Social insurance for foreigners in China plays a crucial role in ensuring their well-being, legal compliance, and long-term financial security. These programs, often mandatory, encompass health insurance, retirement benefits, and access to various social welfare provisions. Understanding the significance of social insurance is essential for foreigners living and working in China, as it not only safeguards their health and finances but also facilitates legal compliance, job opportunities, and integration into Chinese society. In this article, we’ll explore the importance and implications of social insurance for foreign residents in China.
As the number of foreigners looking for job opportunities in China continues to rise, inquiries often emerge regarding their responsibilities concerning social insurance contributions within the country. Although certain individuals may have already made social security payments in their home nations, the Ministry of Human Resources and Social Security (MOHRSS) makes it clear that social security contributions are obligatory for foreign workers in China.
Social insurance in China
As in the “Interim Measures for the Participation in Social Insurance of Foreigners Employed in China, 2011,” the Ministry of Human Resources and Social Security mandates the inclusion of foreign employees working in China within its social insurance program. In accordance with Chinese labor regulations, any foreign national employed by a legally registered entity in China or assigned to work at a registered branch or representative office of a foreign company is obligated to partake in the following insurance categories: basic pension insurance for employees, basic medical insurance for employees, work injury insurance, unemployment insurance, and maternity insurance.
China’s social insurance framework encompasses five distinct categories: pension, medical, unemployment, work-related injury, and maternity insurance. Typically, employees and employers collaborate in contributing to pension, medical, and unemployment insurance. However, it is customary for employers to exclusively fund work-related injury and maternity insurance on behalf of their employees.
However, there are variations and discrepancies that persist across different cities in China. Consequently, the majority of major urban centers have established their specific guidelines and prerequisites for foreign employees. As not all regional authorities have aligned their regulations with international social security agreements, obtaining exemptions can be challenging. However, employees from some countries that have bilateral agreements with China are eligible for exemptions from social insurance contributions.
What are the applicable countries?
China has entered into bilateral agreements with a number of countries. These agreements clearly specify the eligible groups of employees who can benefit from exemptions and outline the specific social insurance categories from which they are exempt. Similarly, Chinese employees dispatched to countries with such agreements will also enjoy exemptions from making certain social insurance contributions in those countries. It’s important to note that these exemptions are not applicable to all foreign employees but are limited to specific categories of workers.
Countries with Social Security Agreements with China:
Legal obligations enrolment of foreign employees for social insurance
As per the existing regulations, it is clear that starting from October 2011, Chinese employers have a clear obligation to register foreign employees, even those working in Shanghai, into the respective local statutory social insurance programs in China. In the past, these obligations were regarded as “non-compulsory” in Shanghai, and even today, some HR and legal experts continue to view them as non-mandatory, partly because of a previous local document known as “Hu Ren She Yang Fa.”
According to the relevant laws and current practices of labor and social insurance authorities in Shanghai, employers in Shanghai who have not fulfilled their social insurance obligations for foreign employees may face potential legal risks. These risks include potential demands from foreign employees, both current and former, to retroactively cover their social insurance contributions, potential late fees imposed by local social insurance authorities, and potential liabilities for the social benefits that foreign employees would have been entitled to, such as compensation for the inability to receive pensions in China after reaching the statutory retirement age. A
Additionally, a foreign employee could terminate their employment and claim statutory severance pay on the grounds of the employer’s failure to meet social insurance obligations.
Furthermore, it’s important to consider the following key points:
1. Potential effects on foreign employees’ individual income taxes in China due to their participation in social insurance.
2. Clarity on whether the employer will cover the employee’s share of contributions for foreign employees and how reimbursement might occur when these employees eventually depart China.
3. The formulation of a comprehensive implementation plan and timeline for contributing to social insurance on behalf of foreign employees. This should also encompass a communication strategy with social insurance authorities, particularly if there are multiple foreign employees involved.
Addressing Potential Double Payment
Concerns may also arise among foreign employees regarding the possibility of dual social insurance contributions, especially when they have already made such payments in their home countries. To address this issue, China has taken measures through bilateral agreements with certain nations. These nations are mentioned above. These agreements enable specific exemptions from social insurance payment obligations for eligible individuals. This means that citizens of these countries working in China may be eligible for relief from certain social insurance premiums if they meet the stipulated conditions in these bilateral agreements.
How to apply for premium exemptions
So you know you can apply for some exemption but do not know how. Don’t worry, we will guide you in this process. First of all, you should know that the exemption isn’t granted automatically. If your company has foreign employees, you’ll need to proactively apply for it with the appropriate bureaus. While the process of seeking insurance premium exemptions can differ from one region to another and depends on the specific agreement in place, there’s a standard procedure to follow.
The company employing foreign workers in China needs to provide the local Chinese social insurance bureau with the original certification of insurance issued by a relevant entity in the foreign worker’s home country. This documentation will undergo verification, and a copy will be kept for record-keeping purposes. Once the verification process is complete, which may include additional checks and certifications if necessary, the employee in question becomes eligible for exemption from the relevant social insurance payments.
The length of the exemption period may differ.
What happens to your social insurance if you leave China?
According to the Interim Measures, if foreign individuals depart China before reaching the country’s legal retirement age, their social insurance individual account will be preserved and will be incrementally renewed upon their return to work in China. For foreigners who have contributed to the social insurance system, there are two options:
Cumulative Payment Period: If they wish to keep their social insurance accounts, they can do so. If they return to work in China in the future, they can resume making contributions and continue to accrue benefits based on their previous payment history.
Lump-Sum Payment: Alternatively, foreign employees have the choice to submit a written request to terminate their social insurance affiliation. In this scenario, they can opt to receive a one-time lump-sum payment equivalent to the balance in their personal social insurance accounts.
Who bears the responsibility for collecting social security payments?
Commencing on January 1, 2019, the Reform Scheme for Enhancing the State Tax and Local Tax Collection Administration System stipulated that tax authorities would handle the collection of all social insurance premiums. Meanwhile, other policies pertaining to the social security payment base and rates would remain unchanged. While this new regulation has yet to be fully implemented in most cities, we anticipate that tax authorities will increasingly leverage big data to gather information about enterprises. Consequently, this is expected to lead to heightened compliance expectations for businesses.
All in all
The landscape of social insurance in China is influenced by international agreements, regional variations, and evolving regulations. While certain exemptions are available through bilateral agreements with specific countries, compliance remains a critical aspect of the employment landscape in China. Employers are tasked with registering foreign employees in the local social insurance programs, and failure to do so can result in legal consequences. In summary, the employer and the employee should pay five social insurance premiums:
Basic old-age insurance for employees (pension);
Basic medical insurance for employees;
Work-related injury insurance;
Unemployment insurance; and