Improvements to the disability employment security fund system

Since 2017, the European Chamber of Commerce in China has been advocating the Chinese Government to optimise the Chinese disability employment security fund system and take practical measures to help companies integrate people with disabilities into the workplace. In the European Chamber’s annual position papers, specific recommendations have been made regarding implementing a fairer system to employ and include people with disabilities at work. Over the years, certain aspects of the Chinese disability employment security fund system have been improved; and the government is taking more practical actions to promote the employment of people with disabilities. Jeanette Yu of CMS Legal looks at how the system has been enhanced so far.

Improvements to the Chinese disability employment security fund system

In 2007, China adopted a mandatory pro rata system for hiring people with disabilities, whereby companies are obliged to proportionally hire disabled individuals so that they constitute no less than 1.5 per cent of total staff. Companies unable to meet the quota are obliged to make contributions to the disability employment security fund (Fund). After 1^st October 2015, the Chinese Government started to mandatorily levy the Fund on companies that failed to meet the quota for hiring disabled persons. Over the years since then, some improvements have been made to the Fund system.

In 2019, the Chinese Government issued an Overall Plan for Improving the Disability Employment Security Fund System for Disabled Persons to Promote the Employment of People with Disabilities (Overall Plan),^[1] which became effective on 1^st January 2020. As a result, the Fund system has been improved in the following ways:

1. Contribution amount to the Fund becomes more reasonable

In 2015, companies failing to hire disabled persons in the ratio required by local governments were requested to pay contributions to the Fund calculated based on the total payroll of all staff, including foreign nationals. Only small and micro businesses of 20 employees or less were exempted from paying into the Fund for the first three years after its establishment. During that time, few companies were able to successfully hire disabled persons. Consequently, most had to make large contributions to the Fund, resulting in a disproportional increase in operating costs – especially for those in the high-technology and service industries, which generally have higher salaries.

Based on the Overall Plan, while the contribution amount to the Fund is still calculated based on the total payroll, it is capped at twice the average salary at a company’s location. Those that already employ disabled persons, even if below the statutory quota—though this will depend on the local ratio—can enjoy some exemptions in paying contributions to the Fund. In addition, small and micro businesses of 30 employees or less are exempted from paying into the Fund. All these policies have greatly reduced the Fund contributions burden for companies.

2. The Fund will prioritise supporting employment of disabled persons

Since 2016, the Fund has been levied nationwide, and constitutes a large share of local governments’ income. For example, in 2021, the total Fund levied by Hebei Province was Chinese yuan (CNY) 1.86 billion.^[2] While the Fund was originally used to subsidise both employment and the daily life expenses of disabled persons, according to the Overall Plan, the Fund now prioritises supporting employment of disabled persons, such as paying subsidies to companies that provide positions for disabled persons; purchasing or improving work facilities to accommodate disabled employees; paying training fees to mentors of disabled apprentices; or rewarding companies that hire more disabled persons than their quota. The new policies will provide more financial support for the employment of disabled persons.  

Practical actions to promote employment of people with disabilities

In addition, China’s Disabled Persons’ Federation released implementing rules for the Overall Plan on 3^rd March 2020,^[3]  while the State Council announced the Three Years’ Action Plan (2022 to 2024) on Promoting Employment of Disabled Persons on 25^th March 2022.^[4] According to the action plan, the government is targeting an increase in the employment of disabled persons nationwide by one million over the next three years. To achieve this, the following actions have been planned:

1. To set up a comprehensive database on employment of disabled persons

Information on both disabled persons and companies hiring disabled persons will be collected in one database. This will include basic personal information of the disabled persons as well as their circumstances, work experience, occupational skills, training record and their intention of employment, among other details; and the basic information of companies offering work positions to disabled persons. A database specifically for disabled undergraduate university students will also be established to ensure each student receives tailored guidance and service on employment before their graduation. This will help companies to identify appropriate candidates more easily.  

2. To establish an effective training system for disabled persons

The Disabled Persons’ Federation plans to set up occupational training institutions with a specific focus on realising increased employment of disabled persons. The institutions will provide standardised training programmes and certificate categories, and issue standardised training certificates. Companies will also be encouraged to participate in the establishment of these training systems and help the institutions to develop training programmes that will meet their specific needs. This will allow disabled persons to undergo effective and practical training, making it easier for them to adapt to companies’ requirements.         

3. To build a professional service system for employment of disabled persons

The government plans to set up a service system to facilitate the employment of disabled persons, such as encouraging the establishment of organisations/companies to provide related public services or human resource services. The government will also create a new official occupation of career counselors, who will specifically provide guidance on employment of disabled persons,  or procure public services for supporting such employment with government funds. The standardisation of the service for employment of disabled persons will also be promoted, to ensure the quality of service received by disabled persons. This will support both companies and disabled employees in quickly integrating together and reduce the risk of unsuccessful hires.

Based on the above improvements, it is believed that, in the future, China will have a fairer and more effective disability employment security fund system. Companies that intend to engage disabled persons in their business will find it easier to identify and hire the right candidates.

Jeanette Yu is partner, and head of Employment & Pensions, of CMS Legal China, and is based at their Shanghai office. She has more than 20 years’ experience in providing legal advice for international companies on Chinese labour law and compliance management issues. Since 2017, Jeanette has also been acting as the national chair/vice chair of the Human Resources Working Group of the European Chamber of Commerce in China.

^[1] Notice on the issuance of the ‘Overall Plan for Improving the Employment Security Fund System for the Disabled and Better Promoting the Employment of the Disabled’, State Council, 27^th December 2019, viewed 17 November 2022, <http://www.gov.cn/zhengce/zhengceku/2019-12/30/content_5465191.htm>

^[2] 2021 employment security fund for the disabled income at the provincial and provincial levels, Hebei Provincial Government,24^th August 2022, viewed 17^th November 2022, <http://czt.hebei.gov.cn/root17/zfxx/202208/t20220824_1661309.html>

^[3] The China Disabled Persons’ Federation on the implementation of the ‘Overall Plan on Improving the Disability Insurance System and Better Promoting the Employment of the Disabled’, State Council, 23^rd February 2021, viewed 17^th November 2022, <http://www.gov.cn/zhuanti/2021-02/23/content_5650152.htm>

^[4] State Council General Office issues a report on the promotion of persons with disabilities: Notice of the three-year Action Plan for Employment (2022-2024) GuoBan Fa [2022] No. 6, State Council, 25^th March 2022, <http://www.gov.cn/zhengce/zhengceku/2022-04/08/content_5684090.htm>