Social insurance law compliance stressed in draft rules
December 06, 2011 | BY
Candice MakBe aware that insurance rates vary by location and industry
Draft measures related to the PRC Social Insurance Law (中华人民共和国社会保险法) were released for public comment on November 15. The Provisions for the Administration of the Filing of Documents of Social Insurance Premiums and the Payment Thereof (Draft) (社会保险费申报缴纳管理规定(草案)) (Draft Provisions) reinforce the Social Insurance Law by requiring employers to provide for all five insurance schemes, including maternity and workman's compensation.
Paul Hastings China employment partner Lesli Ligorner said the Draft Provisions are “mostly procedural”, but that “a key message is that the Chinese government intends to enhance the enforcement of social insurance fee collection and increase penalties for non-compliance”.
Those that have yet to fall in line with the social insurance regulation should stop delaying. “Given the potential enhanced enforcement and greater penalties, in-house counsel should carefully review the company's practice with respect to social insurance contributions, including whether the base and rates are correct according to the law of each individual province in which the company has operations,” said Ligorner.
Insurance rates vary depending on industry and location, and they are updated every year. Companies need to be aware of the differences so that they are adhering to the new regulations. A flat rate cannot be assumed across the country.
To determine the exact insurance rates for different industries, companies are encouraged to check with their local social insurance administration authorities. Typically, each provincial jurisdiction has promulgated more detailed guidelines on the rates.
Although it is unclear how the government will enforce insurance payments, the Draft Provisions have outlined some potentially strict tactics authorities could adopt. According to the draft rules, the social insurance administrative authority may require banks to transfer a company's funds directly to it to ensure the company fully pays the insurance. Ligorner notes that “authorities may also intervene to have the court ensure a company fulfills its obligation for social insurance fees”.
If companies are found to be non-compliant, there is an interest fee penalty of 5% per day for any late payment. A fine of one to three times the unpaid social insurance contribution amount is also possible.
By October 15, all foreigners working in China should have already been enrolled in the five insurance areas. Since the Social Insurance Law came into effect on July 1, companies that hadn't already been contributing to the full range of insurance programmes have had to adjust their budgets to account for the increase. Though this may have caused some financial strain, most simply consider it the cost of doing business in China.
“Businesses that have adopted a 'wait and see' approach are slowly realising that they will have to start complying,” said Ligorner. CM
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