international employment law firm alliance L&E Global

China: China released the Management Measures for Supervision and Reporting of Social Insurance Funds

With the aim of effectively safeguarding the security of social security funds, the Management Measures for Supervision and Reporting of Social Insurance Fund (“the Measures”) specify that any organization or individual is entitled to report to the human resources and social security administrative department the behaviors of institutions, employers, or individuals suspected of fraudulently obtaining, embezzling, or misappropriating social security funds. Specifically, China gradually tightens the examination on the consistency of subjects of labor contracts and subjects of social insurance payment. The Measures encourage the public to report illegal social insurance activities, and the whistleblower will be rewarded up to CNY100,000 for substantiated reports in accordance with the Interim Measures for Social Insurance Fund Supervision and Reporting Incentives, which came into effect in January 2023. Therefore, if the employer pays social security for its employees through a third-party entity that has no actual employment relationship with employees, it will not only face inspection and audit, but also may be reported by the public. In addition, the Measures also provide detailed provisions on procedural matters such as acceptance, processing, filing and reporting, and safeguard measures, and clarify corresponding legal responsibilities to ensure effective implementation of the Measures.

Key Action Points

With the release of the Measures, it is suggested that employers should strengthen self-examination and standardize the compliance of social security payment. In case of cross-regional employment, the employers may avoid risks by establishing subsidiaries, temporarily transferring employees from the affiliated companies, etc.