Good news | More salary on May Day

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Within two years starting from May 1, 2016, the contribution rate for housing provident funds will be reduced in stages; those rates that are higher than 12% will be adjusted accordingly. In case there are those who don’t know what a housing provident fund is, let’s explain it here. Housing provident fund refers to the long-term housing reserve funds contributed by **government agencies, state-owned enterprises, urban collective enterprises, foreign-invested enterprises, urban private enterprises and other urban enterprises, public institutions, privately-run non-enterprise organizations, social organizations, as well as their employed staff. In short, housing provident fund, as the name implies, is an employee’s long-term housing savings fund. The main parties involved are the organization where you work and yourself. Both parties contribute to the housing fund in different proportions. The specific ratio also varies from city to city. So, what impacts will the reduction in housing provident funds have on us? And how should housing provident funds be used properly? Let me explain in detail. According to the current regulations regarding social insurance policies in our country, the total contribution rate for the five types of social insurance – pension, medical care, unemployment, work-related injuries, and maternity insurance – is such that enterprises bear around 30% of the cost, while individuals contribute around 11%; thus, the overall social insurance rate exceeds 40%. There has long been a saying: assuming your pre-tax salary is 10,000 yuan, after deducting various social insurances and income tax, the amount you actually receive each month is 7,454 yuan, while the company’s actual expenditure is 14,410 yuan. The high insurance costs mean that some companies dare not raise wages. Given this, will salary increases come sooner than before? Starry eyes. If the social insurance contribution rate is reduced, the burden on enterprises is also lowered, which means employees receive more cash in their hands; meanwhile, it has no impact on pension benefits. In this way, you have more money to spend on things or to make investments that help increase the value of that money. Don’t tell me you have money but don’t know what to do with it! A decrease in the contribution rate for housing provident funds affects home purchases; if the contribution rate drops, the amount paid will change accordingly. The amount of housing fund contributed by entities and individuals each month = average monthly salary of the previous year x housing fund contribution rate. For example, if in 2015 your average monthly salary was 5,000 yuan: Before the adjustment, the contribution rate to the housing fund was 15%, meaning both the employer and the employee had to contribute 5,000 × 15% = 750 yuan each per month; the total monthly contribution to the housing fund was therefore 1,500 yuan. After the adjustment, the contribution rate dropped to 12%, so both parties now had to contribute 5,000 × 12% = 600 yuan each per month; the total monthly contribution to the housing fund became 1,200 yuan. The difference between the two amounts is 300 yuan, but the take-home salary increases by 150 yuan after the adjustment. Therefore, for those who are planning to buy a house, a reduction in the contribution rate for housing provident funds is not something to be particularly happy about.