How the New Social Insurance Law Impacts Foreign Enterprises and Foreign Employees
The Standing Committee of the National People’s Congress of the People＇s Republic of China (PRC) passed the Social Insurance Law ( thereinafter referred to as the “New Law”) on 28 October 2010. In accordance with Article 97 of the New Law, a foreign employee in mainland PRC has to participate in the Social Insurance Scheme under the Social Insurance Law. The existing social insurance rules or local regulations have certain provisions concerning the social insurance contributions of foreign expatriates, but those have not been implemented yet.
Related Questions and Answers about the existing social insurance rules for foreign employees in Shanghai
Q1: When will the foreigners' social security obligations be enforced according to the New Law?
A: After the implementation of the New Law, local social insurance authorities began to pay attention to as well as implement the New Law. Also, a more detailed policy is being established. However, there is not a clear timeframe on enforcement yet.
Q2: What kind of foreign person is included under the new law in Shanghai?
A: The foreign employees who have established labor relationships with a company or work at a representative office in Shanghai and hold a work permit according to related regulations.
Q3: What’s the maximum contribution for a foreign employee for one month?
A: The maximum monthly contribution amount for the urban social insurance scheme in 2011 for a foreign employee in Shanghai is as follows: RMB 4,324 (employer’s part) and RMB 1,286 (employee’s part) (for reference only).
Q4: Is it possible to cash out the contribution pension when the foreigner working in Shanghai ends or terminates the labor relationship with the employing units and leaves the country?
A: If the foreigner working in Shanghai ends or terminates the labor relationship with the employing units and leaves the PRC, he or she may apply to the social insurance authorities for termination procedures, and the social insurance authorities shall pay them a lump sum for the individual pension account accrual.
Q5: What is the payment method for social security for foreign employees?
A: The Company establishing the labor relationship with foreign employee shall withhold the payment amount and pay it every month.
Q6: What benefits can a foreigner enjoy when participating in the Social Insurance in Shanghai?
A: They shall be eligible for the basic medical insurance benefits upon illness during the period of entitlement; but they shall not have their medical expenses which occurred overseas settled during the period of entitlement. When they happen to encounter injuries and occupational diseases during the period of entitlement, the appraisal of work-related injuries, the assessment of labor capability, as well as the treatment of work-related injuries shall refer to relevant regulations in Shanghai.
Our analysis and suggestions:
The New Law is clearly stating that foreigners working in the PRC must participate in the Social Insurance Scheme, and social insurance authorities are in the process of establishing a detailed policy. We assume that the new regulation and detailed policy will be illustrated and implemented in the near future.
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