The Standing Committee of the National People's Congress passed China's Social Security Law which has taken effect on July 1 2011. It is the first comprehensive law that focuses on the PRC social security matters. The law not only provides new administrative measures to improve China's social security system but also provides guidance on foreign nationals' participation in China's social security system. Under the new law, foreign employees and their employers need to pay social security, foreign nationals will receive medical, retirement, unemployment and maternity benefits similar to those for Chinese citizens. This new law has caused a stir among foreigners working in China. Despite of the concerns and disagreement from foreigners and their employers, the Chinese government has moved quickly to implement the new law.
There are many unanswered questions. For instances, a foreigner who loses the job in China instantly loses the right to live in the country, how would that person benefit from the unemployment insurance he or she has been paying for? For those self-employed foreign individuals in China without formal employment relationships with Chinese legal entities, would the law apply to these foreign nationals? For foreign individuals with employment in their home country but assigned to work in China (e.g. a US expat working in China), it may create duplication in social security contributions since those employees normally would need to make social security contributions in their home countries. Would there be a special waiver for situations like this? Most foreigners work in China for less than five years, will the employer's and employee's contributions be refundable when the foreign national departs China?
From now on, multinational companies doing business China as well as Chinese companies directly hire foreign nationals should factor the additional cost into the total employment cost when they are to hire any foreign individuals.
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