Social Insurance Contributions Now Required for Cash Awards Granted to Expatriates Working in China - Baker & McKenzie - 26 Oct 2011

Under
the Provisional Measures for Foreigners Working in China to Participate
in the Social Insurance System (the "Measures") which became effective
on October 15, 2011, both employer and employee social insurance
contributions are now due on the monthly salary of foreign nationals
working in China.  The particular rates and income thresholds vary by city.  Such
social insurance obligations for foreign nationals are subject to any
bilateral treaty between the employee's home country and China.  Currently, only Germany and South Korea have signed such treaties with China.

As
we have been advising, employer and employee social insurance
contributions are due on cash-settled awards and cash awards granted to
local Chinese employees because income realized from such awards is
considered salary income.  As of October 15, 2011, employer
and employee social insurance contributions are now also due on
cash-settled awards and cash awards granted to foreign nationals working
in China, and the PRC employer will be required to report and withhold
any expatriate employee contributions due.

Although
still somewhat uncertain, social insurance contributions should not be
due on income from share-settled awards realized by any Chinese
employees (regardless of whether local Chinese or expatriate employees)
while working in China on the basis that share-settled award income
should be characterized as investment income, not salary. 

Please see our PRC colleagues' September 2011 China Employment Law Alert for additional details, including the social insurance contribution rates and applicable monthly salary thresholds in Beijing and Shanghai.

If
you have any questions regarding the new social insurance contribution
obligations for foreign nationals working in China, please contact your
GES attorney.