新闻 - J & K Investment Consulting

The recent topic of whether foreign employees need to pay social insurance in Shanghai has become a topic of common concern for foreign employees and company HR. The reason is that the Notice on Participation in Social Insurance of Foreigners Employed in Shanghai (Shanghai Municipal Human Resources and Social Insurance Bureau [2009] No.38), which will expire on August 15, 2021.

On this issue, the Shanghai Municipal Government has not given clear instructions or issued new policies. We take this opportunity to sort out the relevant policies on whether foreign employees should pay social insurance in China, to speculate on the trends and prepare for the later stage for HR's reference.

Relevant Policies on the Payment of Social Insurance

Due to the collection and payment of social insurance is implemented in various overall planning cities and regions, some overall planning regions have special provisions on the liability of social insurance participation when enterprises employ foreigners. At present, when Shanghai enterprises hire foreigners, they can still confirm whether to participate in the social insurance (endowment insurance, medical and industrial injury insurance) through the way agreed by both parties. Accordingly, under the current cognition, if enterprises do not participate in social insurance when hiring foreigners, they do not think they have violated the social insurance obligations. However, this policy (Shanghai Municipal Human Resources and Social Insurance Bureau [2009] No.38) will expire on August 15, 2021.

Then for the future employment of foreigners and participation in social insurance, we believe that, firstly, Shanghai local policies were issued before the Social Insurance Law, legal effect is lower than the national law; Secondly, with the continuous improvement of the social insurance system, the integration of social insurance into the tax collection and management, and the individual income tax policy considers the convergence of foreign employees with national treatment, foreign employees should also enjoy equal rights and obligations. We speculate that the participation rate of foreign employees in Shanghai will probably be close to national regulations. That is, foreigners employed in China shall participate in social insurance in accordance with the Social Insurance Law.

Tax Impact on Different Social Insurance Payment Schemes

For the changes in the employment cost and welfare security of foreign employees, the company also needs to make some plans as soon as possible! Of course, this is just a assumption. There are still many uncertainties, which can only be implemented until the relevant local departments make further explicit provisions on it, mainly involving the following aspects. At the same time, we will list the corresponding tax impacts of different social insurance payment schemes:

It is not ruled out that in August 2021, Shanghai will issue another notice to extend some policies, especially the state recently authorized the Shanghai Municipal Government to formulate laws and regulations in the Pudong New Area according to the needs of Pudong's reform and innovation practice, will bring a certain space for policy formulation.

Tax Impacts: Based on our observations, most foreigners working in Shanghai now choose not to participate in the domestic basic social insurance, If the Shanghai Municipal Human Resources and Social Insurance Bureau shall issue a continuing notice based on the Notice on Participation in Social Insurance of Foreigners Employed in Shanghai ([2009] No.38) issued in 2009, then foreigners will have the opportunity to continue choosing not to participate in the insurance, Therefore, compared with before, there will be no change in individual income tax, and the labor cost of the enterprise will not increase additionally.

Tax Suggestions: It is suggested that the HR department pay close attention to the release of relevant policies in the near future, and timely understand whether the social insurance policies of foreigners will be updated.

According to the spirit of the executive meeting of the State Council on January 20, 2021, it is required to “do a good job in the normal collection and payment of statutory taxes, not collect historical arrears, and not increase the burden of small, medium and micro enterprises". The centralized settlement of social insurance for foreigners also does not meet the requirements of the relevant spirit. The possibility of retroactive payment should be small.

Tax Impacts: Based on the above situation, if the relevant policies are not extended after August 15, 2021, then foreigners in Shanghai need to pay social insurance as Chinese employees in accordance with national requirements, but it may not be necessary to make up the payment for the previous uninsured years, so there will be no individual income tax difference due to unpaid social insurance over the years.

The administrative operation of the Shanghai Municipal Government has always been known for its fairness and transparency. Even if there are further policy changes, a reasonable time will be reserved for enterprises to adjust.

Tax Impacts: Based on the above situation, if the relevant policies are not extended after August 15, 2021, foreigners are required to participate in the basic social insurance in accordance with the relevant national regulations. Therefore, the increase of the enterprise's social insurance expenses will lead to the increase of the enterprise's labor cost. With the increase of costs, the enterprise income tax may be reduced due to the decrease of profit, but it will also reduce the after-tax profit of enterprises. On the other hand, after foreigners participate in the insurance, the individual payment of social insurance will be deducted from the pre-tax salary, and the individual income tax will be reduced accordingly, but at the same time, the net income after tax will also be reduced accordingly.

