The PRC Social Insurance Law that came into effect on July 1, 2011, requires non-PRC nationals working in China to participate in the Chinese social insurance system, but does not provide any further specifics (see our previous Client Alert). To clarify this aspect of the Law, the PRC Ministry of Human Resources and Social Security promulgated the Interim Measures for Participation in the Social Insurance System by Foreigners Working in China. The Interim Measures will become effective on October 15, 2011.

Who must participate?

The Interim Measures are applicable to non-Chinese nationals employed in China by PRC employers (including foreign-invested enterprises, and branches or representative offices of foreign companies, foreign and international organizations) who hold valid working permits or permanent resident permits.

How much must foreign employees and their employers contribute?

Foreign employees are required to participate in the employee pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. The rules of the national administrative agencies for each type of social insurance set the base rates of contribution by foreign employees and their employers. Local governments may set contribution rates above or below the base rates with approval of the applicable national administrative agencies. The base contribution rates, and the contribution rates in Beijing and Shanghai are listed in the following table.

Click here to view table

* There are minimum and maximum salary levels for the purpose of calculating contribution rates.  In general, the minimum for each year is 40% to 70% of the previous year’s local monthly average salary and the maximum is three times the previous year’s local monthly average salary. The levels vary from city to city; for example, the minimum salary for 2011 is RMB 1,680 in Beijing and RMB 2,338 in Shanghai; the maximum salary for 2011 is RMB12,603 in Beijing, and RMB 11,688 in Shanghai.

What must employers do now?

Employers have the obligation to apply for social insurance registration for their foreign employees within 30 days after a foreign employee receives his or her working permit so that a personal social insurance account will be opened for the employee. Although not specified in the Interim Measures, employers should apply for registration as soon as practicable for foreign employees who were already employed when the Interim Measures were promulgated.

What do foreign employees do when they leave China?

When a foreign employee leaves China, the individual may terminate participation and receive a lump-sum payment of the balance in the social insurance account or choose to retain the balance in the account. If the latter, the years of contribution will cumulate when the foreigner comes back to work in China again.

A foreign national who lives outside China and who receives social insurance payments under the system must provide proof that he or she is alive at least once a year. This requirement does not apply to foreign nationals residing in China legally for receipt of social insurance payments. The balance remaining in a foreign employee's personal social insurance account is inheritable.

What if there is a dispute?

Foreign employees participating in the social insurance system may resolve any dispute with their employers through mediation, arbitration or litigation. If an employer infringes a foreign employee's rights, the employee may petition social insurance authorities for relief.

Is there any exception?

Foreign employees who are nationals of countries that have signed bilateral or multilateral social insurance agreements with China, such as Germany and Korea (but not the United States), shall participate in accordance with the applicable agreements.