Working Abroad in China
Working in China as a foreign national is a great experience for many. However, when employment issues arise, it can quickly become a nightmare. Over the years, I have noticed that the misunderstandings and questions are recurring. Thus, I created this series “Working Abroad in China” which explores and discusses some key matters foreign employees should know. In this article, social security will be explained. Since it is a sizeable part of the labor cost, it is important for foreign employees to know their rights and obligations.
Social insurance is divided into five categories: basic endowment insurance (and pension) for employees, basic medical insurance for employees, work-related injury insurance, unemployment insurance and maternity insurance. Social insurance contribution is partly from the employee, reduced from the gross wage, and from the employer, added to the employee’s wage. Participation in social insurance is mandatory for foreign nationals employed in China as clearly stipulated in national law and regulation. Although, some cities allow foreign nationals to not participate, being in direct opposition with national laws and regulations. This situation is in a grey area and may change at any given time on short notice. The issue with paying social security is that receiving the benefits has considerable barriers. In most cases, if eligible, the foreign national will be out of the country, which may create challenges to prove eligibility and obtain benefits. Furthermore, it will require proving that to be alive on an annual basis either through certificate of survival issued, or authenticated, by the Chinese embassy/consular or in person at the social insurance agency.
Given these difficulties, it is preferable to opt for the other option:
“…If the social insurance relationship is terminated upon a written application of the foreigner, the balance in the foreigner’s personal social insurance account may be paid to the foreigner in a lump sum”
The employer’s part of the contribution will not be given back. Howbeit, upon leaving China, the foreign national can request to be paid his own social insurance contributions.
Depending on the individual’s nationality and provided that the relevant social insurances are already paid in the home country, the foreign national may be exempted from participating in social insurance if his country has bilateral or multilateral treaty on social insurance with China. As of the time of writing this article, according to the website of the Ministry of Human Resources and Social Security of the PRC, the following countries have an agreement with China: Germany, South Korea, Denmark, Finland, Canada, Switzerland, the Netherlands, France, Spain, Luxembourg, Japan, and Serbia. The countries under negotiation are Austria, Romania, Czech Republic, Sweden, Belgium and the Philippines. The countries with the intention of negotiation are: Russia, Zambia, Portugal, Kazakhstan, and Québec.
An agreement does not necessary mean it is ratified by China. Older agreements such as Germany and South Korea are ratified, however more recent agreements may not yet be. Furthermore, the local bureau of social security should first be contacted for instructions when an exemption may apply.
In short, social insurance is mandatory except when it is not, the coverage is generally rather low and thus, it would make sense to get proper private insurance/investments. Since not dying is a good thing, I recommend having a particular attention to a good health insurance with direct billing. I personally use and enjoy Abacare. They took the time to explain the local hospital system and to help me find the best health insurance according to my needs.
 Interim Measures for the Participation in Social Insurance of Foreigners Employed in China, Article 5
Business Development Manager
River Delta Law Firm
River Delta Law Firm is a Chinese law firm specialized in Labor & Employment Law. River Delta was founded 15 years ago and has over 200 labor professionals, making it the biggest and one of the oldest employment law firms in the People’s Republic of China.
This article is a vulgarization of laws and regulations and does not constitute legal advice. The author is not responsible for any loss caused by using any information provided in this article. For more information please contact Normand@Laodongfa.com.
For all intent and purpose, the term China in this article refers to the People’s Republic of China.