Edited and translated by People's Daily Online

Recently, China officially implemented the Interim Measures for Social Insurance System Coverage of Foreigners Working within the Territory of China. According to the statistics by the Ministry of Human Resources and Social Security of China (MHRSS), the number of only the foreigners holding Foreigner Employment Certificate working in China surpassed 230,000 by the end of 2010.

Some organizations and foreign people said that many foreigners working in China have paid their insurance premiums according to laws of their own countries or voluntarily, and if China also requires these workers to pay the insurance premium, it means they have to pay it twice.

An official from the MHRSS explained that, in order to give foreign workers the same treatment as citizens, guarantee their social insurance rights and interests practically and avoid the situation of foreign enterprises and workers paying the insurance premium twice, the normal international practice is to carry out a bilateral or multilateral negotiation and solve the problem by signing a governmental social insurance agreement covering mutual exemption.

In as early as 2001 and 2003, the Chinese government had signed mutual social insurance agreements with Germany and South Korea, setting relevant provisions regarding exemptions of certain social insurance premiums for the workers working in each country. Other countries, such as Japan, Belgium and France, have proposed suggestions of solving the issue for workers by negotiating and signing a bilateral social insurance agreement. China's attitude towards the suggestion is quite positive and China is preparing and arranging mutual social insurance premium exemption negotiations with these countries to solve the double-paying issue properly.

Certain foreign workers are worried that it may be difficult to draw their pensions as different countries have different rules on the age of retirement, and most of them will leave China before retirement. However, a relevant official from the Ministry of Human Resources and Social Security explained that according to the Social Security Law and the provisional rules on foreign workers paying the social security tax in China, foreign workers who meet China's requirements for receiving pension payments will be entitled to pension benefits in accordance with Chinese law.

Web link: http://english.peopledaily.com.cn/90780/7627463.html

According to the provisional rules, foreign workers who leave China prior to the statutory age of retirement may maintain their social insurance accounts, and have the accounts reactivated if they return to work in China. When leaving China, foreign works may also apply to terminate their social insurance accounts and receive a lump-sum payment of pension funds in their personal pension accounts. In the event of foreign workers' death, the balance of their pension accounts can be inherited in accordance with the law.

Certain people said that the introduction of a social security tax on foreign workers will increase the operation costs and financial pressure of enterprises and institutions that hire foreign workers and may also produce certain negative effects on China's attraction of foreign capital and talent.

An official at the MHRSS said that requiring foreign workers in China to pay social security contributions conforms to international practice and aims to protect the interests of foreign workers.

Second, related laws and regulations were not clear before the adoption of the "Social Insurance Law."Thus, the work to promote the inclusion of foreign workers in China's social security system was never initiated, and domestic employers could opt out of paying social insurance premiums for foreign workers to cut costs, leading to unfair competition among employers. After the "Social Insurance Law" is put into effect, all enterprises should assume the obligation of paying social security contributions for foreign workers and cover additional costs.

Furthermore, incorporating foreign workers in China into the coverage of social security is to offer welfare to foreign workers, particularly talent and better protect their interests of social security. Therefore, the adoption of the provisional method will not affect the introduction of foreign talent into China.

Web link: http://english.peopledaily.com.cn/102774/7627464.html

Xinhuanet

Foreign employees working in China have been required to pay into the country's social security system since Oct. 15, according to a latest social insurance regulation.

Once the details are rolled out, more than 230,000 foreigners in China will be included in the country's welfare system for pension, medical insurance, unemployment, work injury and maternity benefits.

The new scheme will be implemented by local governments before the end of this year, but companies will have to back-pay contributions from Oct. 15.

In Beijing, the salary cap for paying social insurance is 12,603 yuan (2,000 U.S. dollars) in 2011. For a foreign employee earning that or higher, his employer has to pay about 4,096 yuan every month, and the employee himself needs to pay about 1,326 yuan.

Some foreigners believe the implementation of the new regulation is still short on details, and worry they may not receive the benefits after joining the network.

For instance, a foreigner who loses a job in China instantly loses the right to live here, and it is still unclear how he or she is going to benefit from the unemployment insurance and retirement pension.

At a press conference held on Oct. 28, Xu Yanjun, deputy director of the National Social Security Management Center of the Ministry of Human Resources and Social Security, admitted that the system needs to be improved to function more efficiently.

However, China created its basic social security system just several years ago and is still working on strengthening the system. The imperfection of the system should not eclipse the necessity for foreigners being included, nor should it justify the rejection of the plan.

The lack of social security for foreign workers may lead to many labor disputes. It is an international norm to protect employee's rights, regardless of whether they are foreigners or locals.

In the U.S. and Europe, it is a common practice to treat foreign and domestic workers equally and entitle them to the same social security norms, allowing foreigners the same social welfare benefits as nationals.

"There's nothing wrong with the country making sure that everyone has basic insurance." K. Lesli Ligorner, an attorney in Shanghai for Paul Hastings, was quoted by USA Today as saying.

Some criticize the new policy as a scheme to fill the deficit in China's domestic social security system. This is also untrue for a country like China with such a huge population.

"We have no intention of grabbing money from foreigners, and the money of these 200,000-plus workers is insignificant when we're talking about the welfare of China's entire population," Xu Yanjun explained to reporters.

Under the new rules, companies hiring foreigners, most of them foreign companies, will face more labor costs on doing business in China. Some see the raising costs for the foreign companies as a sign of a deteriorating business environment in China, which is a total misreading.

Chinese companies have been obliged to buy insurance for their Chinese employees for years. Leaving foreign employees out of the system gives their employers an unfair cost advantage in hiring.

As China is deepening reform in its market economy, the equalization of treatments for domestic and foreign businesses has become an irreversible trend. The cancellation of some favorable policies in the past for foreign firms conforms to the trend.

Besides, domestic companies hiring foreigners also need to pay contributions on top of the payments made by the employees. The new rules are not solely targeting on the foreign businesses.

Xu Yanjun vowed there would be no going-back on the scheme.

"Rather than airing grievances, they (foreign firms in China) should simply change their China strategy and share more knowledge with their Chinese partners," a Xinhua commentary suggested last Monday.

Web link: http://news.xinhuanet.com/english2010/china/2011-11/07/c_131232672.htm