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New Expatriate Social Insurance in China

There is much talk about a new social insurance law in China that will increase expatriate costs potentially from 1st July 2011. It is not confirmed yet whether its effect will be voluntary or mandatory e.g. in the case of employers providing private medical schemes. Foreigners who are nationals of countries with bilateral or multilateral social insurance treaties with China would continue to be treated in accordance with those treaties (It is relevant to note that the United States is not party to such a treaty). The definition of “foreigners” currently includes citizens of Hong Kong, Taiwan and Macau as well as westerners.

China is engaged in a major national initiative to increase the quality and availability of medical facilities, treatment and medication while also consolidating benefit, insurance and pensions programs. Improving quality and access to healthcare in China for its 1.4 billion inhabitants is also seen as measure to stem growing concerns in an ageing population which in turn will return economic activity when people spend rather than save in the face of long term concerns about their future medical well-being. The administrative details of the new law and its date of commencement are uncertain, however, what is certain is that employer and employee costs for foreign workers appear set to increase further.

The law would levy additional contributions to be made by employers and employees each month to cover items such as state medical insurance, workplace injury, unemployment insurance, maternity insurance and pensions. In some cases it is said that this levy would be in the range of 4000 RMB per month for employers and 1200 RMB per month for employees. However, other research published has indicated that it could be as much as 16% - 37% of salary for employers and 9% - 12% for employees with a cap level to be specified. Common thought suggests that the levels of these levies will be calculated on a regional or provincial and not a national basis.

Those foreigners that contribute to pension schemes for over 15 years would qualify for eventual benefit from it. It is said that this benefit will be also conferred even if the person has already left China through written application and that the benefit will also be inheritable.

 

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