More bad news from the school sticker shock department: brace yourself for increased costs from international schools next year as the effects of China’s new social insurance laws for foreigners begins to take effect.
Most expats have already heard news of China’s new social insurance laws that will now require foreigners to pay into the social security system, which covers medical insurance, retirement, unemployment insurance and the like. The net effect for this is an increased cost of hiring expats of an estimated 33% to 39% of an employee’s base salary.
For international schools, which are heavily dependent on foreign staff, this could be a massive increase in operating costs. A recent article from USA Today put it in these real terms:
At international schools, which employ a large number of foreigners, expatriate salaries and other costs make up about 70% of operating expenses, according to the American Chamber of Commerce in China. The foreigners’ tax could raise one unnamed international school’s operating expenses by 30%, which would "threaten the financial viability of the school," the chamber says in comments posted on its website. AmCham says that contributions to China’s unemployment and maternity insurance program should be voluntary, as many employees already receive such benefits in their own countries or through personal insurance.
The law will also drive up the already-high cost of international school education, says Tim McDonald, headmaster of the International Academy of Beijing, a Christian school that serves the expat community. More than half of the academy’s 70 staff members are foreigners.
With international school fees in Beijing hovering around RMB 200,000 a year already, one begins to wonder: how much higher could it go? To offset an operating cost increas of 30%, are we looking at an average of RMB 260,000 next year? Expressed in US dollar terms, that’s more than a year of tuition at Harvard.