Companies in China with foreign employees will now have to pay first pillar contributions for them after confirmation from the Ministry of Human Resources and Social Security that the participation of non-Chinese nationals in China’s new social security system is mandatory. Since there is a cap on contributions, however, this should not lead to greatly increased employment costs.
From October 15, 2011, social security contributions must be paid for foreigners working in China, whether for Chinese or overseas companies, unless there is a bilateral social security agreement in place between the employees’ home country and China (only South Korea and Germany so far).

Social security covers old age pension, medical, occupational injury, unemployment and maternity.

Contributions are set by local government, and differ accordingly. For example, in Beijing, employers pay 32.8% and employees 10.5%, with a monthly salary cap of CNY 12,603; while in Shanghai, employers pay 37% and employees 11% of salary, with monthly salary capped at CNY 11,688.

On leaving China, foreign employees can either keep their social insurance individual account to add to during future employment in China, or claim a refund of their own contributions. On death, the employee’s account balance can be inherited. Employer contributions can only be paid out as annuities, not as a lump sum.

Benefit payments
In order to receive a social security pension outside China, foreigners must have paid contributions for at least 15 years. The pensioner must also provide proof of life every year to the local Chinese embassy or consulate.

Although the increase in costs for employers of foreign staff will be fairly small, there could be tax implications, and payroll systems will need to be adjusted. Employers should consult our Swiss Life Network Partners in China for assistance.

For more information
please contact Swiss Life Network