Original Franco Fornari Feb. 29
Source: Franco Fornari
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Franco Fornari
WANG JING & GH LAW FIRM
Foreign-related Legal Service
International Partner
In order to relieve the enterprises’ operation difficulties, promote the orderly resumption of work, and stabilize the employment, various policies for supporting enterprises have been issued continuously in PRC due to the outbreak of COVID-19. This article intends to provide a brief summary and analysis on the social insurance policies favorable to enterprises during the epidemic prevention and control period.
Temporary Reduction and Exemption of Corporate Contributions to the Pension, Unemployment and Work Injury Insurance
The Ministry of Human Resources and Social Security of the PRC, Ministry of Finance of the PRC and State Taxation Admission of the PRC have jointly announced the Notice on Periodic Reduction and Exemption of Enterprise Social Insurance Premiums on Feb. 20th, 2020, which pared down the social insurance payments to support enterprise with specific measures as follows:
1. “Exemption”
Nationwide micro, small, medium-sized enterprises as well as all types of enterprises in Hubei provinces can be exempted from the payment of pension insurance, unemployment insurance and work injury insurance from February to June 2020.
2. “Reduction”
Large enterprises outside Hubei can enjoy halved collection of the above-mentioned three types of social insurance payments for no more than 3 months. (i.e. February to April 2020)
3. “Deferral”
Enterprises with serious difficulties in production and operation due to the impact the epidemic may apply for the deferral of payments of the above-mentioned three types of social insurance, which shall not exceed 6 months in principle, and shall be exempted from late fees during the deferral period.
Besides, the local governments may further decide the reduction scenario of corporate contribution respectively based on the actual situation. Therefore, enterprises shall also pay attention to the corresponding local guidelines, which may further clarify the time limit based on the above measures.
Temporary Reduction of Corporate Contributions to Medical Insurance
In addition to above-mentioned three types of social insurance, the corporate contribution to medical insurance will also be reduced temporarily as well according to Guiding Opinions on the Periodic Reduction of Employees’ Basic Medical Insurance Premium (the “Opinion”) issued jointly by National Healthcare Security Administration of the PRC, Ministry of Finance of the PRC and State Taxation Admission of the PRC on Feb. 21st, 2020.
As stated by the Opinion, since February 2020, on the premise of ensuring the medium and long-term balance of revenue and expenditure of the medical fund, the corporate contribution to employees’ basic medical insurance can be halved for no more than 5 months. Meanwhile, the deferred payment policy can continue to be implemented for no more than 6 months. And no late fees will be charged during the deferral period. Based on the above, the aforesaid key policies can be briefly concluded as follows:
1. Halved collection of corporate contributions to medical insurance for no more than 5 months from February 2020.
2. Application for deferred payment of the above-mentioned corporate contributions for no more than 6 months.
Furthermore, the local governments may also further confirm the specific period for the aforesaid halved collection and deferred payment of employees’ medical insurance fee based on the actual situation of fund operation and work needs. Therefore, enterprises still need to look into the local regulations or guidelines before filing related applications.
Application for Deferred Payment of Housing Provident Fund
According to Notice of Implementing the Periodic Support Policy for Housing Provident Fund issued jointly by the Ministry of Housing and Urban-Rural Development of the PRC, State Taxation Admission of the PRC and People’s Bank of China on Feb. 21, 2020, enterprises affected by the epidemic may be eligible to apply for deferred payment of the housing provident fund before June 30, 2020 according to related regulations. During the deferral period, the payment period will be continuously calculated without affecting employees' normal withdrawal and application for the loan of housing provident fund.
(See Art.4 of Measures to Support Enterprises to Overcome the Difficulties for the Combat to COVID-19 in Shenzhen issued by Shenzhen Municipal People’s Government on Feb 7th, 2020, Notice on Strengthening Housing Provident Fund Management Services During the Prevention and Control Period of COVID-19 issued by Guangzhou Housing Provident Fund Management Center on Feb.19th, 2020.)
Other Related Considerations
1. Local Implementation of the Above Policies
It can be foreseen that many specific implementation guidelines of the above policies will be issued one after another by the local authorities. And there is no doubt that these local regulations and guidelines will help enterprises better understand the relevant specific time limits and operation methods of the above-mentioned social insurance policies. For instance, in Guangdong Province, the local authorities further clarify that the deferred payment period of the pension insurance, medical insurance (including maternity insurance), unemployment insurance, work injury insurance and housing provident fund can be within 3 months without late fees. (See Art.1 of Circular of the People's Government of Guangdong Province on Printing and Distributing Policies and Measures to Further Stabilize and Promote Employment in Guangdong Province, issued by Guangdong Provincial Government on Feb 20th, 2020).
2. Social Insurance Paid by a Third Party
In practice, many employers do not pay the social insurance premiums for employees in their own name, but entrust a third-party company (such as an HR company) to do so. Whether those employers can still enjoy the above social insurance policies through the third-party company will be a controversial issue.
First of all, as per Art. 4 and Art.10 of Social Insurance Law of the PRC, it actually can be concluded that the social insurance premiums shall be paid directly in the name of the employer. Otherwise, paying social insurance by a third party may be deemed to be that the employer has not paid social insurance in compliance with the law, which may give the employee the right to ask for the termination of the labor contract as well as economic compensation according to Art.38 and Art.46 of Labor Contract Law of the PRC. Meanwhile, such behavior may also hinder employees from enjoying work injury insurance benefits. And the employers also face the risk of administrative penalties as per Art. 86 and other related provisions of the Social Insurance Law of the PRC.
And considering the aforesaid behavior may be considered illegal, the related legal relationships such as the contractual relationship between the employer and the third-party company may not be protected by the law. More specifically, without the legal contractual relationship, even though the third-party company is eligible to enjoy the above-mentioned policies, the employer cannot use the related contract as a legal basis to ask the third-party company to reduce the charges or implement specific policies, and vice versa. Therefore, even after enjoying the above policies, the parties may still face the risk of potential disputes and subsequent administrative punishments. Anyway, the employer would be much better to correct the captioned behavior timely and pay the social insurance directly.
As mentioned above, the “Exemption” policy for the corporate contributions to the pension, unemployment and work injury insurance will be applicable to the nationwide SMEs. Therefore, in most cases, the labor dispatch entity can also enjoy the temporary exemption policy of the social insurance payments.
In the meantime, if it is agreed in the labor dispatch agreement as per Art.59 of Labor Contract Law of the PRC that the accepting entity shall bear the social insurance costs of dispatched employees, then in this case, after the labor dispatch entity enjoys the above-mentioned “Exemption” policies of social insurance payments, the accepting entity shall be entitled to require the labor dispatch entity to reduce the corresponding social insurance costs according to the labor dispatch agreement.
Conclusion
Considering all the above, it can be seen that the reduction of the social insurance cost are critical policies for supporting enterprises during the epidemic prevention and control period of COVID-19. Enterprises need to be familiar with the time limit and applicable premise of corresponding policies of different insurances and have a basic understanding of the local regulations and guidelines. And in addition to the above-mentioned policies, there are also other policies favorable to enterprise during the epidemic control period such as policies related to tax, contract performance, and financial support, which are worthy of further attention and discussion.
For further information on this and other interesting topics, please contact lawyer Chen Zhiyan (Eric) at eric.chen@wjngh.cn
