Gov't to Give Employees 60 Pct Pay Hike as Part of Pension Reform

(Beijing) – China’s 39 million civil servants and public workers will get a pay raise of at least 60 percent of their base salaries as part of pension plan overhaul.

Hu Xiaoyi, a vice minister of human resources and social security, said at a press conference on January 20 that government agencies and public institutions have been notified of detailed plans for the salary increase.

"[The pay raise] will make sure that the overall incomes for most of these workers will not decrease after the reform and some of them could actually earn a bit more," he said.

Hu did not provide details of the plan, which will cover civil servants and public workers, such as teachers and doctors.

Copies of documents obtained by Caixin show that top civil servants, including President Xi Jinping and Premier Li Keqiang, will see their base salaries rise from 7,020 to 11,385 yuan starting in October. The base salaries of the lowest civil servants would more than double to 1,320 yuan. It is unclear if the plans Caixin saw are final.

Data from the State Administration of Civil Service show that China had nearly 7.2 million civil servants and more than 31.5 million public-sector workers employed by institutions such as schools and hospitals at the end of 2013.

Those workers do not contribute to pension fund, meaning taxpayers fund their retirements.

A reform announced on January 14 by the State Council, China’s cabinet, will see civil servants and public workers start to contribute to the pension program starting in October. They will make contributions similar to those private-sectors workers have been making since the late 1990s.

Government agencies and public institutions will pay 20 percent of their workers' base salaries to the pension fund on behalf of their employees. The employees will contribute 8 percent of their salary.

The reform plan says government agencies and public institutions should also introduce an income annuity program for employees. That change will see employers contribute 8 percent of their employees’ salaries to an annuity fund, while employees pay 4 percent. The annuity program will provide retirees with another monthly payment.

Hu Jiye, a professor at the Center for Law and Economics at the China University of Political Science and Law in Beijing, said the annuity program and pension scheme will ensure government employees and public workers enjoy the same level of benefits after the reform. That assurance will help the reform make smooth progress, Hu said.

Data from the China Statistical Yearbook show that in 2011 the average government pension paid 2,175 yuan a month per retiree. A private sector pension paid 1,508 per month.

Pension reform is partly aimed at closing this gap. However, the version of the annuity program for private sector employees will only cover 6 percent of them because it is not compulsory, Zhang Chewei, a labor economics expert at the Chinese Academy of Social Sciences, told the Oriental Morning Post.

Some analysts say that the gap will remain an issue in the near term, but over a longer period the authorities could narrow it by pushing more employers to join the annuity program.

(Rewritten by Li Rongde)