Having developed over decades, the social insurance scheme in China has been gradually unified nationwide and is now primarily regulated by the PRC Social Insurance Law (SIL), which came into effect in 2011. Prior to the SIL, the social insurance scheme in China was regulated by various administrative regulations.

The SIL consolidated the social insurance scheme which includes elements covering pension, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance.

It is a mandatory requirement for both the employer and the employee to contribute to the social insurance funds. Employers are required to pay contributions to all five social insurance funds, while employees are required to contribute to the pension, medical insurance and unemployment insurance funds only. The contribution amounts are generally based on the employee’s monthly salary although the contribution rate (expressed as a percentage) for each category of the insurance varies from locality to locality.

In order to regulate the implementation of the SIL, the Ministry of Human Resources and Social Security of the PRC promulgated The Regulation regarding Filing and Payment of Social Insurance Contributions (Filing and Payment Regulation) which took effect on 1 November 2013 and replaced the original regulation which had been in effect since 1999.

According to the Filing and Payment Regulation, contributions payable by employees must be withheld and paid by the employer on behalf of the employees. In the event that an employer fails to pay the required contribution in full, the social insurance authority is entitled to make an administrative decision of compulsory deduction and notify relevant banks or other financial institutions in writing to deduct the outstanding amounts directly from the employer’s bank account (or its account at another financial institution). If the proceeds in the employer’s accounts are insufficient to pay the outstanding contribution, the employer may enter into an agreement with the social insurance authority to defer payment of the contributions after granting security over its assets to the social insurance authority. If the employer fails to enter into such an agreement or cannot pay the contribution in full upon expiry of the deferred deadline under such agreement, the social insurance authority is entitled to apply to the people’s court for attachment, seizure or auction of the employer’s property to recover the outstanding contributions.

Since September 2011, foreign nationals working in China (who have obtained a work permit in China) are also required to contribute to the PRC social insurance scheme regardless of whether they are employed directly by a Chinese entity or seconded by an offshore entity to a Chinese entity. However, this mandatory requirement has not been properly implemented in certain cities. For example, it is currently not a compulsory obligation in Shanghai.

The Chinese version of the Filing and Payment Regulation may be accessed from the link below: http://www.mohrss.gov.cn/gkml/xxgk/201309/t20130929_114695.htm