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Legal Update

Social Insurance Contributions for Foreigners Employed in China

14 September 2011
Mayer Brown JSM Legal Update


On 6 September 2011, the PRC Ministry of Human Resources and Social Security issued the Tentative Measures on Participation in PRC Social Insurance of Foreigners Employed in China ( the "New Rules"), which will take effect from 15 October 2011.

Under the New Rules, from 15 October 2011, all foreigners legally working in China (and their employers) shall pay social insurance contributions in respect of pension, medical care, work-related injury, unemployment and maternity insurance under PRC law.

In many localities of China, social insurance contributions for foreigners is currently either not compulsory (e.g. in Shanghai), or compulsory only for certain items of social insurance contributions (e.g. in Beijing). Therefore, local implementation regulations of the New Rules are expected to be issued in the near future.

Many questions of both foreign employees and their employers however remain unanswered. For instance, how will the penalties for non-compliance be applied where the local authorities have not yet established the mechanism for contribution for foreign employees? Since Hong Kong, Macau and Taiwan residents employed in Mainland China are apparently excluded from the definition of "foreigner" for the purpose of the New Rules, what rules of social insurance contributions shall apply to such residents? Will there be exemptions or partial exemptions for employers who already have private medical/maternity/retirement insurance schemes (often with better benefits than those statutorily prescribed)? How will maternity insurance (which rules are formulated around China's family planning laws) be applied to foreign female employees not subject to these laws? How will unemployment benefits apply to foreign employees who lost their jobs and are back in their home countries jobless? It is hoped that further specific measures at both national and local levels will be issued to address these issues.

Nevertheless, we set out below the salient provisions of the New Rules.

Full Update

1. The coverage of "foreigners"

Under the New Rules, foreigners falling into the following categories shall participate in the PRC social insurance scheme:

  1. a non-PRC national who has obtained his/her PRC work permit and residence permit. The work permit generally refers to the "Alien Employment Permit (??????)", "Foreign Expert Certificate (?????)" and "Press Card (???????)" etc.; and
  2. a non-PRC national who has obtained the "Alien Permanent Residence Permit (????????)" and been legally employed in the territory of the PRC.

2. The coverage of "employers"

Enterprises, public service entities, social organisations, private non-enterprise entities, foundations, law firms, accounting firms and other organisations legally registered in the territory of the PRC ("PRC Employers") shall contribute to PRC social insurance for foreigners they have legally employed.

If a foreigner signs an employment contract with a foreign company and is seconded to work for its PRC branch or representative organisation ("PRC Entity", which should include a representative office or a news bureau), the PRC Entity shall contribute to PRC social insurance for such foreign employee.

3. Components of PRC social insurance

The PRC Employer/PRC Entity and the relevant foreign employee shall pay contributions related to pension, medical care, work-related injury, unemployment and maternity insurance.

4. Filing requirement

The PRC Employer/PRC Entity shall, within 30 days of obtaining the PRC work permit of the foreigner, fulfil the social insurance registration formalities for such foreigner.

5. Foreigner's enjoyment of the PRC social insurance benefits

If the foreigner leaves China before he/she meets the requirements for enjoying pension under the PRC law, he/she can take either of the following options:

  1. Retaining his/her personal social insurance account, which will resume to accumulate contributions upon his/her returning and being employed in China again; or
  2. Upon his/her written application, terminating his/her PRC social insurance account, and being paid with the balance of his/her personal social insurance account in a lump sum.

If the foreigner is deceased, the balance of his/her personal social insurance account can be legally inherited.

If the foreigner has become qualified to enjoy his/her PRC social insurance benefits on a monthly basis (e.g. pension) but resides outside China, he/she shall provide a certificate of being alive ("Alive Certificate") to the relevant PRC social insurance authority at least once per year. Such Alive Certificate should be issued by the PRC embassy or consulate, or notarised by the relevant authority of the country where he/she resides and by the relevant PRC embassy or consulate.

The Alive Certificate above can be waived if the foreigner legally enters into China and attends at the relevant PRC social insurance authority to prove that he/she is still alive.

6. Dispute resolution

In case of any social insurance dispute between the foreigner and the PRC Employer/PRC Entity, either party can apply for mediation, arbitration or bring a lawsuit against the other party (whether these channels are cumulative is uncertain at this time).

The foreigner may also lodge a complaint at the social insurance authority in case of the PRC Employer/PRC Entity's breach of his/her social insurance rights.

7. Bilateral or multilateral treaty

If there is any bilateral or multilateral treaty regarding social insurance between China and a foreign country, the social insurance contribution issues of the citizen of such foreign country are subject to the relevant treaty.

8. Penalty on breach

If the PRC Employer/PRC Entity fails to fulfil the social insurance registration requirement for the foreigner, it will be ordered by the social insurance authority to rectify such failure within a specified period. If it fails to do so, it will be fined at 1-3 times the amount of the overdue social insurance contribution, and the management personnel and other personnel who are directly responsible shall be fined between RMB 500 to RMB 3,000.

If the PRC Employer/PRC Entity fails to make social insurance contributions in full and on time, it will be ordered to make up all unpaid amounts within a specified period and be fined at 0.05% of the unpaid amount per day from the date on which the contribution becomes due. If the PRC Employer/PRC Entity fails to make the overdue contributions within the time limit above, it will be imposed with a fine of 1-3 times of the overdue amount.

For inquiries related to this Legal Update, please contact the following persons or your usual contacts with our firm.

Andy Yeo ( )

Rachel Zhang ( )

Learn more about our PRC offices and Employment & Benefits practice.

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