Posted on Jun 05, 2012 by Sergio Ulloa
On October 15th
2011, China's Ministry of Human Resources and Social Security put in place new regulations which required foreign employees working in China to contribute to the country's Social Insurance System. The regulations stated that foreign employees would have to register after employment and start paying towards five types of insurance policies, including basic pension insurance, endowment insurance and unemployment insurance.
This brought about both positive and negative repercussions as while expats could now enjoy many of the same insurance benefits as local citizens, they were often already paying towards similar schemes in their home countries.
In light of this, China has now started negotiations with 11 countries so far including Singapore, Spain, Finland and Japan with hopes to simplify social insurance payments both for Chinese citizens working overseas and expats working in china.
Both employers and employees pay towards these endowments with workers contributing 8 percent of their wages and employers paying an amount equaling 20 percent of their workers wagers each month. Often, salary levels of foreign employees are high and result in a heavy financial burden for companies each month.
A simplified Social Insurance System could help China and other countries involved in the negotiations to avoid double payment of social insurance contributions as well as deciding which types of insurance policies should or shouldn't be included in the system.
South Korea and Germany have already signed agreements with both deals exempting workers paying endowment insurance in the country where they do not reside. As a result, 2000 Koreans, 4500 Germans and 10,700 Chinese working in these countries have already benefited from these negotiations.
Other foreign nationals surely also hope that such agreements will be made with their home countries as expats working overseas tend to do so on a temporary basis and therefore would not benefit from paying endowment insurance, especially as the system requires an individual to work 15 years before they can collect their fund.
On the other hand, some expats may plan on retiring in China and would therefore appreciate being entitled to these benefits but could already be enjoying coverage from previous insurance policies of their home country and therefore negotiations could result in the exemption of certain policies within the system.
Negotiations may still take a year or two to reach final agreements but they will undoubtedly remain a hot topic as China becomes an increasingly large hub for international business and foreign employment opportunities.