“Compared to October last year, many cities have issued implementing rules for the PRC social insurance contributions by foreign nationals,” said Gordon Feng, chair of Paul Hastings’ employment law practice in Shanghai. Beijing, Chengdu, Qingdao, Suzhou and Chongqing have all issued local implementing rules requiring foreign employees to enroll in government schemes for pension, medical care, work-related injury, unemployment and maternity.
With many of China’s foreigners residing in Shanghai, the city still maintains that contributions to the schemes are voluntary in the country’s most populated municipality. “It seems Shanghai is not interested in enforcing the Social Insurance Law against foreigners as it is keeping quiet about any implementing regulations and so far the enrollment remains voluntary,” said Feng.
Hong Kong, Macau, and Taiwan residents were also part of the initial measures, but later removed as previous legislation required contributions from them. “The Ministry of Human Resources and Social Security already had regulations for Hong Kong, Macau, and Taiwan residents in place, requiring them to enroll in the social insurance system, but the enrollment was not mandatory in practice before October 15, 2011” said Feng. He believed HMT residents were later removed because otherwise the rules would have been redundant.
The southwestern city of Chengdu and the eastern city of Suzhou are two cities where contributions are mandatory. Despite the removal of HMT residents, Chengdu and Suzhou are unique in that their implementing regulations included HMT residents. “The Chengdu Circular and Suzhou Circular do not go against the Ministry because previous regulations required HMT residents to pay social insurance,” commented Feng.
But what about enforcement? China is notorious for releasing measures where enforceability is non-existent. Despite repercussions of forced transfers from the social insurance administrative authority and interest fee penalties of 5% for non-compliance, there has not been any news that they have been enforced or companies employing foreigners chased for contributions.
Social insurance for PRC nationals is a far greater problem in China. The social insurance centre does not have the energy or the appetite to go after foreigners. Foreigners are such a small percentage of the population compared to local residents, and the authorities already have a big problem dealing with nationals.
Even though stories of enforcement or penalties have yet to surface, Feng always recommends his clients to follow local laws. Companies employing several foreigners need to be careful, as enforceability of the measures could increase at anytime. It remains to be seen which other municipalities will release circulars and whether Shanghai will require such regulations.
By David Tring www.chinalawandpractice.com