Ministry of Human Resources and Social Security recently promulgated Administrative Provisions on Declaration and Contribution of Social Security Premiums (“Provisions”). The Provisions took effect on 1 November, 2013.

The Provisions stipulate that employers must inform employees on a monthly basis of the details of social security premiums contributed. Employers must also report the annual contribution of social security premiums to the congress of employees annually or publicize such information at a prominent location in its premises under the supervision of employees.

As clarified by the Provisions, where employers failed to contribute the social insurance premiums in full amount and in a timely manner, the social insurance agency may impose an overdue fine with the rate of 0.05‰ per day from the date of default. Employers must not require their employees to bear the aforesaid overdue fine.

In addition, where an employer is in violation of the stipulations concerning the prompt declaration and contribution of social security premiums, the social security agency will issue a notification on retrospective payment within a prescribed time limit, urging the employer to make payment within 5 working days from receipt of the notice. If such payment is not made within the prescribed time limit, the social insurance agency is entitled to enquire into the deposit accounts of the employer with banks or other financial institutions, and subsequently apply to the supervising administrative authority for a compulsory transfer. Upon acceptance of the application, the social security administrative authority should make a decision on the proposed transfer, and notify the opening banks of the employer in writing of the transfer of social insurance premiums.

Where the balance in the employer's account is less than the amount of defaulted social security premiums, or the employer still fails to pay social security premiums in full amount after the compulsory transfer, the social insurance agency may require the employer to give security and to enter into an agreement on deferred payment. Where the employer fails to pay social security premiums in full amount and fails to give security, or fails to pay social security premiums in full amount upon the expiration of deferred payment agreement, the social insurance agency is entitled to apply to a people's court for seizure, foreclosure or auction of properties of the employer, paying the defaulted social security premiums and respective overdue fine.

KWM Comments: The Provisions is expected to strengthen the supervision on the contribution of social insurance premiums by employers. If employers fail to contribute social insurance premiums in a timely manner and still fail to do so after being urged by the social insurance agency, a compulsory transfer may be imposed and they may also be subject to such serious consequences as seizure, foreclosure or auction on their properties.