On 29 November 2019, the Ministry of Human Resources and Social Security promulgated provisional measures requiring employers to contribute to mainland China social insurance for Taiwan, Hong Kong and Macau (THKM) residents living and/or working in mainland China. The new regulation entered into effect on 1 January 2020; however, local implementation measures have not taken place countrywide.
Prior to the new regulation, the participation of THKM residents in mainland China social insurance was dictated by the province where the THKM resident is located. The rules in each province were inconsistent and made it difficult for multinational companies with many locations in mainland China to maintain a consistent practice. Due to the lack of countrywide legislation prior to the new regulation, some provinces required THKM residents to participate in the mainland social insurance while others simply allowed their participation.
The new requirement applies to the following THKM residents:
- Employed by any legally registered organization in mainland China.
- In receipt of a Chinese residence permit regardless of employment status.
- Self-employed individuals in mainland China.
- University students.
The application and registration procedures, as well as the contribution requirements to mainland China social insurance, are the same for Chinese employees and THKM employees.
Social insurance in mainland China covers five categories of insurance, including basic pension, basic medical, unemployment, maternity and work injury insurance.
THKM residents who are non-employees are eligible to participate in fewer categories, which include only basic pension and medical insurance. THKM employees will participate in all five categories of social insurance.
In addition, individual social insurance accounts may be retained for THKM residents who leave mainland China before meeting the eligibility criteria to receive a pension. This would allow them to resume contributions upon their return. THKM residents may also terminate their social insurance and have their deposits returned as a lump sum. To avoid double payments, THKM employees who continue to participate in the local social insurance plan of their home jurisdictions will only be required to contribute to medical, maternity and work injury insurance so long as the relevant certificates are provided from an authorized agency proving the individual’s continued participation in that local social insurance. Additional guidance on this point is awaited.
Employers should be aware that failure to provide timely social security contributions may lead to the payment of a fine ranging from one to three times of the amount overdue.
Even though it is still unclear how provinces will implement the new measure, multinational companies should ensure they are compliant with the new requirement by registering their THKM employees for social insurance and make timely contributions. If an employer has THKM employees in a region where contributions were not already required, they should contact their local social security bureau or payroll service to determine local implementation dates and requirements.