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China has stepped up scrutiny of companies' social security payments by increasing reporting requirements in several regions and using tax and payroll data to identify discrepancies in employees' reported wages, according to a report by The Epoch Times.
The tighter enforcement comes amid mounting fiscal pressures, weak consumer demand, declining business activity and rising local government debt, conditions that have left many Chinese companies struggling with cash flow, the report said. According to The Epoch Times, several individuals in China spoke about the issue on condition of anonymity, citing concerns over possible repercussions. A factory manager at a garment-processing plant in Tianjin, identified by the surname Lu, said many companies in the industry had historically calculated social security contributions using a relatively low local minimum contribution base rather than employees' full wages. The practice, according to Lu, helped companies reduce labour costs but could also result in social security contributions being reported below employees' actual earnings. "That was the practice across the entire industry," Lu told The Epoch Times, adding that companies relied on the local minimum standard as long as the practice did not attract attention. Lu said companies that did not follow the practice could struggle to maintain their profit margins, particularly amid rising operational costs. The Epoch Times reported that tax authorities in Liaoning Province said in August that they had used cross-checks of tax data to identify irregularities in companies' social security declarations. In Guangdong Province, the provincial tax authority on July 2 required employers to report employees' wages for the 2026 social security year, including salaries, bonuses, allowances and subsidies. The report said employees are required to sign the declarations, while companies must retain the documents for inspection. According to Lu, the stricter measures are making it increasingly difficult for companies in some sectors to maintain their existing operations. He alleged that companies facing higher costs may be forced to reduce expenses through layoffs or greater use of automation. "The Chinese Communist Party (CCP) is squeezing us hard," Lu was quoted as saying by The Epoch Times. The increased enforcement is being implemented alongside broader efforts by Chinese authorities to digitise tax administration, according to the report. The report noted that accurate social security contributions can affect workers' eligibility for benefits, meaning that underreporting wages can have consequences for employees as well as employers. (ANI)
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