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Macro Economy: Burden on firms eased to save jobs

(China Daily)
Updated: 2008-12-22 07:18

Companies can delay contributions to pension funds and reduce the rates of various kinds of employee insurance, the government said on Sunday, in a bid to stem mounting job losses across various sectors as the global downturn bites into the Chinese economy.

"Companies are expected to pay hundreds of billions of yuan less in insurance and pension payments while tens of millions of jobs can be secured," three key ministries said in a statement yesterday, without providing detailed figures.

"The rates of basic medical, unemployment, workplace injury and maternity insurance for urban residents can be reduced (in some areas) by a proper margin for a maximum of 12 months" next year, they said.

Companies in financial difficulties can delay payment of social security funds for up to six months, the Ministry of Human Resources and Social Security, the Ministry of Finance and the State Administration of Taxation said.

But the rate of contribution to pension funds should not be cut, the statement said, without elaborating the criteria of "financial difficulty".

Companies typically pay 20 percent of an employee's basic salary to the pension fund while the employee pays 8 percent.

Medical insurance comprises payments of 6 percent of the salary by a company and 2 percent by the employee.

The ministries will also allow local governments to use unemployment insurance funds to subsidize jobs at struggling companies for a maximum of six months.

But only companies that promise not to lay off workers or cut only a small number of jobs will be subsidized.

All these measures, however, should not cause "a decline of people's social security benefits and a shortage of the funds that back social welfare", it said.

Other measures include:

Setting up of special funds to help train workers;

Encouraging employers and employees to negotiate and sign economic compensation agreements on job cuts.

The moves are the latest effort by the central government to stabilize the job market when the financial crisis is forcing many exporters and manufacturers to down their shutters or downsize operations.

Hundreds of thousands of more than 200 million migrant workers have lost their jobs and have had to head back home much before the Spring Festival, which falls on Jan 26.

China's urban registered unemployment rate stood at 4 percent in the third quarter, but may rise in the fourth quarter, officials said earlier.

(For more biz stories, please visit Industries)

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