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China

Foreigners must pay up for new coverage

Updated: 2011-06-28 10:54

By Zhong Nan and Li Aoxue (China Daily)

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BEIJING - Beginning in July, Americans in China will enjoy the same social security rights as Chinese nationals but the new law means they will have to pay dual fees to both nations for separate coverage.

The Social Insurance Law will take effect on July 1 and will for the first time apply to all foreigners living with a visa in China.

"Foreign workers and employers will pay a similar rate of insurance contribution from their incomes to the government, as Chinese workers do," said Bai Liangze at the Chinese Academy of Personnel Science, who is familiar with social welfare regulations.

There are 71,493 United States citizens working and living in China, which makes up about 12 percent of China's total foreign population, according to the sixth national census released by the National Bureau of Statistics in April. Up until now, employers of foreign workers in China have reimbursed employees for their medical and maternity expenditures because it costs less for employers and employees each year.

"Foreign employees who work in China for longer than six months must be included in the social security system," said Xu Yanjun, a deputy director at the Ministry of Human Resources and Social Security. "They need to contribute to pension accounts for at least 15 years to collect a pension after retiring."

The new law will allow foreign employees to receive similar medical, work injury, disability, unemployment and maternity benefits in China. In the US, most Americans in most cases can only receive social security benefits after they retire, Chinese nationals are partially reimbursed for medical expenses through China's social security net. Shanghai-based law firm Haworth and Lexon estimated that a foreigner holding a working visa in Shanghai will pay a maximum 1,285 yuan ($198) per month to the central government after the Social Insurance Law goes into effect. In Beijing, a Chinese national pays between 1,000 yuan to 1,200 yuan a month.

The new law's monthly payments, taken automatically from monthly paychecks, will be on top of existing income taxes.

The Ministry of Human Resources and Social Security still has not released details about what foreigners will be paying to the central government each month but said it will do so after July 1.

Currently, Chinese nationals (depending on which province they live in) pay at least 14 percent of their monthly income to social security: 11 percent to pensions, 2 percent for medical and 1 percent for unemployment. In Beijing, employees don't pay part of their monthly salaries for maternity or disability benefits.

In the US, the social security tax rate is 12.4 percent.

But joining the Chinese social security system means a US citizen will have to pay two social security contributions, one fee in China and another in the US.

The fortunate thing is that a foreign employee who is eligible to enjoy a pension but has left China can make arrangements with a Chinese embassy to continue receiving the Chinese pension after they've moved. The Chinese law will also permit the balance of an individual's pension account to be inherited by his or her offspring.

Bai said the law gives equal treatment to foreigners working in the country and follows international practices. But he pointed out that the public housing fund (where employers help pay toward future housing for employees) will not be available to foreign workers at the moment.

Target groups include foreigners employed by Chinese and foreign-owned companies, factories, public institutions, foundations, social groups, schools, accounting and law firms that register in China, as well as foreign employees assigned to China by overseas companies.

At least one American is delighted about the new law. Bruce Goshorn, an engineer of renewable energy at AES Corp (China), said the regulation would benefit Americans working in China.

"In Florida, I need to pay $420 per month for my health insurance alone, which is quite expensive for the working class like me. I really rejoice this change," Goshorn said.

But some US companies think the new law may result in a decrease of a company's net savings and an increase in their personal management costs in China.

"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 be no longer legally," said David Dai, senior manager of human resources at the Chinese offices of Jones Lang LaSalle, a global real estate management group.

China Daily

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