China’s top legislature adopted the Social Insurance Law (the Law) of the People’s Republic of China on October 28, 2010. This will come into effect as of July 1, 2011.
Prior to 2007, China had no specific national law for social insurance. The Law was first reviewed in December 2007 and was further reviewed 4 times before adoption. Although the Labor Law of China then specified that employees should enjoy rights in social insurance, the local governments had different interpretations and execution standards, some employers did not pay or paid less than the social insurance fee they were supposed to pay for their employees and some migrant workers were not willing to pay for it as they didn’t understand for the benefits. This newly enacted Social Insurance Law is the first legislation for a social insurance system in China and is of great significance to overcome the obstacles the Labor Law had encountered and ensure the rights and benefits of workers in China.
The Social Insurance Law specifies the following 5 basic social insurance systems, which are applicable for employers and employees within the territory of China and are compulsory:
Basic Pension Scheme
Full time employees (including rural residents working in cities and foreigners working in China) must be registered for basic endowment insurance, and both the employer and the employee pay part of the contribution. The employer and the employee each pay a portion of the total salary as basic endowment insurance fee. The employer’s contributions are based on the total payroll for the period concerned, and the amount will be credited to the mutual assistance fund. The employee pays contributions based on his/her own salary, and the fee is credited to their individual account for pension purpose.
Part-time employees and those in flexible employment may take part in basic endowment insurance independently. They shall pay their basic endowment insurance fee in accordance with stipulations of the country, which will be credited to their individual accounts.
For individuals moving to new employment, their basic endowment insurance data will be transferred with them and the contribution years will be calculated accumulatively.
Basic Medical Insurance
Employees must be registered for basic medical insurance, and both the employer and the employee pay basic medical insurance contributions. Part-time employees and others in flexible employment may take part in basic medical insurance independently and shall pay their basic endowment insurance expense in accordance with stipulations of the country.
For individuals moving employment, their basic medical insurance data will be transferred with them and the contribution years will be calculated accumulatively.
Work-related Injury Insurance
Employees must be registered for occupational injury insurance and the occupational injury insurance fee is to be paid fully by the employer with no contribution from the employee and shall be in accordance with the rate determined by social insurance authority.
Any employee, who is injured or suffers from an occupational disease due to the work he/she is engaged in, can obtain work-related injury insurance treatment once the injury or disease has been confirmed. If the employee loses his/her ability to work he/she will enjoy the disability treatment after assessment by the related authority.
If the employee is injured or dies as a result of one of the following causes, his/her injury/death will not be acknowledged as work-related injury/death:
The following expenses caused by work-related injuries shall be paid by the employer in accordance with stipulations of the country:
If the employer does not pay work-related injury insurance fee, they will be solely responsible for expenses equal to occupational injury insurance treatment in case of any occurrences.
Employees must be registered for unemployment insurance and the unemployment insurance fee is paid by both the employer and the employee as determined by the country. The rate of unemployment benefit is determined by the government of each province, autonomous region and municipality where employers are located, but the unemployment benefit shall not be lower than the minimum subsistence standard of the urban residents.
Employers must issue proof of termination or dissolution of labor relation for unemployed people in time and submit a list of unemployed people to the social insurance authority no later than 15 days after the labor relation is terminated or dissolved.
For individuals moving employment, their basic unemployment insurance accounts will be transferred with them and the contribution years will be calculated accumulatively.
Employees must be registered for maternity insurance, and maternity insurance fees are payable solely by the employer with no contributions required by employees. If the employer has paid the maternity insurance fees, the employee can benefit form maternity insurance treatment, and an unemployed spouse of the employee can obtain maternity medical expense treatment in accordance with the stipulations of the country (maternity insurance treatment includes medical expenses for childbirth and childbirth subsidy).
Legal Consequences for Failure to Register or Inappropriate Payment
If the employer fails to register, the social insurance authority can require them to make rectifications within a specified time limit. If they exceed the time limit to rectify, a fine of 1 to 3 times of amount of social insurance fee shall be collected from the employer, and a fine of RMB500~3000 shall be collected from the person in charge and other personnel concerned.
If the employer fails to pay social insurance fee in full and on time, the social insurance authority shall require them to pay in full amount within a specified time limit and collect 0.5% of overdue payment each day. If they still fail to pay, a fine of 1 to 3 times of the amount in arrears shall be collected by the relevant administration department.
In case of the employer failing to pay or make up for the unpaid social insurance fee within the time limit, the social insurance authority is in the position to inquire in their deposit account in the bank or other financial institutions, and apply to the relevant administrative department to recover the social insurance fee.
In case the balance in the account of the employer is less than the amount of social insurance fee that shall be paid, the social insurance authority may require the employer to provide a guarantor and sign an agreement to postpone payment.
In case the employer fails to pay the social insurance fee in full and/or provide a guarantor, the social insurance authority can apply to the court for detaining, freezing or selling by auction their assets with their value equal to the amount of social insurance fee they shall pay.