China to Get Tough on Employers Shirking Social Insurance Payments

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Nov. 16 – China is mulling stronger enforcement of its latest Social Insurance Law by specifying harsher penalties for enterprises that delay or do not fulfill their payment obligations towards all five of the required social insurance items.

A draft document of the “Regulations on Social Insurance Declaration and Payment” was unveiled yesterday by the Ministry of Human Resources and Social Security (MOHRSS), clarifying that employers will be required to pay the whole social insurance package, which includes pension, medical insurance, unemployment insurance, work-related injury insurance and maternity insurance. In contrast to the newly proposed Regulations, the previous legal document that is to be replaced (MOHRSS Decree [1999] No.2) imposed most of its emphasis on mandatory employer contributions to only three items (pension, medical insurance and unemployment insurance) and payment on work-related injury insurance and maternity insurance was not strongly enforced.

The new draft Regulations offer detailed measures that will require enterprises to make prompt and complete social insurance payment for their employees.

An employer will receive an officially-issued enforcement letter that asks for a complete social insurance payment 10 days after it meets any of the following stipulations:

  • Fails to declare social insurance fees and make the payment on time
  • Fails to make the complete social insurance payment on time
  • Has made the social insurance payment but the payment falls short due to a miscalculation/misstatement of the company’s staff size or payment base

A late payment fine will also be issued along with the enforcement letter.

If the employer still does not complete its social insurance payments within 15 days from the date it receives the enforcement letter, the social security department will be authorized to transfer the arrears from the company bank account automatically. In addition, the employer will be charged a fine amounting to between one to three times that of the arrears.

An employer that cannot make prompt social insurance payments will be allowed to sign a three to six-month agreement with the social security authority for a deferred payment. However, the employer will be asked to mortgage or pledge its legally-owned properties to guarantee such an agreement.

If the employer fails to pay off all of its social insurance dues within the guaranteed period, the social security authority will be empowered to auction the company’s properties to offset the part of the unpaid social insurance fees.

The Regulations are set to take effect in 2012, and additional paperwork details will be released by the MOHRSS at a later date.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, Vietnam and India. For further information or clarification on China’s social insurance policies or the new Social Insurance Law, please email

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