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Background

As of 1 July 2011, the new PRC Social Security Law requiring foreigners to participate in the country’s social security system as of 15 October 2011 came into effect. Shortly after this announcement, the Chinese government released its Interim Measures outlining the coverage for foreign workers, as well as a Guidance of Measures providing registration information and participation procedures. However, despite these updates many details remain unclear.

What do the Changes Mean?

Businesses employing foreigners will have to make contributions on their behalf, and in the process take on extra costs. The amount is capped at three times the local average salary, but this is not universal; the city of Dalian has already removed the cap, and employers may have to pay up to 37 per cent of an entire foreign employee monthly salary.

The law also requires foreign employees to make contributions proportional to the amount of salary earned. Foreigners may be exempt if they meet the requirements specified in bilateral or multilateral agreements; this currently applies only to arrangements with Germany and South Korea, and even those require special circumstances.

Current Status for Making Payments

Despite the deadline, officials had yet to work out the methods for tax payment. Some of Beijing’s Social Security Bureaus had begun accepting contributions mid-December, but many were unable to fully process social insurance benefits for all five types of insurance. The Guidance of Measures states that foreigners who fulfil the participation requirements were required to register with the relevant social security bureau before 31 December 2011, and failure to do so could result in a fine. As it currently stands, most companies have registered and set up foreign worker accounts with their local social security bureaus; payments – as well as back payments – should commence mid-January.
Employers should collect pension insurance benefits according to present retirement age policy. However, details on claiming procedures for foreigners who leave the country, or require payment to next of kin in the event of death still need clarification.

The maternity insurance foundation should pay maternity insurance; however, as foreign women are not restricted to having one baby, it is unclear if they can use the policy multiple times. As for employment, foreigners who lose their jobs must leave China, and cannot take advantage of unemployment insurance.

What Next?
BritCham and CBBC have been supporting members regarding this new legislation and keeping them informed on the latest developments, particularly by holding events and answering their queries. The Chamber is working closely with the British Embassy, the EU Chamber and other Beijing Chambers to lobby for its members’ interests.
 

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