First and foremost, it is a legal obligation for employers in China to provide social insurance for all employees, both Chinese and foreign. If you are a foreigner working for a Chinese company and do not have social insurance, your employer is BREAKING THE LAW.
The Law
According to the Social Insurance Law of the People's Republic of China (中华人民共和国社会保险法): (Article 97)Foreigners employed within China shall participate in social insurance according to this law.
The Interim Measures for the Participation of Foreigners in Social Insurance in China （在中国境内就业的外国人参加社会保险暂行办法） provide further details. For instance: (Article 3) Foreigners employed by …… employers…… shall participate in employee basic pension insurance, employee basic medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance. Employers and employees shall pay social insurance premiums as required by law.
What is Social Insurance?
To understand the significance of social insurance, it is essential to know what it entails. In China, social insurance typically covers five key areas:
Pension: Provides retirement benefits. (Although many of you may not plan to retire in China, you can withdraw your contributions if you leave before reaching retirement age.)
(Employee Basic) Medical Insurance: Covers healthcare expenses.
Unemployment Insurance: Offers financial support during periods of unemployment.
Work-Related Injury Insurance: Covers medical costs and compensation for injuries sustained at work.
Maternity Insurance: Covers expenses related to childbirth.
Note: If you are from a country with an exemption treaty with China and are covered in your home country, you may be exempt from paying for pension and unemployment insurance in China. However, medical insurance, work-related injury insurance, and maternity insurance are not exempt.
Countries with Exemption Treaties include:
Germany
Japan
South Korea
Canada
Finland
Netherlands
Switzerland
Luxembourg
Denmark
Spain
Serbia
The Importance of Social Insurance
Social insurance provides critical medical coverage, allowing you to receive treatment in local hospitals at reduced costs and potentially reimbursing some medical expenses. Typically, with employee basic medical insurance, your out-of-pocket costs can be reduced to 20-30% of the total bill. Furthermore, if you experience a work-related injury, the insurance can significantly alleviate your financial burden.
Let's look at this hypo:
Consider John, a diligent employee at a company in China who sustains an injury at work, incurring 10,000 RMB in medical bills.
The social insurance center classifies John's injury as work-related and determines it caused a degree 10 disability. (Note: Not all injuries at work are classified as work-related, and similarly, some injuries outside the workplace may be classified as work-related.)
Since John's employer provided social insurance, the following benefits apply:
John’s medical bills are covered.
He receives compensation for lost wages.
He qualifies for a one-time disability benefit (equal to seven months of his salary).
If John's employment ends, he is entitled to:
4. A one-time medical treatment benefit (equal to two months' average salary in his city).
5. A one-time disability employment benefit (equal to three months' average salary in his city).
If John's injury is classified as non-work-related, he may still receive partial coverage for medical expenses but will miss out on work-related injury compensations.
However, if John's employer neglects to enroll him in social insurance as required by law, he will not receive any coverage for his medical expenses or compensation.
What About Commercial Insurance?
Despite the importance of social insurance, some employers fail to provide it for foreign employees, leading to significant risks.
Some companies may offer commercial insurance instead. While this can provide some coverage, it often does not match the comprehensive protections of social insurance, particularly regarding workplace injuries and maternity benefits. Additionally, the reimbursement process for commercial insurance can be lengthy and complicated, whereas social insurance typically allows for automatic deduction of medical bills at the time of payment.
What to Do If Your Employer Fails to Pay
If your employer does not make the required contributions to social insurance, this constitutes a violation of Chinese labor law, and you have the right to take action. You can report the situation to the local labor bureau or seek legal assistance to enforce your rights, particularly if you have suffered losses due to your employer's non-compliance.
Although courts typically won’t order the employer to pay unpaid insurance contributions directly to the employee (as the contributions should be paid to the social insurance department, not to the employees themselves), they will support an employee’s claim for compensation for losses that could have been covered by social insurance. For example, this could include medical bills that should have been covered or taxes that could have been reduced if social insurance had applied (as it lowers taxable income).
For personalized legal advice regarding foreign-related matters, including employment and social insurance issues, please feel free to contact us directly.
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