Social insurance in mainland China: new rules for residents of Hong Kong, Macao and Taiwan

In late 2019, the Ministry of Human Resources and Social Security of the People’s Republic of China and the National Healthcare Security Administration jointly announced the “Interim Measures for Residents of Hong Kong, Macao and Taiwan to Participate in Social Insurance in Mainland China” (the Measures), which came into effect on January 1, 2020.

The Measures serve to further refine the Social Insurance Law of the People’s Republic of China. They also refine the supporting measures issued by relevant competent authorities on social security matters for Hong Kong, Macao and Taiwan residents (the Residents) after the cancellation of the Employment Permit of Hong Kong, Macao and Taiwan residents by State Council in 2018. Employers need to be aware of this change to ensure they are complying with the new legislation.

Insurance entitlement

Procedures

The procedures for obtaining insurance are consistent with the formalities for Mainland residents. Social security agencies or social security card management agencies shall establish social security numbers for Residents (the numbers shall be the same as the citizen identification number on the Residence Permit or be numbered in accordance with the uniform provisions of the state), and shall issue social security cards.

Measures for handling personal accounts, if a Resident leaves before satisfying the conditions for receiving pensions

Generally, the personal account of social insurance will be retained. If the individual comes to the Mainland for employment or residence again and continues to pay the insurance, the payment period shall be calculated cumulatively.

But, upon the individual’s written application for terminating the social insurance relation, the deposits in his/her individual social insurance accounts can be repaid all at once.

Cross-provinces transfer of social security relationship

Where Residents participating in a pension for employees move across provinces, the basic pension relationship will also transfer in accordance with relevant State regulations (Guo Ban Fa [2009] No. 66).

Avoidance of double payment

Residents who have participated in their local social insurance and continue to maintain the social insurance relationship shall be exempted from participating in pension and unemployment insurance in Mainland China. To be exempt, Residents will need to provide certificates issued by competent authorities.

Relevant issues

Local practice

In most cities, such as Beijing and Shenzhen, the social security agencies require that employers pay social insurance for employees from Hong Kong, Macao and Taiwan. Previously, in Shanghai, if the employer had reached an agreement with employees from Hong Kong, Macao and Taiwan that they would not participate in social insurance in the Mainland, the local social security agency would not require the employer to pay social insurance for the employees mandatorily.

However, in order to facilitate employment of employees from Hong Kong, Macao and Taiwan and to ensure equal treatment of those employees and Mainland resident employees, this practice has changed since late 2018 (after the cancellation of the Employment Permit for employees from Hong Kong, Macao and Taiwan). It is anticipated that employers in Shanghai will also be required to pay for social insurance for employees from Hong Kong, Macao and Taiwan after the Measures have been formally implemented.

Housing fund payment for Hong Kong, Macao and Taiwan residents

As regards the housing fund payment, currently there is no law or regulation at state level that explicitly requires employers to pay the housing fund for employees from Hong Kong, Macao and Taiwan. The local requirements on this matter vary from region to region. For example, in Beijing, an employer has to pay for the housing fund if so requested by its employee from Hong Kong, Macao and Taiwan. However, in Shanghai, the employer can choose whether to pay the housing fund for its employee from Hong Kong, Macao and Taiwan if both parties have reached the consensus through consultation.

Employment relationship of Hong Kong, Macao and Taiwan residents

The implementation of the Measures will further promote the equal treatment between Mainland employees and Residents when they are employed in Mainland China. In the past, due to the special identities of employees from Hong Kong, Macao and Taiwan, certain regional arbitration committees and courts (such as some arbitration committees and courts in Shanghai) referred to relevant provisions concerning foreigners when presiding over labour disputes between these employees and employers in the Mainland.

Subject to the guaranteeing basic labour rights of these employees (e.g. minimum wages, rest, vacation, labour safety and hygiene, etc.), employers in Shanghai were allowed to agree a flexible arrangement in favour of the employer on the other matters (e.g. the period of the labour contract, the reason and compensation for termination of the employment, and the participation in social insurance etc.).

To do

It is highly possible that this will be changed after the cancellation of the Employment Permits and now that the mandatory requirement on participation in social insurance for employees from Hong Kong, Macao and Taiwan is in force. So, based on the actual needs of individuals and enterprises and the specific conditions in different locations, a review and/or adjustment on the forms of employment of Residents (such as employment relationship, service relationship, and flexible employment), as well as the contents and performance of respective labour contracts or service contracts, will be necessary. This will effectively control employment risks and costs whilst complying with the Measures.