NEW LEGISLATION YOU NEED TO KNOW House Funds Plan / 深圳市住房公积金制度改革方案 深府[ 2009]107号; By Ella Xu

A 17 year old law previously existing in name only in Southern China, about House Funds, will be modified and actually enforced starting in 2009. This will create another major impact to most of the companies that are already starting to follow the new nationwide Labor Law and Labor Contracting Law of PR China in 2008.

Those 2008 amendments created things like a Labor Arbitration Tribunal, seeking to protect workers rights against abusive employers, required actually writing down employment agreement (imagine that!) and other basic and objectively reasonable sets of protections. We have been a long standing supporter of those amendments, which were an unfortunate necessity based on the way some employers treated their employees.

In Shanghai, Beijing and Zhejiang Province, the House Funds Law – a component of the Chinese ‘social insurance’ framework – had been implemented (and actually followed) very well in the past years. Almost all of the local enterprises there, including both state-owned and private companies, have already been paying into the house funds program for their employees. That rate was set at 13% and was carried by the employer 100%.

But down here in Shenzhen, because of some particular local political reasons, only a few owners paid into this savings program for their employees and the local government did not require mandatory compliance before. It was one of those pieces of legislation that existed in writing only and neither private enterprise nor the government paid any attention to it. This reminds one of the Chinese saying, the sky is wide and the Emperor is far away.

From May 2009, the Shenzhen Government changed the current situation and has publicized a rather innovate plan where the amounts paid are quite a bit lower and the burden is shared by both the employer and employee.

【2009(107)】 . Hereinafter is the abstract of this new plan.

Deposit subject of housing accumulation fund
The local government organs, state-owned company, investment of town cooperative, foreign investment enterprise, town private business and other town business, institutional unit, unit run by the local people, social group and other native on-the-job workers must deposit the housing accumulation fund. The unit can refer to relative principles deposit the housing accumulation fund for non- household register on-the-job workers.

Other enterprises, town individual industrial and commercial businesses or free-lance professionals can apply for housing accumulation fund deposit.

The deposit base and proportion of housing accumulation fund
The individual workers and their units according to the deposit base to deposit a certain percentage of the housing accumulation fund. The fund deposit into the employees’ individual housing accumulation fund accounts, all principal and interest are owned by individual workers.

The monthly wage base of the housing accumulation fund deposit means the average monthly wage of previous year for workers, and the average monthly wages of workers should be included in the city's Bureau of Statistics provides statistics on the calculation of total wages.

The housing accumulation fund deposit ratio from both employee and unit shall not be less than 5%, the upper limit of the deposit ratio was draw out by the Municipal Housing Accumulation Fund Management Committee, audit by the municipal government, approval and put in practice by the provincial government. Under the circumstances, the unit can choose the proportion of deposit within the specified options.

If the unit inconvenient on the housing accumulation fund deposit, discussed and adopted by the unit of employees or unions on behalf of the General Assembly, audited by the Urban Housing Accumulation Fund Management Center, approved by the Urban Housing Accumulation Fund Management Committee, can reduce the proportion of deposit or postponement; if the economic efficiency has improved, to increasing the proportion of deposit in further or make a supplementary payment.

The finance operation of the housing accumulation fund
The Housing Accumulation Fund Management Committee in accordance with relevant provisions, established by the commission of the Commercial Bank (the trustee bank) to handling the finance operation of housing accumulation fund; the Housing Accumulation Fund Management Center in accordance with the provisions to providing the low-interest housing loans to the staff who participate the Housing Accumulation Fund, and entrust the trustee bank to transacting the loan, balance of the Housing Accumulation Fund and other finance operations and the establishment of housing accumulation fund accounts, deposit, restitution and other formalities. Housing Accumulation Fund to implement the "low deposit low loan ", deposit and lending rates of the interest rate stipulated by the state.

Extraction and use of housing accumulation fund
The Municipal Housing Accumulation Fund Management Center in accordance with national relevant provisions, and combine with the urban actual situation, normative housing accumulation fund for housing consumption, and other related projects to extract and use of management practices, approved by the Urban Housing Accumulation Fund Management Committee, and then implementation.

The process of system reformation and system construction to the housing accumulation fund
Before the end of May 2009, announce the plan and carry out the reform of the housing accumulation fund system.

From Jun. 2009 to the end of Dec. 2009, the Municipal Bureau of Land Real Estate is responsible for land preparation for the establishment of the Municipal Housing Accumulation Fund Management Committee and the Municipal Housing Accumulation Fund Management Center. Prior to the establishment in these two institutions, the Municipal Bureau of Land Real Estate (Municipal Housing Reform Office) in charge of housing accumulation fund system reform works, and looking for housing accumulation fund management with the specific methods and procedures, make basic work for the full implementation of the housing accumulation fund system.

Since Dec. 2010, the Municipal Housing Accumulation Fund Management Committee and the Municipal Housing Accumulation Fund Management Center operational.

During the year 2010, according to the reform progress of the municipal housing fund system, the municipal government organize relevant departments to drafting the urban housing accumulation fund management rules (draft), or regulations. Municipal finance department cooperate with labor and social security department to dealing with the existing housing fund clean-up, deposit transfer and other preparations.

This program implemented from the date of release.

Clearly, this will meet with some difficulty at the beginning of implementation. But it is coming.

So, we would suggest that all HR and Accounting managers remind their management to modify their budgets for Social Insurance and Personal Income Tax of all employees this quarter. If not, it is quite likely that an employer will lose a case canceling a Labor Contract or firing an employee if that employee chooses to file a claim at the Labor Arbitration Tribunal.