On September 6, 2011, the Ministry of Human Resources and Social Security promulgated the Interim Measures for Contribution of Social Insurance by Foreigners Employed within China (“Interim Measures”), which came into effect on October 15, 2011. The Interim Measures stipulates that all foreigners legally employed within the territory of China must participate in China’s social insurance system in accordance with the Social Insurance Law. To supplement Bryan Cave’s Asia labor alert announcing the Interim Measures, this alert will provide an update on how this issue has developed on the national level and how it is actually being implemented on the local level.
The national and local regulations detailed below refer to foreigners paying social insurance premiums. Please note that in practice, and according to Article 20 of the Several Provisions on Implementation of the Social Insurance Law of the People's Republic of China, employers are obligated to withhold and pay social insurance premiums for their employees. Article 20 further states that if an employer fails to withhold and contribute social insurance premiums in accordance with the relevant laws and regulations, the employer shall pay a late payment fine equal to 0.05% of the outstanding amount per day. Employers are not allowed to shift late payment fines to employees.
- National Rules on Payment Starting Dates, Late Payment Fines
To provide guidance for how local authorities should implement and administer social insurance for foreigners, the Ministry of Human Resources and Social Security promulgated the Circular on Issues Relating to Participation in Social Insurances by Foreigners Employed in China (“Circular”) on December 2, 2011. The Circular establishes premium payment starting dates and late payment fines as follows:
- Payment starting date: The Circular states that foreigners employed in China before October 15, 2011 shall participate in social insurance and pay insurance premiums beginning October 15, 2011. Foreigners who are employed in China after October 15, 2011 shall participate in social insurance and pay insurance premiums from the month they started employment.
- Late payment fines: The Circular also introduces late payment fines for foreigners employed before October 15, 2011 who failed to complete the insurance payment registration procedure. Foreigners who applied for the registration procedure between October 15, 2011 and December 31, 2011 and paid social insurance in full will have any late payment fines waived. However, foreigners who complete such procedure after January 1, 2012 shall be charged with late payment fines from October 15, 2011. The Circular does not contain specific language on late payment fines for foreigners employed after October 15, 2011.
- Local Implementation
As is often the case in China, directives issued at the national level are not always uniformly reflected at the local level. While the Circular establishes national guidance for the implementation of social insurance for foreigners, many local authorities have established modified rules.
The table here lists the major cities that have issued notices implementing social insurance for foreigners, based on our research as of April 12, 2012. The table also summarizes each city’s relevant rules on payment starting dates and late payment fines, indicating that several cities have implemented rules that differ from the Circular or lack language specifying how social insurance will work in practice.
Many questions remain about the social insurance system for foreigners. Local governments in Shanghai and Shenzhen, for example, have yet to promulgate their own implementing rules, sparking questions as to whether and when foreigners will be responsible for paying social insurance in these cities.
As the above table indicates, several major cities in China have implemented social insurance systems for foreigners that differ from the national guidance found in the Circular. Authorities in Beijing, Xiamen, and Zhuhai have issued rules on payment starting dates and late payment fines that are different from those found in the Circular. Furthermore, the rules of Chengdu, Qingdao, and Wuxi do not expressly specify the payment starting dates or late payment fines, and Xiamen and Suzhou’s rules are silent on the requirements for foreigners employed after October 15, 2011. In the absence of more uniform procedures and formalized rules for the implementation of social insurance for foreigners, these ambiguities and open questions may have to be settled by examining how local authorities actually enforce the rules.
Still, employers operating in cities that have implemented social insurance for foreigners should ensure that they are compliant with the local rules. Employers operating in cities that have not issued such regulations need to monitor the issuance of implementing rules, to ensure that the additional cost of employing foreigners is not further burdened with penalties and fines.