a significant reason for some low-income groups discontinuing their insurance coverage. According to a survey by the China Social Security Association, the proportion of people paying for old-age insurance out of the insured population decreased from 85.2% in 2011 to 80.8% in 2022.
Xiang Yunhua, Director of the Social Security Research Center at Wuhan University, stated that in accordance with convention, provinces that have not announced the social security payment base for the year 2025 will generally continue with the previous year’s base for the employees of enterprises within the province.
Feng Shuaizhang, Dean of the Institute of Economics and Society at Jinan University, supports lowering the lower limit of the payment base. He mentioned that currently, some employees and flexible employment groups have a monthly average income lower than the lower limit of the payment base. If they continue to pay social security based on the existing rates, their payment burden will increase year by year. He suggested adjusting the lower limit of the payment base flexibly based on individual income levels, which would also enhance the willingness of flexible employment groups such as delivery personnel to pay social security.
However, the report also noted that if the lower limit of the payment base is lowered, there is a possibility that some non-compliant enterprises might use a lower base to make social security payments for their employees, leading to a decrease in the retirement benefits for employees and an inability to ensure individual retirement security.
Xiang Yunhua, Director of the Social Security Research Center at Wuhan University, stated that while appropriately lowering the payment base indeed benefits reducing the burden on enterprises, the decision to decrease the social security payment base needs to be carefully considered from the perspective of balancing the social security fund. Against the backdrop of an increasingly aging population, the sustainability of the social security fund still faces certain pressures.