The company that employs the foreign worker in China must present to the local China Social Security Bureau an original insurance certificate issued by a relevant company in the country of origin. In order to correctly calculate the monthly amount of social security contributions, it is important that employers understand the basic rules for deciding on the contribution base. The new system was created by a number of specific provisions and provisions of the Labour Code of 1994 and the Employment Contracts Act of 2008. It was only in 2011 that these different parts were codified into a comprehensive national framework under the Social Security Law, which sets out the basic principles of China`s social security system. Workers who are nationals of certain countries that have concluded bilateral social security agreements with China and workers from Hong Kong, Macao and Taiwan who continue to be affiliated to equivalent schemes could be exempted from affiliation to the Chinese social security system. The agreements allow SSA to add up U.S. and foreign coverage credits only if the employee has at least six-quarters of U.S. coverage. Similarly, a person may need minimum coverage under the foreign system to obtain U.S. coverage credited to meet the eligibility criteria for foreign benefits.

“Under local rule, foreign workers are not required to contribute to maternity insurance in Shanghai, which can lead to disagreements between the employer and the employee. In the event that foreign employees need to take maternity leave, the local social security office will not cover the payroll and the corresponding costs for the staff during the leave. “Social security contributions to pension funds, health insurance companies, etc. are mandatory for Chinese workers. Since October 15, 2011, foreign persons holding a Chinese work permit to work in China are required to pay social security contributions related to pensions, medical care, unemployment, maternity and work accidents under China`s Social Security Law. Employers` and employees` monthly social security contributions, applicable ceilings, etc. are subject to local regulations, which may vary depending on local jurisdictions. For example, the contribution rates and ceilings that apply to local Chinese in Shanghai, Beijing and Guangzhou are as follows: On the other hand, Shanghai does not require foreigners to be subject to social security contributions.

If a foreigner leaves China before the retirement age, his or her individual account will be retained. If the foreigner later returns to China for later employment, the payment period will continue to be calculated cumulatively. Upon written request from the foreigner, the social security institution may pay abroad the amount of his individual account in the form of capital and terminate the basic pension relationship. The prerequisite for this is that the employee intends to leave China permanently. After the death of the foreigner, the amount remaining in the individual pension insurance account can be inherited. And to further reduce the social security burden, China plans to change the method of calculating the contribution base – the local average salary is calculated on the basis of employees in all sectors and not just on the basis of those in the non-private sector. 2 See “Expert Blog on the entry into force of the social security agreement between Switzerland and China”, published by the member firm KPMG International in Switzerland. All existing agreements define the groups of workers eligible for exemption and define the categories of social security for which workers are exempt from payment. Foreigners from countries that have tabulation agreements with China may be exempted from certain Chinese social security contributions in accordance with the specific scope of the respective agreements. These agreements eliminate the double taxation of social security that occurs when an employee from one country works in another country and is required to pay social security taxes to both countries for the same income. Currently, China has only tabulation agreements with two countries: Germany (which covers both pensions and unemployment) and the Republic of Korea (pensions only).

However, since social security is managed at the regional level, there are a number of inconsistencies between cities. As a result, most major cities have implemented their respective requirements for foreign employees. Other frequently asked questions are: Can companies exempt social security obligations by entering into agreements with employees? What are the risks of non-compliance? How does the system affect foreign workers? Anyone wishing to obtain more information about the U.S. Social Security aggregation program – including details of the specific agreements in place – should write to the following address: Although bilateral exemption agreements are concluded at the national level, regional governments must implement the system locally. Secondly, the basic figures for social security contributions have lower and upper limits. As a general rule, the basis for assessing contributions is limited to 300% of the average local salary. And the minimum contribution base is usually determined either by the local minimum wage or by a certain percentage of the average local wage. Most U.S. treaties eliminate double coverage of self-employment by assigning coverage to the employee`s country of residence. For example, under the agreement between the United States and Sweden, a doubly insured independent U.S.

citizen living in Sweden is only covered by the Swedish system and is excluded from U.S. coverage. Economic commentators in the region often debate whether China`s social security contributions are burdensome for businesses. Although agreements aim to allocate social security coverage to the country where the employee has the most important ties, unusual situations sometimes occur in which strict application of the rules of the agreement would lead to abnormal or unfair results. For this reason, each agreement contains a provision that allows the authorities of both countries to grant exceptions to the normal rules if both parties agree. .