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Update - The PRC National Social Security Law and How It Impacts Foreign/Overseas Workers

This past summer, a national social insurance scheme was passed which technically went into effect on October 15th, 2011, requiring foreign workers and their employers to contribute to a social security fund in respect of pension, medical care, work-related injury, unemployment and maternity insurance under PRC law.

The regulation has caused concern among overseas workers and companies employing foreign workers in China. A recent survey of companies with foreign workers in China shows that the majority are adopting a “wait and see” approach as the new regulation will generate additional costs and employers will bear larger costs than the employees. More than 10 countries are in talks with Beijing to sign bilateral tax agreements that would exempt their nationals and companies from paying the new social security tax. The United States, Japan and Russia are among countries negotiating with Beijing.

So far, China has only signed bilateral agreements with the Republic of Korea and Germany for social insurance exemption.Workers from Germany are exempt from pension and unemployment contributions in China forthe first 48 calendar months, while those from the ROK are exempt from pension contributions.

Salient points have been issued by the PRC Ministry of Human Resources and Social Security. However, many questions from foreign employees and their employers yet remain to be answered.

Salient Points:

Took effect on October 15th, 2011. Although the law will be implemented year-end, money will be collected according to the Oct 15th start date and payments will be retroactively made.


Under this new law, the “foreigners” participating in the social insurance scheme will fall under the following categories:

  1. A non-PRC national who has obtained his/her PRC work permit and residence permit. The work permit refers to the “Alien Employment Permit,” “Foreign Expert Certificate,” and “Press Card.”
  2. A non-PRC national who has obtained the “Alien Permanent Residence Permit” and been legally employed in the PRC.


Enterprises, public service entities, social organisations, private non-enterprise entities, foundations, law firms, accounting firms and other organisations legally registered in the territory of the PRC shall contribute to PRC social insurance for foreigners they have legally employed.

If a foreigner signs an employment contract with a foreign company and works for its PRC branch or representative organisation (the PRC Entity), the PRC Entity shall contribute to PRC social insurance for this foreign employee.


Every city will have its own pricing scheme, requiring companies to pay a percentage of an employee’s salary to the social security fund. The Ministry of Human Resources and Social Security recommends that every individual check with a local bureau to determine rates.

Below is Beijing’s contribution rates, with a salary cap of 12,603 yuan ($1,981):

Corporate Contribution Individual Contribution
2% + 2 yuan
Work-Related Injuries

(Source: Wall Street Journal)

Medical Insurance

The medical insurance plan will allow foreigners to choose which hospitals they’d like to go to.

Upon leaving China, foreigners will be able to collect the unused portion of the individual contribution to the medical insurance fund. Corporate contributions cannot be collected.


  • What percentage of expenses will be reimbursed using the funds from the account.
  • Whether insurance will cover a foreigner beyond China’s borders.

Maternity Insurance

The Ministry has not yet specified if maternity insurance will cover multiple births.


The Ministry said it is working with employment and visa agencies to devise a plan that will allow unemployed foreigners to collect.


Pensions can be collected if the foreigner has contributed for 15 years. They will be paid until death.

The Ministry has not specified a retirement age for foreigners or how foreigners will collect the fund.

Upon leaving China, foreigners will be able to collect the individual contribution to the retirement fund. Corporate contributions cannot be collected.

Contract Workers

Contract workers and workers who would be forced to pay on behalf of the company and themselves can visit the local bureau of the social security office to have their cases reviewed. The Ministry will reconfigure payments for individuals.

Filing requirement

The employer shall complete the social insurance registration for the foreign employee within 30 days of obtaining the PRC work permit of the foreigner.

If the Foreigner Leaves China

If the foreigner leaves China before he/she meets the requirements for enjoying pension under the PRC law, he/she can take either of the following options:

  1. Retaining his/her personal social insurance account, which will resume to accumulate contributions upon his/her returning and being employed in China again; or
  2. Upon his/her written application, terminating his/her PRC social insurance account, and be paid the balance of his/her personal social insurance account in a lump sum.

Bilateral or Multilateral Treaty

If there is any bilateral or multilateral treaty regarding social insurance between China and a foreign country, the social insurance contribution issues of the citizen of such foreign country are subject to the relevant treaty.

Penalty on Breach

If the PRC Employer fails to fulfil the social insurance registration requirement for the foreigner, it will be ordered by the social insurance authority to rectify such failure within a specified period. If it fails to do so, it will be fined at 1-3 times the amount of the overdue social insurance contribution, and the management personnel and other personnel who are directly responsible shall be fined between RMB 500 to RMB 3,000.

If the PRC Employer/PRC Entity fails to make social insurance contributions in full and on time, it will be ordered to make up all unpaid amounts within a specified period and be fined at 0.05% of the unpaid amount per day from the date on which the contribution becomes due. If the PRC Employer/PRC Entity fails to make the overdue contributions within the time limit above, it will be imposed with a fine of 1-3 times of the overdue amount.

(Sources: Mayor Brown, Wall Street Journal, China Daily, SCMP)






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