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Social security set to cover foreign workers

By Li Jing and Peng Yining (China Daily)
Updated: 2011-06-29 07:55

Foreign workers in China will soon be covered by the country's social security program, according to the Social Insurance Law, which will take effect on Friday.

The new law will allow foreign employees to receive medical, work injury, retirement, unemployment and maternity benefits similar to those for Chinese citizens.

Detailed regulations are yet to be published. In early June, the Ministry of Human Resources and Social Security solicited public opinion on a set of temporary measures for the program, which stipulates that all registered foreign workers with a valid work permit in China should be covered.

About 600,000 foreigners lived on the Chinese mainland at the end of 2010, according to the latest national census. Approximately 231,700 had work permits, the ministry said.

Foreign workers employed by Chinese and overseas-funded enterprises, social groups, law firms and foundations that register in China, as well as foreign workers assigned to China by overseas-registered companies, are all subject to the coverage requirement stipulated by the Social Insurance Law.

Participation in the program means foreign workers' take-home pay will shrink, because part of their wages will be put into the pension fund, and that their employers' costs will increase.

Workers from countries that have signed social insurance agreements with China could be exempted from the program, said Xu Yanjun, deputy director of the ministry's social security center. So far, only Germany and the Republic of Korea have signed such agreements.

Internationally, such treaties are aimed to close gaps in social security coverage for people who migrate between countries. For instance, the United States has signed international social insurance agreements with 25 countries.

While the details have not been released, experts say the social insurance program for expats will be similar to the one that applies to Chinese citizens.

Currently, Chinese citizens (depending on the province they live in) pay at least 11 percent of their monthly income to social security - 8 percent to pensions, 2 percent for medical and 1 percent for unemployment. There are both lower and upper limits for the payment. A Chinese citizen pays 1,000 to 1,200 yuan ($154-$185) a month.

Varied response

Reviews from foreigners are mixed. A recent online survey conducted by China Daily found that nearly 58 percent of the 164 foreign respondents are willing to participate in China's social security policy while working here.

Clare Pearson, a British national who moved to China five years ago, works at a Chinese magazine in Beijing. She said she welcomes the new initiative of the government.

"I think it's a good move, which could benefit foreigners like me who love to stay and work in this country," she said. "I don't care about the monthly social insurance fees that I should pay, because such a measure would make me feel that I'm no longer an outsider but a part of the country."

Ismael, who didn't want his full name used, is a 28-year-old Frenchman who has worked for a Chinese company in Beijing for more than three years. He thinks foreign employees who plan to work long-term for a company in China, under contract, will be willing to pay for the insurance because the financial burden will be shared with the employer.

He is partly covered by expensive private insurance provided by his company. He has been considering applying for coverage in China provided by a French company. "However, it is also extremely expensive in absence of a partnership on the matter between France and China," he said.

Compared with going to a "fancy" hospital with English-speaking staff, he said, treatment in a standard Chinese hospital is cheaper and efficient. "It is unfair that non-citizens would be excluded from mandatory social security coverage," he said.

Why some say no

Reasons cited by survey participants who rejected the idea included doubt over how the premium will be managed, limited information about the benefits and possession of social security in their home countries.

Some simply didn't want income deducted for the premium because they don't intend to be in China for long.

Melia, who gave just her first name, is a 30-year-old Indonesian who doubted she would stay long enough to collect her pension and she worried that it will be difficult to claim a refund when she leaves China or changes jobs. She has been assigned to China for 1 years by an Indonesian company, and she works in Xiamen, East China's Fujian province.

Lu Xuejing, a social security expert at Capital University of Economics and Business, said that the new regulation would be more popular with foreigners who planned to stay in China even after retirement.

Take endowment insurance, for instance. In China, workers pay 8 percent of their wages and employers pay an amount equal to 20 percent of workers' wages each month to workers' pension accounts. Workers must contribute for at least 15 years to collect a pension after retiring.

Notably, distrust over the fund management ranked as the top reason, chosen by 30 percent of those who frowned upon the idea, the survey found.

A Filipino working for an education company in Xiamen said insurance companies are the biggest winner of this new social insurance program.

"I think the only people who will see any benefits are those who married Chinese citizens and are planning to reside long term. They are only a small group among all expats living in China," she said, asking not to be named.

"But obviously the insurance companies are definitely benefiting a lot from this program. And we don't know who will manage the fund and how."

The quality of the services she will receive from the program is another concern.

"I don't use the company's prescribed health insurance, because I don't like the public hospitals." She said it is unreasonable to ask her to pay about 10 percent of her salary only to be treated in crowded public hospitals.

Employer costs

For employers, the cost might be the top concern.

Some US companies think the new law may decrease their profits and increase their personnel management costs in China.

Shanghai-based law firm Haworth & Lexon estimated that a foreigner holding a work visa in Shanghai will pay up to 1,285 yuan a month to the central government under the law. The employer will need to pay up to 4,323 yuan to the social insurance program.

David Dai, senior manager of human resources at the Chinese offices of Jones Lang LaSalle, a global real estate management group, said, "We may change a series of HR policies, like a revision of commercial insurance for foreigners. Salary structure due to tax exemptions (up to 38 percent) may no longer be legal."

"Once the new regulation comes into practice, our cost will increase substantially," said a human resources manager who didn't want to be named at a Chinese company employing about 60 foreigners.

For the health insurance alone, "We have to spend 800,000 yuan more."

Two business newspapers reported that the European Union Chamber of Commerce in China has urged the Ministry of Human Resources and Social Security to make contributions for foreigners optional.

Workplace fallout

Some foreigners worry that the increased costs could result in a deteriorated working environment if employers try to dodge the increased expenses.

A foreign worker at an overseas-funded manufacturing services company in Shanghai, who didn't want to be named, said he's afraid his employer may want to lower his salary when the new policy takes effect.

He pays for his own commercial medical insurance in China. "I'd rather have control over how the money is spent myself."

The Filipino who works in Xiamen also is concerned. "If the new program increases expenses too much, I'm afraid that some companies will likely to reduce the number of full-time legal foreign employees, so you may see an increase in a labor black market, employing foreigners illegally."

She said she and many foreigners come to China to experience the country. "What I do is to travel for a period of time, then work to make some money, and then hit the road again. And of course I won't stay in the country for too long, so I don't really need the social insurance.

"I think China should be really careful when making the rules and policies for the social insurance program, which should be more focused on its citizens," she said.

Yang Yansui, a public policy and management professor at Beijing-based Tsinghua University, said an agreement on social insurance between China and a foreign country is a prerequisite for including expats in China's social insurance programs.

The agreement should include detailed arrangements for the contribution of social insurance and how the benefits will be transferred between two countries, she said. "Without such arrangement, it is unreasonable to force foreigners to join China's social insurance program."

Bai Liangze at the Chinese Academy of Personnel Science countered that the new social insurance program gives equal treatment to foreigners working in the country and follows international practices.