{"id":2693,"date":"2025-10-22T09:39:29","date_gmt":"2025-10-22T09:39:29","guid":{"rendered":"https:\/\/msadvisory.com\/?p=2693"},"modified":"2026-04-20T11:27:38","modified_gmt":"2026-04-20T11:27:38","slug":"foreigners-in-shanghai-social-security","status":"publish","type":"post","link":"https:\/\/msadvisory.com\/foreigners-in-shanghai-social-security\/","title":{"rendered":"Social Security for Foreigners in Shanghai"},"content":{"rendered":"\t\t
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Compliance with China\u2019s social security system can confuse some foreign-invested companies and their employees.<\/p>

Since the Social Insurance Law of the People\u2019s Republic of China<\/a> (effective 1 July 2011) and corresponding Interim Measures, foreign employees working in China must enrol in the statutory social insurance scheme<\/strong>. \u00a0Compared to other cities such as Beijing, Tianjin, Guangzhou<\/a>, and Shenzhen<\/a> where foreign employees have been treated as domestic employees for the purpose of contributing to the social security system, in Shanghai these regulations, historically, were not been enforced<\/strong> and thus foreign employees were not required to make these social security contributions.\u00a0<\/p>

This changed in August 15, 2021, with all foreign employees no required to contribute to the system. In this article we provide a key explainer of China\u2019s social security system and how this affects employees and companies doing business in Shanghai<\/a>.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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China’s Social Security Explained<\/h2>

When China opened its market in 1978, the economy rapidly developed and the need for an improved welfare system for urban worker was a key component of economic reforms. This new social security system emerged through a series of specific regulations and provisions in the 1994\u00a0Labor Law and the 2008\u00a0Labor Contract Law. It was however until 2011 that these separate laws were merged into a comprehensive national framework, namely the Social Insurance Law (or \u793e\u4f1a\u4fdd\u9669\u6cd5 in Chinese).<\/p>

Different than the\u00a0Individual Income Tax (IIT) Regulations<\/a>, contributing to social security results in indirect benefits to employee and is complimentary to direct salary benefits. For the employer however, it increases the total employment cost of each employee. With increasing labor costs in China, the country\u2019s mandatory social security contributions have placed an additional burden for companies\u2019 salary structure and operational costs.<\/p>

The pillars of the Social Insurance Law are Pension, Medical Insurance, Unemployment Insurance, Work Related-Injury Insurance, Maternity Insurance and the Housing Fund.<\/p>

Employers and employees make joint contributions for pension, medical, unemployment insurance, and the housing fund, whereas the contributions for work-related injury and maternity insurance are solely born by the employer. Foreigners can opt not to participate in the housing fund scheme, which is a mandatory component of China\u2019s social security system<\/a> for Chinese domestic employees.<\/p>

More detailed information on China\u2019s Social Security and Housing Fund system can be found in\u00a0our full article<\/a>.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Social Security Contributions in Shanghai<\/h2>

In 2009, the Shanghai Municipal Bureau of Resources and Social Security<\/a> issued the notice stipulating foreigners\u00a0can<\/u><\/strong>\u00a0contribute to the social security system, leaving social security contributions for foreign employees in Shanghai open to interpretation. In practice, most foreign employees and their employers in Shanghai have chosen to opt out of the social insurance contributions.<\/p>

The notice concerning the Participation of Urban Workers in Social Insurance for Foreigners Working in Shanghai, Persons Obtained Overseas Permanent (Long-term) Right of Residence, and Taiwan, Hong Kong and Macao Residents states that\u00a0\u201cforeign nationals who come to\u00a0<\/em>Shanghai with an Employment Permit\u00a0can<\/u><\/strong>\u00a0participate in the city\u2019s urban workers social insurance program \u00a0\u00a0in accordance with relevant regulations. The basic endowment insurance, basic medical insurance and work-related injury insurance shall be stipulated in the labor (employment) contract.\u201d\u00a0<\/em>This resulted in foreign employees and their employers to interpret that social security contribution is not a mandatory requirement in Shanghai and has since been tentatively accepted by the Shanghai Labor Bureau.<\/p>

Later in 2011, following the implementation of the Social Insurance Law and after the \u201cInterim Measures for Foreigners Working in China to Participate in China\u2019s Social Insurance\u201d were issued by the Ministry of Human Resources and Social Security, the Shanghai Municipal Bureau of Human Resources and Social Security did not modify the provision released in 2009. \u00a0Additionally, we must note that according to the official website of Shanghai Municipal Bureau of Human Resources all domestic employers hiring foreign employees should pay social insurance \u2013 which is different than the 2009 notice. In the situation where the national law conflicts with a local law, the national law supersedes the local legislation. This would indicate that foreigners must contribute to the social security system in Shanghai in accordance with the Social Insurance Law and Interim Measure.<\/p>

Nevertheless, in 2016 the original notice by the Shanghai Municipal Bureau of Resources and Social Security released in 2009 had been extended until 15 August 2021, meaning that in practice foreign employees and their employers in Shanghai continued to be exempt from paying social securities (see China-Briefing article<\/a>). At this moment it is uncertain whether the notice will be extended again, however, upon expiration it would be mandatory for foreign employees and their employers to contribute to social security in accordance with national regulations.<\/p>

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IMPACT OF SOCIAL SECURITY CONTRIBUTIONS FOR FOREIGN EMPLOYEES AND EMPLOYERS<\/h2>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t
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Social Insurance Participation for Foreign Employees in Shanghai \u2013 Key Milestones & Obligations<\/strong><\/p>
Date \/ Milestone<\/th>What Changed<\/th>Practical Implication for Foreign Employees (or Employer)<\/th><\/tr><\/thead>
July 1st, 2011 \u2013 Social Insurance Law Takes Effect<\/td>National law states foreigners \u201cshall participate in social insurance\u201d under Article 97.<\/td>Employers must register foreign employees for social insurance; contribution obligations extend to many cities.<\/td><\/tr>
August 15th, 2021 \u2013 Expiry of Shanghai Notice No. 38 (2009)<\/td>Local Shanghai document granting optional status for foreigners to participate ended.<\/td>From this date, foreign employees in Shanghai may face mandatory social insurance contributions (depending on enforcement).<\/td><\/tr>
Post-2021 \/ 2022 Onwards \u2013 Increased Enforcement<\/td>Legal analyses highlight growing risk of retrospective contributions for non-compliance.<\/td>Employers with foreign staff in Shanghai should audit past compliance and budget for contributions or penalties if necessary.<\/td><\/tr><\/tbody><\/table>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t
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\"Shanghai<\/a><\/figure>
Uncertainty over whether my foreign employees in Shanghai are still exempt from social insurance.<\/a><\/div>

Don\u2019t risk back-payments and penalties \u2014 book a social insurance compliance check with MSA today. We\u2019ll review your employee structure in Shanghai, verify past contributions and help you update your payroll setup correctly.\n\nMessage  \u2192<\/span><\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t

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In this section we highlight the method to calculate social securities and provide a scenario for social security contributions in which we compare the impact for both the employee and the employer considering current exemption for foreign employees with a situation in which social security contributions are made in line with national legislation.<\/p>

An employee\u2019s social security contributions are deducted directly from the gross salary while the employer\u2019s contributions are added as an additional cost to the gross salary, which results in an increase in total employment cost of each employee.<\/p>

It is important to note that:<\/p>