Social Security

China | Changes to social security compliance and the impact to higher education institutions (HEIs)

Summary

China has recently implemented key changes integrating foreign work permits with social security cards, making a significant shift in compliance requirements for foreign nationals working in China. This move aims to streamline processes while reinforcing a more structured and monitored framework for social security contributions. For higher education institutions (HEIs) with employees working in China, understanding these updates is critical. The integration may heighten compliance risks, making it essential to review current employment arrangements and ensure proactive management of obligations.

The detail

Mandatory requirement

Under Chinese legislation, all foreign employees—regardless of their employment arrangement (i.e., locally hired or seconded)—must register and contribute to the Chinese social security system. This typically includes pension, medical, work injury, unemployment, and maternity insurance. Generally, employers are required to process these contributions through a local Chinese bank account registered under the company’s name. Compliance with these regulations is essential to avoid potential penalties.

HEIs’ current arrangement in China

Many overseas universities deliver joint education programs in China through a Joint Education Program (JEP) or Joint Education Institution (JEI). However, compliance with China’s social security obligations for faculty and employees remains a challenge for some institutions.

Key considerations

• Permanent establishment status: Most JEPs/JEIs are deemed permanent establishments in China but lack a local bank account, making it difficult to process mandatory social security contributions.
• Alternative arrangements: In some cases, Chinese partner universities may facilitate contributions through their own bank accounts under special agreements—though this is not a common practice.
• Current non-compliance trend: Due to these complexities, many institutions have opted not to account for social security contributions in China, potentially exposing themselves to compliance risks.

New changes and implications

Integrated system

Effective December 2024, China will phase out physical work permit cards for foreign nationals. Instead, work permit details will be fully digitized and integrated into the electronic Social Security system, accessible via a dedicated mobile app. This shift underscores China’s move toward streamlined digital administration – ensuring easier access for foreign nationals while reinforcing compliance tracking. Please refer to the detailed Vialto Insight on this matter here.

Stricter compliance requirements and increased scrutiny

The integration of foreign work permits with social security cards signals a new era of stricter enforcement. This digital consolidation gives authorities enhanced monitoring capabilities, likely resulting in:

• Increased scrutiny: Local departments will now have more robust tools to track foreign nationals’ social security participation, leaving fewer gaps in compliance oversight.
• Higher financial risks: Employers (including foreign HEIs) and employees could face penalties—such as late payment surcharges or fines—for non-compliance.
• Closing compliance loopholes: While past challenges (e.g., lacking a local bank account) made full compliance difficult for some HEIs, local authorities are increasingly rejecting these excuses—especially where alternative solutions exist.

How can we help

To ensure compliance with China’s evolving regulatory landscape, we advise HEIs to:

1. Conduct a comprehensive review of current social security contributions, including any applicable totalization agreements and alignment with work permits.

2. Identify and address gaps where past obligations may have been overlooked—particularly as stricter enforcement takes effect in 2025.

Vialto Partners is ready to assist with liaising with local authorities to resolve compliance issues and mitigating risks tied to the new integrated system.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Jacky Chu
Partner, China Leader

James Shen
Director, Tax

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