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China's New Social Security Scheme for Foreigners

by Henry Tan, Nexia International, 18 October 2011

topics:
Human Capital Management Law and Compliance

tags:
foreigners in China maternity medical insurance old age insurance social insurance system unemployment insurance work injury insurance

New measures have come into force clarifying the social security insurance requirements on foreign employees working in China. The “Interim Measures for Participation in the Social Insurance System by Foreigners Employed in China” took effect on 15 October 2011 and has potentially costly implications for employers and foreign employees alike.

It was introduced after China’s latest Social Security Law included a requirement that foreign employees must participate in the country’s social security system, but failed to explain how.

While the current measures provide guidance, the local social security offices will determine much of how the programme is implemented and enforced. To minimise both costs and surprises, employers of foreign workers should engage in discussions with their local social security offices at the earliest possible opportunity.

Mandatory for foreigners

Participation is mandatory for all foreigners who sign employment contracts with employers outside of China and are sent to work in subsidiaries and representative offices registered or incorporated in China. Foreign workers employed directly by Chinese businesses must also comply.

Article 2 of the Interim Measures defines a “foreigner working within the territory of China” as a non-Chinese national who has been granted the Permanent Residence Permit of Foreigners and possesses an employment permit such as:

Employment Permit for Foreigners
Foreign Expert Certificate
Resident Foreign Correspondent’s Press Card

Both employers and foreign employees will contribute towards the cost of the insurance, which covers the following:

basic old-age insurance
basic medical insurance
work injury insurance
unemployment insurance
maternity insurance

The local social security offices will determine the exact contribution rates. We believe that they are likely to be up to a maximum of 12% of salary for employees and 38% for employers. At present, the combined contribution total is capped at around RMB5,600 per month per foreign employee.

The new social security measures are expected to provide benefits to foreign employees similar to those enjoyed by local Chinese employees. However, with the exception of the pensions programme, information has yet to be released on how foreigners can apply for these benefits.

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