China: China has enacted its first Social Security Law

The Social Security Law of the People's Republic of China ("Law") was passed during the 11th session of the Standing Committee of the National People's Congress of China on 28 October 2010. The Law will take effect as of 1 July 2011. Before its promulgation, the social security policies were scattered throughout a range of rules and regulations at both national and local levels. The Law is the first comprehensive law of the PRC to address social securities and their related administrative issues. In addition to consolidating various existing social security rules and regulations, the Law also introduces some new provisions and policies.

To view the article in full, please see below:



Full Article

The Social Security Law of the People's Republic of China ("Law") was passed during the 11th session of the Standing Committee of the National People's Congress of China on 28 October 2010. The Law will take effect as of 1 July 2011. Before its promulgation, the social security policies were scattered throughout a range of rules and regulations at both national and local levels. The Law is the first comprehensive law of the PRC to address social securities and their related administrative issues. In addition to consolidating various existing social security rules and regulations, the Law also introduces some new provisions and policies.

The key aspects of the Law are as follows:

Basic Social Security Scheme

The Law, for the first time, expressly clarifies that in China the social security system basically contains five types of insurances, that is (i) pension; (ii) basic medical insurance; (iii) unemployment insurance; (iv) work-related injury insurance and (v) maternity insurance, all of which are mandatory for both the employer and the employee of PRC companies. The Law expressly specifies that contributions to the pension, basic medical insurance and unemployment insurance shall be paid by both the employer and the employee while the contribution to the work-related injury insurance and the maternity insurance shall only be paid by the employer. The Law does not specify the contribution rates and the basis of calculation for each kind of social securities which leaves room for local governments to formulate their own policies in line with their local economic realities.

Transfer of Individual Social Security Relationships

In the past, if the employee changed his work location, it was not possible to transfer the social security relationship of an employee from one city to another. This restriction discouraged employees who work out of their hometowns to participate in the social security scheme. This restriction has now been lifted under the Law. An individual will be allowed to transfer his or her pension, basic medical and unemployment insurance relationships with him or her when the individual decides to move to another city to take up new employment. The social security contribution years will be calculated accumulatively regardless of the change in the work location of the individual concerned. As a result, this new significant change which is brought about by the Law will greatly facilitate the mobility of human resources within the PRC. Under the PRC employment law, the employer is obliged to help the employee to transfer his/her social security relationship in case the employment contract terminates or expires.

Participation in Social Securities by Foreigners

In the past, it was not entirely clear whether expatriate employees need to participate in the Chinese social security scheme. In practice, foreigners if they preferred could have participated in the pension, basic medical insurance and work-related injury insurances based on a contractual agreement with the employer in some cities such as Shanghai, Suzhou and Tianjin. This situation will change after the Law takes effect on 1 July 2011 as the participation in social securities by foreigners will be handled by taking reference of the provisions of the Law. This means that foreigners working in China will be able to participate in the Chinese social security scheme.

Reduction of Work-related Injury Costs to be borne by Employer

According to the current regulations, an employer is obliged to pay to its employee who has suffered a work-related injury a hospital food allowance, transportation and accommodation fees for medical treatment outside the city where the employee works as well as a lump-sum medical subsidy when the employee's employment contract terminates. According to the Law, in the future, all the above fees and expenses will be covered by the work-related injury insurance fund.

Collection of Social Security Contributions enforced

Compared with the current regulations, the Law expressly empowers the social security collection body with more authorities to collect social security contributions when an employer who fails to make payments in full and on time refuses to rectifiy the situation within the requested time limits. These new authorities are as follows:

  1. access to the deposit account of the employer with banks or other financial institutions;
  2. right to deduct the outstanding social security contributions directly from bank account(s) of the employer upon the approval of the relevant administrative authority;
  3. right to require the employer to provide a warranty in case the balance of the employer's bank account is insufficient to pay the outstanding social security contributions; and
  4. right to apply to the People's Court to detain, seize and auction off the assets of the employer at the value equal to the outstanding social security contributions and deduct the outstanding amounts from the proceeds of the auction.

Employer's Liabilities for Breach of Social Security Law increased

After the Law takes effect, if the employer fails to make social security registration and refuses to make a rectification within the ordered time limits, in addition to a standard penalty of anywhere between RMB 500 to RMB 3,000 imposed directly on the responsible persons which are directly in charge and involved, the employer will also be subject to a penalty which is calculated based on one to three times of the outstanding social security contributions.

Further in addition to a late payment fee of 0.05% of per day, according to the Law, the authority may now also impose a penalty in the amount which is equivalent to one to three times of the amount of the outstanding social security contributions.

In summary, the Law clarifies the obligations of the employers under the social security scheme and also aims to improve employers compliance in the scheme by increasing the penalties and the power of the authorities to enforce such penalties in case of breach. The promulgation of the Law will raise the employees' awareness of their rights in respect of the social securities and allow them more freedom to work in different cities. As to the provision of the social securities for foreigners, it is still unclear whether such provision will be voluntary or mandatory.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 20/01/2011.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions