On 1 July 2011, the PRC Social Insurance Law came into effect.
In its Article 97, the new law very generally provides that
foreigners working in China are able to participate in the Chinese
social security system. However, from the law itself, it is not
clear whether such participation is mandatory or not.
On 10 June 2011, the PRC Ministry of Human Resource and Social
Securities issued the draft Interim Measures on Participation of
Social Insurances by Expatriates Working in China (the
"Measures") for public discussion. According to the
Measures, basically all expatriates working in China will be
required to participate in the PRC social security system in the
future. However, until now, the Measures have not yet become
In the meantime, most of the provinces such as Shanghai,
continue their practices from before the PRC Social Insurance Law
came into force, according to which the participation of
expatriates in the Chinese social security system is optional and
the types of social insurances which can be engaged by expatriates
are limited to pension, medical, work-related injury insurance.
Only few provinces such as Tianjin already require expatriates to
join the Chinese social security system.
We expect that in the near future, the Measures will be
officially issued by the central government with some further
amendments. For implementation, the local governments will
stipulate their own policies based on the Measures.
Below are some key issues stipulated in the Measures:
1 Scope of Application
The Measures shall apply not only to expatriate employees who
are directly employed by entities established in China, but also to
those who have concluded employment contracts with overseas
affiliates and are seconded to work at subsidiaries or
representative offices in China.
2 Social Insurance Funds
Expatriate employees working in China must participate in the
same funds as Chinese employees, i.e. pension, medical,
work-related injury, unemployment and maternity insurances.
The calculation of the social insurance premiums is also the
same as for Chinese employees. The rates are determined by the
local governments and will, therefore, vary from city to city. In
Shanghai, the employer shall contribute social insurance premiums
at a total rate of 37% of its total payroll, while the
employee's rate is 11% of the monthly salary. The calculation
basis is capped. The cap is determined jointly by the local Labor
Bureau and the Statistics Bureau every year. The current cap for
Shanghai is RMB 11,688. That means that for expatriates in Shanghai
with salaries above the cap, the annual extra costs amount to RMB
51,895 for the employer and RMB 15,428 for the employee.
3 Entitlement to Pension Benefits
Expatriate employees are entitled to pension benefits at the
statutory retirement age, i.e. 60 for men and 55 for women,
provided that contributions have been paid for 15 years. The
benefit payment does not require that the employee is still
resident in China.
If the expatriate employee leaves China prior to reaching the
retirement age, his or her personal pension account will be
reserved and can be revived when he or she works in China again.
Alternatively, the expatriate may apply for immediate payment of
the balance in his or her personal pension account and terminate
the pension relationship in China when he or she leaves the
4 Exemption based on Treaties
If a treaty to avoid double payment of social insurance premiums
exists between China and the home country of the expatriate
employee to avoid double payment of social insurance premiums, the
employee may be exempted from part of the Chinese social securities
under certain conditions. Until now, China concluded social
security treaties with Germany and South Korea only.
In any case, with the effectiveness of the Measures, the costs
of employing foreigners in China will rise. It will be interesting
to see how the Measures will be implemented in the different
provinces and how much room there will be for local
We are paying close attention to the development of the new
policies. As soon as the Measures become effective, we will
immediately provide you with an update.
This article was written for Law-Now, CMS Cameron
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