eNewsletter

For the first time, the Chinese government has mandated that foreign expatriates working in China are required to participate in China’s Social Security System.  The new law went into effect on October 15 and will affect the 232,000 foreigners with work permits in China. 

The new law states that foreign expatriates must now contribute to the social security systems of both China and their home countries.  This includes expatriates hired by local Chinese businesses and expatriates hired in their home countries to work at a Chinese office.  Employers must also contribute to their foreign employees’ China social security.  

Contribution rates have been determined locally and vary by city.  In Shanghai, the first $1,843 of an expatriate’s salary is subject to an 11% social security contribution for the employee and 37% for the employer.  These contribution rates will substantially increase costs for employers deploying workers to China or hiring foreign expatriates.  There are high penalties for failing to contribute, ranging from 100-300% of the expected contribution. 

However, there has been confusion among employers and government officials on how the law will work.  Specific details are still being ironed out.  For example, some cities have cap levels based on minimum wage, while others have none.  As a result, no city has begun to collect taxes yet.