Tax Suggestions: Since this change will directly affect the net income of foreigners, it is suggested that the HR department communicate and explain with foreigners in advance, and actively deal with various unexpected situations under the change of social insurance.
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Enterprises can evaluate the cost budget in order to balance the risk of policy uncertainty.

Tax Impacts: As mentioned above, the labor costs of enterprises will increase after foreigners participate in the insurance.

Tax Suggestions: It is suggested that the HR department formulate a plan in advance, communicate and reach a consensus with foreigners to ensure that both the enterprise and foreigner recognize or know the impact of enterprise income tax and individual income tax after insurance.

Arrange to collect foreign employees' social insurance payment certificates overseas, and prepare for exemption from insurance according to the bilateral agreement.

Up to now, China has signed bilateral social insurance agreements with Germany, South Korea, Denmark, Finland, Canada, Switzerland, the Netherlands, Spain, Luxembourg, Japan, Serbia and other countries. For example, after providing foreign insurance certificates, German citizens can not participate in endowment insurance and unemployment insurance in Shanghai, Korean citizens can not participate in endowment insurance.

Tax Impacts: As mentioned above, any foreigner who has participated in the social insurance of the original country and meets the provisions of the bilateral social insurance agreement can be exempted from paying social security in China after providing relevant overseas insurance certificates. Therefore, there will be no impact of enterprise income tax and individual income tax for enterprises and foreigners.

Tax Suggestions: It is suggested that the HR department check the list of foreign employees of the company as soon as possible, and verify whether the nationality of the foreigners belongs to a party to the bilateral social insurance agreement, verify whether they are insured in their original country, and determine whether they need to be insured in China in the next step.

Source: Shanghai Human Resources and Social Insurance Bureau, the 17th Meeting of the Standing Committee of the National People's Congress, the Ministry of Human Resources and Social Insurance.

Edit Statement: if any information in the content is inaccurate or has copyright problems, please contact us and we will adjust it.

According to the requirement of The Ministry of Human Resources and Social Security，foreign employees are required to participate in the Chinese social security program.

See the previous related article, please click this link: Policy Interpretation of Social Insurance of Foreigners in Shanghai

In China, social insurance includes five different types of insurance, including pension, medical, unemployment, work-related injury, and maternity insurances.

Generally, you can jointly contribute the pension, medical and unemployment insurance with your employers, and require your employer to contribute your work-related injury and maternity insurance solely.

If you are from one of the following countries that have signed a social insurance agreement with China, you are entitled to a social insurance exemption, once approved, you and your employer may save unnecessary insurance costs from this benefit.

Which countries have signed such agreements?

All the existing agreements have specified the details, including:

Which employee groups can apply for this exemption.
What categories of social insurance are involved.
How long could my exemption last once approved.

For more information, please contact us: 021-51785021 / info@jkinvest.net

How to apply for the exemption？

These exemptions do not apply automatically. If you are qualified, you can require your employer to apply to related bureaus for exemption.

Generally, companies should submit the Insurance Participation Certification issued by the relent entity of your country to the Social Insurance Administration Center of the Ministry of Human Resources and Social Security.

Foreigners who work in China will likewise experience a similar labor dispute as the Chinese people do. We often receive inquiries from foreigners on how to resolve disputes with the employment company.

Because of labor disputes with foreign employees, some employers are unwilling to provide a release letter and work permit cancellation forms, which will affect the employee‘s next work visa application and affect their legal work and accommodation in future in China.

Generally speaking, the legal methods to resolve labor disputes include labor arbitration and litigation in court (file a lawsuit). Here, we will explain labor arbitration, and how can foreign employees apply for labor arbitration in China.

01 What is labor arbitration?

Labor arbitration is a necessary procedure for the parties to a labor dispute to bring a lawsuit to the people's court. If the parties are dissatisfied with the results of the arbitration, they can further file a lawsuit.

02 Can foreigners apply for labor arbitration?

Yes.

According to the relevant regulations on the employment management of foreigners in China, labor disputes between employers and foreigners who are hired shall be handled in accordance with The Labor Law of the People's Republic of China and The Regulations On The People's Republic Of China On Settlement Of Labour Disputes In Enterprises.

Note: Obtaining legal employment qualifications is necessary for foreigners to initiate labor arbitration.

