In China, all foreign employees working in China are obliged to pay social insurance, Shanghai is the exception before due to one local document (No. 38) implemented in 2009 that foreign employees in Shanghai MAY pay the social insurance. This gives an option to many foreigners working in China and their employers to choose not register into the social insurances.
Below is the latest explanation regarding the most concerned social security contribution questions for foreigners working in China.
1. After 15th August, 2021, is the company obligated to contribute social insurance premiums for all the foreign employees hired in China?
Answer: Considering the Shanghai local documents No. 38 “Interim Measures for Foreigners employed in China to participate in social Insurance” is going to be expired on 15th August 2021, and will not to be extended anymore, all foreigners working in Shanghai, China including individuals from HK, Macao, Taiwan shall all contributed China social security starting from 15th August 2021. Except for countries that have bilateral mutual exemption agreements with China, in this case, foreign employees who are already engaged in the social security in such countries, are able to opt out of the pension and unemployment insurances in China, the other three social insurances still need to be contributed in China.
What need points out especially is, foreign employees who are not received the work visa in China cannot be treated as labor relationship, employer has no social security contribution obligation in such case.
Foreign company HR or your payroll vendor in China shall aware to add the social security contribution when calculate employee salary in China.
2. Can foreign employees claim employer to pay the social insurance premiums between 15th October 2011 to 15th August 2021?
Answer: In view of the interim Measures for Foreigners hired in China to Participate in Social Insurance, which came into effect on October 15, 2011, if foreign employees complain about making up the social insurance payment, there is a risk for employers to make up the social insurance payment for foreign employees.
3. Can the employer defend the social security obligation with foreign employees by mutual agreement?
Answer: If the labor contract signed by the foreign employee and the company clearly stipulates that the foreign employee does not require to pay Chinese social security, such agreement will be generally recognized in the labor supervision practice before January 2020, but after January 2020, such agreement will be deemed as “violating the law” and invalid. In 2020, there is a real social security case regarding such case. In this case, the foreign employee complained about the employer’s supplementary payment of social security. The employer defended the case according to the mutual agreement in the labor contract, but the employer was eventually pay nearly 500,000 RMB of social security fees, and the supplementary payment period started from October 2011.
4. Can the employer invoke the 2-year limitation defense when the foreign employee requires to pay the social security?
Answer: The two-year limitation is in the provisions of the Labor Security Supervision Regulations. According to local regulation in China, If the employer has not paid the social security for a long time, such behavior is treated illegal in China, and the two-year limitation is not applicable. In China, it is each local social security bureau’s responsibility to performs the social security audit duty, so it is also not applicable to the provisions of the Labor Security Supervision Regulations.
5. If foreign employees require to make up the social security payment, should they make up the payment according to the “three insurance” or “five insurance”?
Answer: Employer shall make the five social insurances when contributing the makeup social security for foreigners working in China.
6. Can foreign employees require severance payment and leave the company on the name of no social security contribution?
Answer: base on the judicial practice in Shanghai, employees’ severance payment is based on the terms and conditions in the labor contract that signed with the employer as well as the local regulations and polices, if there are no written agreement states that did not pay social security staff can stand for economic compensation or severance payment, in most of the cases, such request from employees will not be accepted.
7. When the foreign employee reaches the legal retirement age, can the foreign employee claim the loss of pension because the employer has not paid social security?
Answer: according to this city’s adjudication caliber, “employer who hire foreign employees in China must apply for work permit, and sign labor contract according to law. During the period of employment, the salary paid by the employer shall not be lower than the local minimum wage standard. Working time, annual leaves, rest, vacation, labor safety and health and social insurance shall be implemented according to local regulations. Other labor rights and obligations agreed or performed in addition to the above provisions may be determined in accordance with the written labor contract, individual agreement or other agreement between the parties and the content actually performed.” The tendency of loss of social security treatment still belongs to the category of agreed rights and obligations. If foreign employee and employer in China do not agree on pension treatment responsibility or agree to pay pension separately, the appeal of the employee is unlikely to be supported.
8. Can employees from HK, Macao, Taiwan claim to pay the social security premiums since 1st October, 2005?
Answer: According to the local regulation in China, if employer hiring employees working in China from Taiwan, Hong Kong and Macao, the employer is still obligated to pay the social security.
9. Are foreign, Taiwan, Hong Kong and Macao employees required to pay housing provident fund?
Answer: according to “regulation of housing accumulation fund management”, foreign employees and employees from Taiwan, Hong Kong and Macao do not have urban household registration, and employers do not have the legal obligation to contribute to the housing provident fund for hiring foreign employees in China.
If you would like to learn more regarding foreigners working in China.
JSC will remain in consistent communication with the social security bureau in Shanghai and share the latest information with you once we receive any updates about the policy and implementation to ensure compliance for foreign companies doing business in China.
Frequently asked questions for payroll and hiring employees in China.
No, you do not need.
If you don’t have a company in China, you can hire employees through PEO service through the employment agency in China.
a) Hire employee through the PEO/employment service.
If you don’t have a legal entity in China, this is the only compliance way to have employee working for you in China.
b) Hire employee under WFOE.
If you already set up a WFOE in China, you can sign the labor contract with employees directly. You can either choose to handle their payroll land benefits yourself, or you can choose to outsource.
c) Hire employee under representative office (Ro)
Representative office in China is not allowed to hire employees directly. The only compliance way is hire employees through labor dispatch agency under PEO service
PEO refers to a professional employment organization, in China it’s also called employee outsourcing, labor dispatch. Foreign companies can hire staff in China through a PEO agency without setting up a legal entity in China.
Severance payment in China is based on the number of years employee has worked for the company.
Each full year employee worked for your company, one month salary shall be paid as severance payment.
For the working periods that are less than 6 months, half month salary shall be paid.
If employee’s monthly salary is higher than 3 times local average monthly salary, each year of the severance payment compensated shall be 3 times local average monthly salary.
If employees are in the probationary period, both employee and employer shall give 3 days as notice period for termination.
After probationary period, both employee and employer shall give 3o days as notice period for termination.
If employer need immediate termination, employer shall compensate one month salary.
No, You shall have a company registered in China to sign a written labor contract with each of your employee.
In practice, employer will sign a fixed term contract with their employee. However, when it goes to the third time renewal of the contract, then the contract becomes to a permanent contact.
Sign a two years or three years contract is more common in China.
Labor contract in China shall be at least in Chinese, and including but not limited to:
Company details including full name, address and legal representative or person in charge.
Employee details including full name, ID number, address.
Term of the employment contract; (E.g., 2 years, 3 years…).
Position (job title), location(city), working hours, holidays, leaves.
Package: gross salary, bonus, commission, social insurance, other benefits.
Occupational safety, and occupational hazard prevention.
Other terms which laws and regulations required.
You need to set up a company in China and then set up a separate Social Insurance and Housing Fund Account. After the company has been set up, you can contribute the benefits to the employees who have signed a contract with you.
The most popular job portals in China is: Zhaopin.com, Liepin.com, zhipin.com. However, these three job portals only accept a registered company in China.
If you don’t have a company in China, you can search candidates through Linkedin.com or engage a headhunting or recruitment firm to help you search the candidates.
In China, employees’ individual income tax (personal tax) shall be declared monthly by the employer, and yearly by employee themselves.