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Voluntary to Mandatory: Foreign Employees Now Subject to Chinese Social Insurance in Shanghai

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published on 11 August 2021 | reading time approx. 1 minute
 
It was required from 2011 by a state level order (Interim Measures for the Participation of Foreigners Employed in China in Social Insurance) that all foreign employees who are legally employed by enterprises in China shall participate in the Chinese statutory social insurances (including pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance, hereinafter referred to as "5 social insurances").

  

  

[2009] No. 38 (hereinafter referred to as "the Circular") which permitted foreign employees to participation in Chinese social insurances on a voluntary basis.

  

It is noted that the Circular expires from 15 August 2021, since when it is understood from a local legislative basis that foreign employees who are legally employed by an enterprise in Shanghai are obliged to participate in the Chinese statutory social insurances. And retroactive contributions may be required if they have not made any social insurance contribution in Shanghai. The retroactive payments might be traced back to the starting month of the current employment contract.

  

The current contribution rates of the 5 social insurances in Shanghai are as follows:

 

Social InsurancePensionMedicalWork-related InjuryUnemploymentMaternity
Employer16%9.5%0.16%-1.52%0.5%1.00%
Employee8%2%N/A0.5%N/A

* The minimum calculation base is CNY 5,975/month and the maximum calculation base is CNY 31,014/month.

 

Still it may be possible for German employees who are staying in the German social security system to be exempted from paying the Chinese pension and unemployment insurances by application with certain certificate to be issued by the German social security authority. The initial exemption period can reach a maximum of 60 months and may be extended to a total of 96 months upon approval.

 

We will pay a close attention to the further practical rules to be released by the relevant authorities in Shanghai especially regarding the retroactive contribution period, as well as potential new rules or practices to be implemented by other provinces such as Jiangsu and Zhejiang. Although, there is so far no news on this topic from other provinces than Shanghai, it could be a sign that local authorities in other areas may not extend the current practice, either, when Shanghai local authority takes the expiry of the Circular as a trigger to start collecting mandatory social insurances from foreigners. It may be the right time now for foreign employees in Shanghai to pay attention to their social insurance status with a timely communication with the local social security authority, not only regarding the payment starting date, but also regarding the possible exemption for German employees, as different districts in Shanghai may have different practices.

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