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The Interim Measures for the Participation in Social Insurance of Foreigners Employed in China (the “Interim Measures”), effective on November 15, 2011, require that all the foreign employees and their employers shall participate in China’s social insurance scheme and contribute social insurance premiums. However, Shanghai’s local practice allowed foreign employees to participate at their own choices pursuant to the local rule, called the Notice of Shanghai Municipal Human Resources and Social Security Bureau on Several Issues Relating to the Contribution to Social Insurance for Urban Employees by Foreigners, Persons with Permanent (Long-term) Residence Abroad and Residents from Hong Kong, Macau and Taiwan Working in Shanghai (the “Notice”), which expired on August 15, 2021. No further exception policy has been released so far. It means foreigners employed by Shanghai companies are mandatorily required to make contribution to social insurances since August 16, 2021.
1. Foreign employees in Shanghai are mandatorily required to participate in China social insurance
Before August 15, 2021, foreign employees and their employers were able to (neither shall nor must) participate in the social insurance pursuant to the Notice. After the expiration of the Notice, there is no official document to extend the implementation of the Notice. Thus, the foreign employees with no exemption from the Social Insurance Agreements shall abide by the Social Insurance Law and compulsorily participate in the social insurances.
(1) an employer shall conduct social insurance registration for its foreign employees within thirty (30) days from the date of employment.
(2) foreign employees shall participate in the pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance (i.e. “five insurances”). Both employer and foreign employees shall pay insurance premiums pursuant to their respective premium rates.
Our experience and observation indicate that the Notice has been gradually phased out in recent years, and Shanghai Labor Bureau has been interpreting the implementation of the Notice in a more conservative way. Especially, after the Provisional Measures for the Participation by Hong Kong, Macao, and Taiwan Residents in Social Insurance in China became effective, Shanghai Labor Bureau has clearly required that employers and their Taiwan, Hong Kong, and Macau employees participate in the social insurances and make contributions to the social insurances. Therefore, even though the Notice was in effect at that time, Shanghai’s local practice has been complied with and linked up to national regulations step by step.
2. Will the employer be required to make retroactive contributions of social insurance premiums for the period before August 15, 2021? Is the 2-year limitation period of the retroactive contributions applicable to the employer?
Generally, the employer shall contribute the social insurance premiums in full amount. Where the employer fails to do so, the social insurance premiums collection agency shall order the employer to make or supplement contributions within a time limit. However, it is not crystal clear if the employer should make retroactive contributions for those foreign employees this time as Shanghai Labor Bureau has been keeping silent on this.
Upon our consultation with 12333 (the local labor consulting hotline) in Shanghai, the employers are obliged to make retroactive contributions for the foreign employees for the period from the effective date of the Interim Measures (October 15, 2011) in the event that they complain about the failure of the contribution in full amount for that period.
Moreover, as for the limitation period of retroactive contributions, the local labor supervision agency generally will accept and investigate the complaint about the social insurance contribution issues within 2 years after the employer’s non-compliance is rectified. For those complaints beyond 2 years, if the employee can provide the relevant evidence to support his/her complaint, the 2-year limitation period will be extended in practice. Theoretically speaking, if the foreign employees complain about the employer’s failure to contribute the social insurance in full amount, the local labor supervision agency may require the employer to make retroactive contributions for the period starting from the effective date of the Interim Measures (October 15, 2011) or the commencement date of his/her employment, whichever is later.
3. Social insurance exemption for foreign employees
For the avoidance of the double payment of social insurance premiums by the foreign employees working in China, China has signed Social Insurance Agreements with 11 countries respectively. Such agreements have come into effect and the categories of social insurance for which employees are exempt from contributing are as follows:
* China signed the Social Insurance Agreement with France on October 31, 2016; such agreement is not yet in effect.