Do I have to make Social Security contributions?

Maggie Jia

Corporate Compliance
Employment
maggie.jia@dawo-lf.com
21-6288 8682

 

We are seeing a growing number of foreign friends working in Shanghai inquiring about their employers’ Chinese Social Security contributions. Here is some up-to-date information from the authorities, and some descriptions of special recent cases.

 

1.Laws and regulations on social security contribution for foreigners
The , , and , require foreigners legally employed in China to contribute to Chinese social security. However, according to , this might not be so black and white. According to that document, employers might be required to make contribution to pension insurance, medical insurance, and work injury insurance for foreign employees only upon mutual agreement in employment contracts. In short, it is negotiable. Therefore, the Shanghai social security center usually does not explicitly require companies to pay social security for their foreign employees.

That said, we recently clarified this with the labor bureau in Shanghai, which confirmed the following: even if, in practice, there must be a clear contractual agreement regarding foreigners’ social security, in terms of strict compliance with the law, employers are obligated to pay it after the employment relationship is legally established. Thus, once a foreign employee requests such contributions, the employer may not refuse.

How to handle social security for foreign employees in Shanghai?
The employer would need to contact the appropriate social security center to handle the process. Documents required include a valid employment contract, payroll records, and one of the following four certificates: “Shanghai Residence Permit of B Class”, “Approval Certificate for Employment of Persons with Permanent Right of Residence Abroad”, “Permanent Residence ID Card for Foreigners”, or “Work Permit”. The rest of the process is the same as for Chinese employees.

 

2.Is it possible to make supplementary contributions of social security for foreigners?

What does “supplementary contribution” or “re-contribution” mean?
To make up any unpaid social insurance owed since the beginning of the employment relation.

Is the re-contribution applicable to foreigners?
The short answer is: Yes.

Then how long of the period can be re-contributed?
After negotiation with the employer, the re-contribution can be traced back to the date when the employment relationship was established. In practice, the social security center would identify the established date based on documents submitted by the employer (such as the employment contract, work permit, etc.). In the event of any discrepancy, the work permit shall prevail.

What if the employer refuses to make a supplementary contribution? Can contributions still be made?
According to the , the Department of Labor Inspection has the authority to ask for recovery of two previous years of missed social security contributions. We confirmed with the Department of Labor Inspection that this provision also applies to foreigners. If a foreign employee asks for the re-contribution of unpaid social security, and the employer refuses to do so, the employee could complain to the Department of Labor Inspection, which could trigger an enforcement action.

 

3.Related Benefits

With normal social security contributions, foreign employees may enjoy many of the same related benefits as their Chinese counterparts.

Such benefits include, but are not limited to, eligibility for maternity allowances under the same conditions as those for Chinese, and the ability to withdraw the individual contributions accrued in their pension accounts after reaching retirement age, and having contributed social security for at least 15 years.

 

4.Compliance risk for non-contribution of foreign employees’ social security
It is worth noting that social insurance contributions are a legal obligation, rather than a right of employers and employees. However, due to some inconsistencies between law and common practice, many employers have not paid social insurance for their foreign employees. This has indeed produced a hidden compliance risk for employers. In the event of a labor dispute, this issue could become one of the focuses that enlarges and worsens the situation. DaWo’s labor lawyers are always available to guide you through issues such as this. Please don’t hesitate to reach out if you have any questions.

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by phone +86.21.6288.8682,
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