Non-local Social Insurance Contribution is a familiar term for companies conducting business in multiple locations. It refers to the practice where an employer contributes social insurance for an employee who does not work in the place where the employer is located.
Instead, the insurance is paid in the name of a third party (mainly a human resources company) entrusted in the actual working location, since the employer is unable to open a social insurance account outside its local area. Recently, as social insurance audits become stricter, more and more companies are paying attention to the compliance risks of such arrangements.
Current Provisions for Social Insurance Contribution
At present, social insurance contribution is under territorial management, which means the company’s location must be the same as the location in which the employee’s social insurance contribution is paid. Article 57 of the Social Insurance Law provides that an employer shall, within 30 days upon its establishment, apply for social insurance registration with the local social insurance agency by presenting its business license, registration certificate or unit seal. Article 7 of the Interim Regulations on the Collection and Contribution of Social Insurance Premiums also specifies that the entity that makes the contribution shall register with the local social insurance agency.
Background of Non-local Social Insurance Contribution
The appearance and long-term existence of Non-local Social Insurance Contribution is based on the realistic demand of companies’ employing people in different places. For companies, it is inevitable that some employees work in different places for a long period of time due to business needs. The number of such employees may be small, and the cost of contributing social insurance for them by establishing local branches too high.
For employees, the inability to contribute social insurance in the work location may cause inconveniences with things like medical treatment, among others. So, the utility of Non-local Social Insurance Contribution is clear – it helps companies “fulfil” the responsibility to participate in social insurance with a relatively low cost and at the same time satisfies employees’ demand for convenient access to the social insurance benefits.
Although it seems that Non-local Social Insurance Contribution satisfies every party, the practice opens up both companies and employees to potential compliance risks. In practice, Non-local Social Insurance Contribution could lead to difficult problems with the following:
1.Supplementary social insurance contributions;
2.Termination of labor contract and severance payment;
3.Payment of work-related injury insurance benefits;
4.Administrative labilities such as penalty;
5.Criminal liabilities in some occasions.
In Part Two, we will focus on the details of these risks and countermeasures to them.
DaWo has helped numerous companies understand and address their specific Social Insurance needs. Please reach out if you have any questions.