Overall, China`s social security system is complex and inconsistently managed over the long distance and can become costly due to the continued increase in labour costs. However, it is not necessarily a burden for companies that take into account their role in recruiting talent and preventing the risk of work-related injuries. Hello, I plan to start a business in Guangzhou with foreign employees. I would like to know if foreign staff in Guangzhou, as in Shenzhen, need social security or if it is not mandatory, as in Shanghai. On November 27, 2017, a social security agreement was signed in Beijing between the government of the Grand Duchy of Luxembourg and the government of the People`s Republic of China. This is the first international agreement on China-Luxembourg relations on social security. On February 5, 2018, a bill was introduced in the Chamber of Deputies to approve the agreement. Workers affected by the transitional period should take into account the three-month period for applying for a certificate of coverage from the relevant authorities. Notifications were due to be filed by early September 2017.
The scope of exemption and qualifications may vary from agreement to agreement and local social security offices may follow different measures to implement exemptions. Employers should consult and apply with the relevant local office before deciding not to pay dues for their foreign workers. As part of the agreement, Japan will exempt seconded personnel, crew members, aircrew, diplomatic and consular staff and domestic officials working in the country from the obligation to pay two significant local pensions, while China will do the same for its Japanese colleagues. However, the court considers that such an agreement would be invalidated in the event of a labour dispute between the employer and the worker. The employer may be required to reimburse the elected social security or to pay additional compensation to its employee in the event of dismissal. Each year, the contribution base can change if there is a change in salary, and we had a client with employees in China who was to know the current contribution for 2020. In this case, the basic salary of contributions should be more appropriate, since there was a wage increase for a worker compared to the previous year, which meant a higher social contribution for both the employee and the employer. – the export of services which stipulate that services acquired under the legislation of one of the contracting states cannot be subject to a reduction, amendment, withdrawal or suspension, since the beneficiary resides in the other contracting country. As of May 1, 2019, employees of Chinese companies that have been seconded to Luxembourg will be able to remain in the Chinese pension system. China`s social security system represents five types of insurance and contributions to the mandatory housing fund. China Briefing explains how social security is calculated in China, what employers` obligations are and how it affects foreign workers and migrants.
Another exception applies to foreign workers whose country of origin has a social security contract with China and, in this case, does not need to be paid (because the worker always contributes at home). These include Germany, Canada, Japan and other countries where pensions and/or unemployment are tax-exempt. The employer is obliged to keep monthly social security contributions from the relevant local authorities of employees` social contributions, from pay slips to remuneration, as well as employer contributions.