Business China

Understanding the Complications with Chinese Social Insurance

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Social insurance policies were introduced in 2011 in China and currently serves as the social security framework to protect employees and employers throughout mainland China. Chinese social insurance is a valuable asset but many companies—foreign and local—are unaware of the benefits and what the process entails.

China social insurance

What Is Chinese Social Insurance?

According to Chinese law, social insurance is one of the many mandatory benefits that employers must provide to the employees. Both local and foreign employees are eligible for these benefits and employee’s social insurance process commences as soon as the working relationship starts—be it a part time job or probation period.
There are five types of social insurance.

  • Pension
  • Medical insurance
  • Injury insurance
  • Maternity insurance
  • Unemployment insurance

Even though the law was propagated by the central Chinese government, local authorities were responsible for governing the process, till last year—when National People’s Congress reshuffled the national level agencies. Now China’s tax bureau handles the contributions instead of social insurance bureau.

What Do Employers Need to Know?

Foreign employers need to be extremely careful with Chinese rules and regulations since they’re subjected to heightened scrutiny compared to domesticated companies. Any accidental or mindful violation can subject you to harsher fines and may cause problems in smooth business operations. 

To avoid unnecessary problems, keep these four things in mind.

  • If you’re planning on making minimum contributions to the social insurance fund for employees, don’t! The tax bureau can spot these payments and can fine you.
  • Even if you have low-cost workers, immediately review their social insurance policy because the tax bureau records all information regarding the number of employers and salaries being dispatched. Don’t cut any corners.
  • You need to pay insurance in the company-registered city and cannot use a local agency or a third party to pay insurance for employees in another city—where the company isn’t registered.
  • The collection method isn’t just a door-to-door scheme, it follows the security laws, which is why you can’t delay contributions.
  • If you’re not compliant with the regulations governing social insurance, you can and will be subjected to penalties.

Many foreign companies face problems in keeping up with the obligations and insurance rates.

China company registration

If you’re an expat employer and are having trouble understanding the process, Business China provides expert advisory and consultancy services every step of the way. The rules of social insurance can differ for each employer and each region in China.

For help and more information, call us at +86-020-2917 9715 or send us a message here. We provide multifaceted support to foreign businesses operating in China across legal, accounting and management functions—along with helping them with setting up and the registration process.
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