The new Social Security Law effective on July 1, 2011 is aimed to achieve a portable and unified social welfare system nationwide.
There has been a national framework for social security for urban workers, while
contribution rates and certain benefit provisions vary by province and city. For
the large number of rural population, the coverage is modest. Migrant workers
who live and work outside their hometowns often receive little or no benefits.

Five Types of Coverage
Five basic types of social security benefits have been included under the new law:
pension, medical, maternity, unemployment insurance, and work-related injury
insurance. Both employer and employees contribute towards pension, medical
and unemployment, while maternity and work-related injury insurances are
funded solely by employers. However, contribution rates and wage bases are to
be decided at the local level.

Foreign Workers
As the rules on foreign worker participation in social security are not yet fixed
and needs more clarification. An interim measure document has been issued but
did not clarify all the issues. The interim draft measure allows foreign workers
to withdraw benefits when they leave China permanently. Currently while foreigner
workers who have been locally hired already participate in some local
systems, for example in Beijing, Shanghai and Guangzhou, expatriates do not.
This is not clear whether or how the Chinese authorities will adjust the implementation
details based on feedback.

The restriction on the social security benefits transferred from one city to another
will be lifted. Individuals can transfer social security pension, medical and
unemployment benefits when they move between provinces and cities. The system
takes into account contribution years in each local programme when the
individual participates in any social benefit scheme, regardless of where he or
she lives in mainland China. Thus, the participation from migrant workers, who
originally were discouraged to participate in the social security system due to
lack of mechanism for benefit transfer, will likely to increase.

The new law is a big step towards a more portable and unified national social
security system to guarantee a basic level of income and health protection for
the population. This helps to facilitate human resources mobility within China.
However, the administrative costs are likely to increase due to the changes. The
lack of clarity on foreign worker participation in social security systems indicates
the trend towards using local talent instead of foreigners. As closer supervision
has been introduced, employers face harsher penalties when they fail to
comply with the new law or to rectify within a specific period, such as penalty
of up to three times the amount due plus a late payment fine of 0.5% per day.
Both Swiss Life Network Partners China Life and Ping An of China are fully
prepared to support employers under the new law.

For more information
please contact Swiss Life Network: