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Understanding China’s Social Insurance Law for Foreign Employees It is mandatory for employers to buy certain types of insurance coverage, in certain countries. For example, in U.K. employers must buy employer's liability insurance, and this can be obtained either locally or by extending the head office policy. As per China’s Ministry of Human Resources and Social Security, there have been new measures that require foreign employees in China to participate in its Social Insurance System. The law is the first attempt to bring together and intensify laws and regulations that were previously spread across different administrative bodies and levels of government. All the foreigners employed in China and their employers in China will be required to pay for five types of insurance policies, namely the Basic Pension Insurance, Unemployment Insurance, Maternity Insurance, Work-related Injury Insurance and Medical Insurance, effective from October 15th 2011. The regulations stipulate that the insurance fees will be paid both by the employers and the foreign employees which could increase per head costs for employers, while the employees also incur additional costs. Considering high salary levels of foreign employees, this law will result in a cost burden of as high as RMB 5,000 to RMB 5,500 per month, considering the present contribution rates. Chinese local governments are expected to issue further measures and regulations in order to bring some clarity on the rates of various contributions, administrative procedures, etc. The law also requires employers to undertake their employees’ social insurance registration within 30 days of applying for their employment permits. The insurance program also extends to employees in representative offices registered or incorporated in China after signing employment contracts with employers outside of China. Further, it requires the Chinese entity to conduct social insurance registration on behalf of the foreigners. Social Insurance Penalties In an international business expansion, employers who fail to register their expatriates for social insurance or fail to pay fees on behalf of the expatriates will be penalized according to the Social Insurance Law and other relevant regulations. Penalties amounting to more than one time and less than three times the social insurance fee amount can be levied and the personnel responsible for it will have to pay a penalty of more than RMB500 and less than RMB3000. A 0.05 percent late payment fee will be imposed on a daily basis for employers who fail to pay full social insurance fees in a timely manner. For those that fail to pay overdue payments until the stipulated date, the relevant administrative department will impose a penalty of more than one time and less than three times the delinquent amount. Social Insurance outside China The law requires foreign employees receiving social insurance payments outside of China to annually submit a certification proving that he/she is still alive issued by the Chinese embassy/consulate to the social insurance agency from which he/she receives payments. Taking the help of a business expert can bring many benefits, in any international expansion, and avoid costly penalties later. A reliable business will be aware of all the regulations and the ever changing laws. They offer useful guidance on various aspects like tax equalization expat, regulatory filings, etc. Click here for more on International accounting, Expanding business overseas


Understanding China’s Social Insurance Law for Foreign Employees