Highlight: The new Measures concerning foreigners’ participation in the local social insurance in China has come into effect recently. In this essay, we would like to introduce you the detailed regulations of the new document.
As provided in the Article 97 of the Social Insurance Law, P.R.C, which has come into effect from 2011.7.1, all foreign workers with a valid work permit could be covered by the social security program. However, according to the reply from the hotline of the Shanghai Municipal Human Resources and Social Security Bureau, the participation in the program is on worker’s own choice as agreed in their labor contracts instead of being mandatory.
On 6th Sep. 2011, the Interim Measures for the Participation in Social Security of Foreigners Employed in China (the “Measures”) was promulgated by the Ministry of Human Resources and Social Security, P.R.C, which is enforced from 15th Oct. 2011. With the enforcement of the Interim Measures, all the foreigners legally working in China shall be involved in the social benefits and local detailed regulations shall be drafted on the Measures which stipulates the specific insurance base and the proportion.
◇ Foreign Nationals Must Participate in China’s Social Security System
The foreign nationals working in China as provided in the Measures refer to those non-Chinese citizens legally working in China who has been granted employment certificates and foreigner residence permit certificates such as Work Permit for Foreigners, Foreign Expert Certificate and Permit for Permanent Foreign Journalists, as well as Foreigner Permanent Residence Certificate.(by the Article 2 of the Measures)
◇ The foreigners covered by the insurance program shall first be legally permitted working in China, among whom they shall either be employed by organizations, duly incorporated or registered in China such as enterprises, public institutions, social organizations, private non-enterprise entities, foundations, law firms, accounting firms, or have concluded an employment contract with his/her overseas employer and then is dispatched to any branch or representative office duly incorporated or registered in China. (by the Article 3 of the Measures)
The Employer registered in China or the receiving offices or branches in China shall conduct the social insurance registration for the foreigner within 30 days upon issuance of his/her employment certificate. (by the Article 4 of the Measures)
◇ Where a foreigner participating in the social insurances satisfies the prescribed conditions, he/she may enjoy the social insurance benefits. Where a foreigner departs China prior to the stipulated age for receiving pension, his or her individual account will be retained. Where the foreigner re-enters China for employment, the payment period can be calculated cumulatively. Upon written application by the foreigner, the social insurance agency can pay the foreigner the amount in his or her individual account in a lump sum and terminate the basic pension relationship. (by the Article 5 of the Measures)
◇ The Measures also demands the local social insurance administrative authorities to supervise and inspect the participation of foreigners in social insurances. Where an Employer employs any foreign who does not hold a valid employment certificate or the Foreigner Permanent Residence Certificate or where an Employer or a Domestic Work Unit fails to complete the social insurance registration for any employed foreigner, or fails to pay the social insurance premium for any foreigner, it shall be handled in accordance with the applicable laws, regulations and rules. (by the Article 11 of the Measures)
◇The influence hereby produced on the employer and employee.
With the enforcement of the Measures, the employment cost for foreign invested companies in China will be increased after expats’ participation in the insurance. The premium shall be paid by the detailed local base and proportion, take Shanghai as instance, the set maximum insurance base is the triple of the average monthly salary of last year, which refers to those remuneration paid in cash including time wage, piece wage, bonus, allowance and subsidy, salary for extended working time and special working payment, and the minimum one shall be the 60% of the average monthly salary of last year. The specific maximum and minimum insurance bases of 2010 in Shanghai are respectively RMB 11,688 yuan and RMB 2,388 yuan as issued by the Shanghai Human Resources and Social Security Administration. For the remuneration of foreign workers are usually higher than the maximum, the monthly payable premium of expats working in Shanghai is RMB 5,600 yuan calculated from the maximum base of RMB 11,688 yuan, with RMB 4, 386 yuan taken by the employer and RMB 1,286 yuan taken by the employee.
The implementation of the Measures may lead to the problem of double-payment of the premium in China and home country of foreigners. Furthermore, the pension receiving period in China is 15 years, however few dispatched expats could meet such demands and thus no pension could be received by them in China. Furthermore, the benefits for foreign workers after their participation in the insurance of unemployment, maternity, work-related injury and medical remain unknown or unclear. For example, foreign employers will leave China when the employment is terminated and the certificate is cancelled, and in such case, they are not legally permitted to apply for the social insurance benefits. To settle the double-payment problem, Japan has begun to negotiate with China for the bilateral treaty on social security.
◇The Sino-Japan treaty of social security
Once the treaty could be entered into between the parties, the Japanese employers dispatched to China shall only pay the social insurance premium in its home country, while those premiums legally payable in China could be exempted after relevant administrative formalities, thus could relieve the burden of both employers and employees.
As provided in the Article 9 of the Measures, social insurance for foreigners employed in China with nationalities of countries who have concluded bilateral or multilateral treaties upon social insurance with China shall be handled in accordance with respective treaties. That means once a country has signed treaty with China, then the social insurance of its nationals working in China shall be handled by the concluded treaty.
China has only concluded bilateral treaty on social insurance with Germany and Korea till now, and Japan is negotiating with China for the signing. Generally, the negotiation may take 1 and half year at least, and another 1 year is demanded before the enforcement of the concluded treaty. With the consideration of great number of Japanese workers in China, Japan is setting up the talk with China. However, after the enforcement of the Measures, the double-payment problem may still afflict Japan and China once there is no transitional measure issued before the signing of the treaty. Therefore, it shall be paid close attention to the latest development of the related policies between China and Japan.
Author: Ms. Meng Jie
Attorney-at-law of DeBund and Bridge IP Commentary;
Co-author: Mr. You Yunting
the Founder & Editor-in-Chief of Bridge IP Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
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