Shenzhen Housing Fund: Maximum Contribution Limit Lowered

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By Amber Liu

Shenzhen-lake

The Shenzhen housing fund management center issued a notice on June 29, 2018, announcing a change to the maximum contribution base of the housing fund.

With the change, Shenzhen lowered the maximum housing fund contribution base from five times the local average salary to three times, effective July 1, 2018.

The adjustment aims to lower costs for employers by reducing the housing fund contributions they must make for highly paid employees.

The change will not affect the vast majority of workers in Shenzhen, as most are not paid highly enough to make such large monthly housing fund contributions.

In China, the housing fund is a type of social security designed to ensure that workers save money to buy a home.

Under the current housing fund scheme, both employers and employees must make regular contributions into the housing fund.

The housing fund contribution base is set at the employee’s average monthly wage in the preceding year, which is also subject to a minimum limit and a maximum limit.

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Previously, the minimum limit was the minimum monthly wage in Shenzhen in the preceding year, and the maximum limit was five times the average monthly wage in Shenzhen in the preceding year.

According to figures released by Shenzhen’s municipal statistics department, in 2017 the average monthly wage of an employee in Shenzhen was RMB 8,348 (US$1261.84), up from RMB 7,480 (US$1,130.64) in 2016.

Thus, the maximum housing fund contribution base has been adjusted from RMB 37,400 (US$5,653.20) [RMB 7,480 x 5] to RMB 25,044 (US$3785.53) [RMB 8,348 x 3].

The adjustment will therefore decrease the housing fund contribution rate for both the employers and employees with contribution bases over RMB 25,044.

For example, consider an employee whose contribution base is RMB 30,000 (US$4,534.65) and whose contribution rate is five percent:

  • Before July 1, 2018, the housing fund contribution amount for the employer and the employee is RMB 1,500 (US$226.73) [RMB 30,000 x 5%] each;
  • Starting from July 1, 2018, the housing fund contribution amount for the employer and the employee is RMB 1,252.20 (US$189.28) [25,044 x 5%] each.

For existing staff who have registered a monthly contribution base more than RMB 25,044, the Shenzhen Housing fund system will automatically adjust the monthly base to RMB 25,044.

Employers are not required to proceed with any formalities to the housing fund center.

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However, businesses are advised to inform staff the change of housing fund policy in a timely manner to avoid any possible misunderstanding from the employees.

Employers should also consider that in Shenzhen, some foreigners are able to participate in the housing scheme, meaning that foreign employees should also be alerted to the change.

Shenzhen’s change to its housing fund scheme is in accordance with a national campaign to implement similar reforms nationwide.

On April 28, 2018 the Ministry of Housing and Urban-Rule Development, the Ministry of Finance, and the People’s Bank of China jointly issued the Circular about Improving the Housing Fund’s Contribution Mechanism and Further Lowering Enterprise Cost, which instructed jurisdictions across China to lower housing fund costs for businesses.

Most cities in China, however, already implement housing fund caps at three times the local average salary, which previously made Shenzhen somewhat of an outlier.


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