Foreign Nationals Must Participate in China’s Social Security
The Interim Measures for the Participation of Foreigners Employed in China in the Chinese Social Security System came into effect on October 15, 2011 following the promulgation of China’s new Social Security Law earlier in the year. The avowed aim of the Interim Measures is to enable foreign workers in China to benefit from participation in the country’s state-run social security system but has proved controversial.
The Interim Measures require all employers with foreign staff (except employees from Hong Kong, Macao and Taiwan) to register and ensure that employee and employer contributions to China’s various social security programs are paid in accordance with local laws and regulations.
What is proving to be most controversial about the Interim Measures is that China’s social security system is administered and enforced by local authorities and so far there has been no unified approach by these agencies in mandating enrolment of foreign workers. Some communities are requiring full participation whereas in other towns and cities, participation is still only voluntary or partly mandatory. Employers with foreign staff working in different cities are therefore unable to adopt universal policies or procedures in China.
In broad terms, the cost of complying with these Interim Measures will be prohibitive for many employers. The Interim Measures are silent on the amount of contributions but the word from local authorities is that all employee and employer contributions will be on par with those for local Chinese staff. Combined, these will translate into approximately U.S.$10,000 per employee per year for most skilled professionals and managers working in China.
The scope of benefits offered under China’s social security system appears to be as limited for foreign staff as they are for local Chinese staff. Foreign staff can expect to receive a very meager pension of a few thousand Rmb benefits only after they have made contributions for at least 15 years. Few details concerning entitlements under the other social security programs are available so far.
Although the Interim Measures specifically exempt employees from Hong Kong, Macao and Taiwan, regulations covering these and other implementation issues will presumably be released in 2012. While employers wait for these further regulations to be issued, steps need to be taken to ensure that they comply with whatever local arrangements are in force concerning registration and payment of contributions.