What Is a Social Security Cap?

The social insurance base is referred to as the social insurance base, which refers to the social insurance contribution base for employees in a social insurance year. It is determined based on the monthly average of all salaries earned by employees from January to December of the previous year. The social insurance payment base is an important basis for calculating the payment of social insurance premiums and employee social insurance benefits by the employer and its employees. There are upper and lower limits, and the specific amount depends on the actual situation in each region. ^[1]

Social Insurance Base

Social insurance is the core part of the social security system. It refers to the state as the main body, which is implemented by specialized institutions of laws and regulations. It uses social forces to raise funds from workers and their employers through legislative means to establish special funds. A system that guarantees a certain degree of income compensation after workers lose their labor income, thereby ensuring the normal operation of labor reproduction and expanding reproduction, and ensuring social stability. The Chinese social insurance authority is the Ministry of Human Resources and Social Security of the People's Republic of China. ^[2]

Every July, the participating units must go to the municipal social insurance fee collection management center or district social insurance office (collectively referred to as the hereinafter

Individual employees take the monthly average of their total wages for the previous year as the monthly payment base for the current year, of which: new employees in the unit use the full-month wage income of the month in which the employee starts to pay as the base for payment; The sum of the monthly payment base of the insured employees is taken as the monthly payment base of the unit.

The total wage and income of employees in the previous year refers to all monetary income obtained by employees during the entire calendar year from January 1 to December 31 of the previous year, including hourly wages, piece rate wages, bonuses, allowances and subsidies, and overtime Wages, wages paid under special circumstances.

In view of the various forms of wage distribution by employers, employees should pay attention to the following aspects when determining the payment base:

(1) All social insurance premiums, housing provident funds, and individual tax adjustments directly withheld from the employee's salary shall be included in the payment base.

(2) Transportation subsidies, telephone subsidies, lunch subsidies, holiday expenses, and allowances for special positions such as high temperature, high altitude, underground, poisonous and harmful, etc., which are paid by the unit to employees in cash or bank deposits, shall be included in the payment base.

(3) The wages paid to the individual workers by the unit through the after-tax profit commission or dividends shall be included in the payment base.

(4) The employees who implement the basic salary system shall receive the income based on the turnover or the operating performance commission, which shall be included in the payment base.

(5) 60% of the contracted income of employees who carry out business contracting or expense contracting and the unit no longer reimburses travel expenses shall be included in the payment base.

The upper limit of the payment base means that the part of the employee's salary income that exceeds the arithmetical average of the average monthly salary of the employed employees of the province and the city by more than 300% in the previous year is not included in the payment base;

The lower limit of the payment base means that the employee's salary income is lower than the 60% of the average monthly average wage of the provincial and municipal on-the-job employees in the previous year.

There are upper and lower limits for social insurance payment bases, and the minimum must not be lower than 60% of the city's average monthly salary of employees in the previous year (private enterprise employees, self-employed industrial and commercial employees, and non-city employees).

For violations of social insurance laws and regulations by employers, concealment, underreporting and underreporting of social insurance payment bases, and infringing on the legal rights and interests of workers' social insurance, workers can report complaints to the local social security agency or labor security supervision agency. According to Article 27 of the Labor Security Supervision Regulations (Order No. 423 of the State Council), the labor security administrative department will order it to make corrections and impose a fine of between 1 and 3 times the amount of wages withheld.

Insured units should report their payment bases by way of offer, and social insurance agencies provide copying services; social insurance premium declaration and payment of A-rated credit units and other social insurance trustworthy entities with good integrity can implement online payment base reporting. Freelancers will start to pay the bank to make payment base declaration on July 1st. If they do not report, the bank will not deduct the payment. Those who have joined the medical insurance will interrupt the payment, which will affect their personal enjoyment of medical insurance.