Articles 72 and 73 of the PRC Labour Law require that both an employer and an employee must contribute to the social insurance schemes so that employees are able to enjoy social insurance benefits when they (i) retire, (ii) are sick or injured, (iii) suffer from a work-related injury or occupational disease, (iv) are unemployed, or (v) (in the case of female employees) give birth to a child.

As such, the following five schemes are mandatory and apply throughout the PRC (subject to local practice):

  • Fundamental pension scheme
  • Fundamental medical insurance scheme
  • Unemployment insurance scheme
  • Work-related injury insurance scheme
  • Maternity insurance scheme

I was instructed by the officials of the local social insurance centre that I am not required to contribute to all these five schemes in respect of my employees. Is there any risk if I follow such instructions?

While there is a national law which requires participation in all of the schemes, as of March 2010, there is no uniform national standard as to how to contribute to these social insurance schemes. In practice, such a standard is formulated by each local government with its own local rules. These local rules vary from region to region. Even in the same city different rules may apply depending on the registered address of the employers and the residence status of the employees (e.g., urban employees or rural employees, local employees or migrant employees). In terms of enforcement, some local governments may be more demanding than others.

Therefore, although the instructions from the local social insurance centre do not seem to comply with the national law, if what has been told to you reflects local practice then currently there does not seem to be any major legal issues if you follow such instructions