03 What are the general situations in which foreigners need labor arbitration?

Disputes handled by general labor arbitration include:

Disputes about the confirmation of a labor relationship;
Disputes about the conclusion, performance, modification, rescission or termination of a labor contract;
Disputes about the removal or layoff of an employee or the resignation or retirement of an employee;
Disputes about the work hours, breaks, vacations, social insurance, benefits, training, or labor safety;
Disputes about the labor remunerations, medical expenses for a work-related injury, economic indemnity, compensation, etc.

04 How to apply for labor arbitration?

Foreigners can apply for labor arbitration at the labor arbitration office of the administrative region where their company is located.

The materials generally required are:

Passport
Work permit
Relevant evidence (videos, documents, labor contracts, and other supporting documents)

The Arbitration Commission shall make a decision on acceptance or rejection within five days from the date of receipt of the arbitration application.

According to our experience, generally, the service handling form will be obtained on the day when the application is filed.

05 The suggestion to enterprise

Release letter is a certification letter provided by the employer, stamped with the corporate seal. Generally speaking, a release letter mainly includes: the name of the employee, passport number, the start date of the work, the position, the end date of the work, the company name and the date when the letter is issued.

Release letter mainly has three functions:

Only after the foreign employee gets the release letter, can he or she apply for the cancellation certification of work permit and move on to the next company smoothly.
A foreign employee needs to provide the copy of release letter when he or she applies to the Exit-Entry Administration Bureau for the cancellation of the residence visa.
A foreign employee must provide the original copy of the release letter from the previous company in order to get a new working visa, when he or she goes to the next company.

Therefore, the release letter is essential in the job change for foreign employees.

According to Article 50 of The Labor Law of the People's Republic of China the employer shall issue a certificate of rescission or termination of the labor contract when rescinding or terminating the labor contract. And The Labor Law also stipulates that if the employer violates this provision and causes harm to the employee, it shall assume compensation liability.

Here, we suggest that the enterprise should issue the release letter to the employee on the day of resignation.

J & K could assist you with labor arbitration in Shanghai regarding:

Consulting;
Material preparation;
Accompanying to the labor arbitration office & translation;
Visa processing afterward: Cancellation of permits / New applications etc.

If you have any related needs, please feel free to contact us: 8621 - 5178 5021

Shanghai has started appointment-based COVID-19 vaccination for foreigners in the city pursuant to the Joint Prevention and Control Mechanism of the State Council.Starting from now, Shanghai will include the foreigners of appropriate ages in the city into the program of getting the domestically-developed COVID-19 vaccine (in the marketing stage) on the basis that they are informed, voluntary and willing to be inoculated at their own costs and bear corresponding risks.

Those foreigners who are willing to be inoculated may book the vaccination appointment online via Jiankang Yun (Health Cloud) APP, and each will receive in total two doses of domestically-developed inactivated vaccine now available in Shanghai. Those who have been covered by China’s medical insurance are entitled to the same treatment as that to the insured Chinese citizens. Those who have not been insured should bear the cost of RMB 100 per dose on their own.

For foreigners in Shanghai ready to take the vaccine, please make your appointment as follows:

Scan the following attached QR Code and access to the service page for the foreigners in Shanghai to get the COVID-19 vaccine on Jiankang Yun platform and fill in your information to make an appointment.

Receive the text message confirming the date, time and venue for vaccination if you succeed in making the appointment.Take your Foreign Permanent Resident ID Card, passport or valid permit of stay or residence to the vaccination venue on the confirmed date.

Before inoculation, you will be required to sign a letter of informed consent, disclaimer and other documents according to the given procedures. You should also ensure your personal protection and advise your health status truthfully to the on-site medical professionals so that they will decide if you are suitable for inoculation or not. You should also pay close attention to your health status within 14 days of inoculation and go to hospital promptly for medical advice in case of any adverse response.

Vaccination Venues (*Appointments is Required) :

Note: Please kindly be noted that you will be inoculated at the designated venue by presenting the text message confirming your appointment.

For more information, please contact us: +86 21 - 5178 5021

People returning from overseas will have to monitor and report their health condition to their community office for a further week after being quarantined for two weeks, starting May 16, the city government said yesterday.

They need to measure their temperatures twice a day, avoid non-essential outings, wear masks and refrain from attending any gatherings. At least six nucleic acid tests need to be administered during the two-week quarantine and one-week self-monitoring.

For those coming from or passing through medium-risk areas for coronavirus in China, they are subject to two-week self-monitoring of health conditions and receive two nucleic tests.

They should report to the community office of their residences or hotels within 12 hours of their arrival.

The measures were announced after another round of sporadic resurgences of COVID-19 cases in China, with five in Anhui, two in Liaoning and three in Beijing.