Recently, I often hear from semiconductor company bosses around me that operating costs are too high, while employees feel they are underpaid. The reason is that a large part of the company’s actual costs are not accounted for by the employees. Why is this?
In fact, high operating costs for companies are largely due to high labor costs. Let’s break it down specifically.
Suppose an employee’s pre-tax monthly salary is 10,000 RMB. How much does the company actually spend?
Based on the company paying all social security contributions (DiskMFR confirmed through Baidu that the payment ratios for the “five insurances” are: pension insurance: employer 16%, employee 8%; medical insurance: employer 6%, employee 2%; unemployment insurance: employer 2%, employee 1%; maternity insurance 1%, all borne by the employer; work injury insurance 0.8%, all borne by the employer. Employees do not contribute to maternity and work injury insurance), the calculations are as follows:
- Medical insurance: employee 2%, employer 6%; Pension insurance: employee 8%, employer 16%;
- Unemployment insurance: employee 1%, employer 2%;
- Work injury insurance: employee 0%, employer 1%;
- Maternity insurance: employee 0%, employer 1%;
Housing provident fund: employee 5-12%, employer 5-12%. The housing provident fund is a floating ratio, with the minimum contribution ratio for both employee and employer being 5%, and the maximum being 12%. Generally, most small and medium-sized private enterprises contribute at 5% or not at all. Supplementary housing provident fund is not mentioned as most companies, including Shida Xiaosheng, do not have it.
Enterprise annuity: not mentioned either, as many companies do not have it. It is part of supplementary pension, with both employee and employer contributions being optional.
Moreover, the insurance and provident fund are not calculated based on the salary you receive but on the contribution base set by the company. Medical insurance is calculated at least based on the average social wage. It is adjusted annually and has an upper limit.
So, for the five insurances, you pay 11% while the company pays an additional 26%. For the five insurances and one fund, you pay 23% while the company pays 38% (assuming the company has good benefits and pays the maximum provident fund contribution rate of 12%). Therefore, if you pay 1,100 RMB each month, the company pays around 1,800 RMB.
This is the difficulty of business operations. In addition to paying the required taxes, they also bear extra labor costs.
For Example
If an employee’s pre-tax monthly salary is 10,000 RMB and the company sets the five insurances and one fund contribution base at 10,000 RMB, the employee can only take home 7,454.30 RMB, while the company actually spends 14,410 RMB.
- Employee contributions
Social insurance and provident fund payment details:
- Pension insurance 8%: 800 RMB;
- Medical insurance 2%: 200 RMB;
- Unemployment insurance 1%: 100 RMB;
- Housing provident fund 12%: 1,200 RMB;
- Total personal contributions: 2,300 RMB;
- Personal income tax: 290 RMB.
Total: 2,590 RMB.
- Employer contributions
Social insurance and provident fund payment details:
- Pension insurance 16%: 1,600 RMB;
- Medical insurance 6%: 600 RMB;
- Unemployment insurance 2%: 200 RMB;
- Work injury insurance 1%: 100 RMB;
- Maternity insurance 1%: 100 RMB;
- Housing provident fund 12%: 1,200 RMB.
Total employer contributions: 3,800 RMB.
From the above calculations, it can be seen that if the pre-tax monthly salary is 10,000 RMB:
Employee’s actual take-home pay: 10,000 – 2,590 = 7,410 RMB Total employer labor cost: 10,000 + 3,800 = 13,800 RMB
Some netizens have calculated labor costs based on a net salary of 10,000 RMB. Let’s see the situation for a net take-home of 10,000 RMB (ignoring the personal income tax threshold and regional differences in contribution rates).
According to this calculation, for a net take-home of 10,000 RMB (including allowances, bonuses, benefits, labor protection, etc.), the total expenditure from a financial perspective is 18,815 RMB.
In fact, there are many hidden costs that companies need to bear, such as training costs, turnover costs, and humanistic care costs. Training costs are divided into skills training costs (directly matching the employee’s job content) and cultural training costs (ensuring the employee can stay with the company longer). Turnover costs include compensation if the employee leaves due to company reasons, as well as the cost of recruiting and training new employees and the cost of covering the workload during the turnover period. Humanistic care costs are increasingly important nowadays, such as team building, internal activities, birthday parties, various holiday gifts/cash, etc., which are indispensable costs.
Related:
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