Essays on State Pension System in China and Its Impact on Employee Benefit Practices for Companies Case Study

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The paper "State Pension System in China and Its Impact on Employee Benefit Practices for Companies" is an outstanding example of a management case study.   The state of the pension system in China is complex. From increased fragmentation of different schemes under different administrative bodies to the need to grow the different types of assets under the system, the Chinese pension system is characterised by many factors which not only define its current state but also present a number of challenges for its future. This is because of the many demographic and social changes that the country is currently experiencing.

Also, the complexity in the Chinese pension system arises from the fact that the system has undergone tremendous changes in the past decades. Social and economic transformation has resulted in many changes in the general administration of different funds under the system. On the other hand, the pension system bears a strong impact on the way companies manage the benefits of their employees. This paper examines the current state of the pension system in China and evaluates its impact on company benefits, including retirement benefit practices in China.

It presents the following information: a brief account of the history of the pension system in China over the years; a detailed description of the current system; and lastly, ways in which the pension system has affected the practice of employee benefits for companies in China. In order to understand the impact of the pension system on the practice of employee benefits in companies in china, it is important to take into consideration the historical developments of the public pension system in the country. According to Dorfman et al.

(2013, p. 35), the Chinese pension system has undergone tremendous changes in the last five decades. These changes have been a reflection of the social, economic and political transformations that have been taking place not only within the country but also globally as a result of the changes brought about by globalisation. In the early 1950s and 1960s, the social security system in China consisted of the following benefits: guaranteed employment, medical care, pensions and other social welfare benefits (Jiange 2005, p. 16). Under the system, all state-owned enterprises were tasked with the responsibility of ensuring that their employees enjoyed all these benefits apart from supporting their retirees from their current revenue (Sha 2003, p.

18). One important characteristic of the old system is that the workers did not have to make any contributions. In the event of the employer contributions, which were set at 3% of the total wage bill, being insufficient, the state budget would allocate more resources to the scheme. Another characteristic of the early system is that it tended to ignore the rural population.

According to Impavido, Hu and Li (2009, p. 29), the system favoured the young urban population at the expense of the majority of the rural population who did not have any formal systems of pension and other old-age benefits. Lastly, because the system actually covered the relatively young workforce in the urban areas, the demands on the system were relatively few. This resulted in a substantial build-up of surplus resources within the system during the early years (Jiange 2006, p. 21).

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