China: Foreign worker enrollment in Shanghai social security system

Employer Action Code: Act

The Shanghai government has allowed a long-standing policy to expire, with the apparent result that foreign nationals and residents of Hong Kong, Macau and Taiwan (HKMT) who work in Shanghai now must be enrolled in the social security system. Before the policy expired, enrollment had been optional (or at least not enforced). The social security system provides retirement, healthcare, maternity, unemployment and workers compensation benefits, with required monthly contributions to these programs in Shanghai totaling 10.5% of covered pay for employees and about 27% of covered pay for employers (covered pay, in 2021, is pay between 5,975 yuan and 31,014 yuan). Some partial exemptions from enrollment may apply for foreign and HKMT workers covered under their home social security systems.

Key details

• The national government issued legislation in 2011 requiring foreign workers to participate in social security (expanded to include HKMT workers in 2020), but Shanghai did not reverse the policy that it established in 2009 (and extended in 2016, through August 15, 2021) under which participation of such workers was optional.
• As of August 16, 2021, Shanghai companies must enroll such employees in the social security system. Enrollment must occur within 30 days of obtaining a work permit for foreign workers or at the start of work for HKMT workers.
• Employers must make their required monthly contributions and withhold the required employee monthly contributions.
• HKMT workers, and employees from jurisdictions with which China has a social security totalization agreement, may be exempt from enrolling in the retirement and unemployment insurance programs if they participate in their home social security system.
• Noncomplying companies may be subject to financial penalties and other negative consequences for their businesses.

Employer implications

Affected employers should ensure compliance and evaluate the financial implications for their companies and employees. Employment costs for expatriate employees in Shanghai who were not participating will increase considerably as a result of this change. As employees are also required to contribute to social security, their net pay will also be lower.