By Pan Lidong, Deng Yong
Wang Jing &Co.
At the end of 2010, the legislature of China promulgated the Social Insurance Law to regulate that foreigners working within the territory of China shall participate in social insurance by reference to the provisions of the law. Since the relevant implementing rules were not laid down, the aforesaid regulation has not been properly implemented. Recently the Central government promulgated the implementing rules that the public has been anticipating all along, Interim Measures for Participation in Social Insurance by Foreigners Working within the Territory of China (hereinafter referred to as “Interim Measures”). We would like to introduce the main contents of the Interim Measures as follows:
1. Foreigners Required to Participate in Social Insurance
Article 2 of the Interim Measures regulates that “foreigners working within the territory of China” shall refer to the persons who: (1) hold employment certificates such as a Work Permit for Foreigners, Foreign Expert Certificate, and Permit for Permanent Foreign Journalists; or (2) are not of Chinese nationality and who are employed lawfully within the territory of China.
Article 3 of the Interim Measures regulates that foreigners who, after having entered into employment contracts with overseas employers, are dispatched to work in the branches or representative offices duly registered within the territory of China (hereinafter referred to as the "Domestic Work Entities") shall participate in the basic employee pension insurance, basic employee medical insurance, work-related injury insurance, unemployment insurance and maternity insurance in accordance with the law, with the social insurance premiums to be contributed respectively by themselves and their Domestic Work Entities as required.
In the light of the above, foreigners having acquired employment certificates by following legal procedures, whether employed directly by the enterprises in China or dispatched to China by enterprises abroad, fall into the group of persons who shall participate in social insurance, and the insurance premiums shall be paid by the Domestic Work Entities and the foreigners themselves pursuant to the applicable regulations.
2. Specific Insurance Participated in by Foreigners Working Within the Territory of China and Time of Social Insurance Registration
In accordance with the regulation specified in the Social Insurance Law and Interim Measures, foreigners working within the territory of China shall participate in social insurance, including the following five kinds of insurance: pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance.
For foreigners employed by Domestic Work Entities or dispatched by their overseas employers to work for Domestic Work Entities, the social insurance registration formalities shall be handled within 30 days from the date of handling the formalities for employment permits.
3. Termination of Social Insurance and Refund of Social Insurance
Where a foreigner leaves China prior to reaching the statutory age for pension withdrawal as prescribed, his/her social insurance personal account shall be retained, and the contribution years shall be calculated on a cumulative basis if he/she comes to work in China again in the future. Alternatively, upon his/her written application for termination of the social insurance relationship, the relevant social insurance handling agency may make a lump-sum payment of the money deposited in the social insurance personal account to him/her. (However, in accordance with the law of China and in practice, the portion of insurance paid by the relevant enterprise may not yet be available at the time of termination of the social insurance relationship).
The balance remaining in the social insurance personal account of a deceased foreigner may be inherited pursuant to the law (the portion of insurance paid by the enterprises is not able to be inherited at present).
4. On Receiving Social Insurance Benefits
A foreigner who resides outside the territory of China and receives monthly payments of social insurance benefits shall, at least on a yearly basis, submit to the social insurance handling agency that pays him/her the benefits the certification of existence issued by the relevant Chinese embassy or consulate, or the certification of existence that is notarized or certified by the relevant authority of his/her country of residence, and is then certified by the relevant Chinese embassy or consulate.
Where the foreigner has lawfully entered China, he/she may go to a social insurance handling agency to prove his/her existence by himself/herself and no longer provide the certification of existence as stipulated in the preceding paragraph.
5. Settlement of Social Insurance Disputes
Foreigners participating in the social insurance system in accordance with the law may apply for mediation or arbitration, or file lawsuits in accordance with the law regarding the disputes over social insurance with their Employers or Domestic Work Entities. The disputes shall be governed by PRC law.
6. Bilateral Agreements
Foreigners working within the territory of China who are nationals of the countries that have signed bilateral or multilateral social insurance agreements with China shall participate in the social insurance system in accordance with the said agreements. Where bilateral agreements have been signed, he/she may avoid undertaking dual social insurance obligations specified by the laws of the states with bilateral or multilateral social insurance agreements. According to our legal research, only Germany and South Korea have signed bilateral agreement on social insurance with China.
7. Legal Obligation for Not Paying Social Insurance Premiums
If an employer or Domestic Work Entity fails to go through the formalities for social insurance registration for a foreigner recruited and employed by it or fails to contribute social insurance premiums for such foreigner in accordance with the law, the labor and social security administration department may order such employer to make corrections. If the employer refuses to make corrections in compliance with the order of the administrative department for labor and social security, or refuses to abide by the decision made by the labor and social security administration department on dealing with a case by administrative means, a fine of not less than 2,000 yuan and not more than 20,000 yuan will be imposed on such employer.
With the passage of the implementing rules on 15 October 2011, we take the view that the local administrative authorities will gradually implement such rules. However, in our experience, the strength of enforcement will differ in various regions. Therefore, we should pay attention to the strength and attitude of the local labor administrative authorities that enforce the implementing rules.