Payment into housing reserve for migrant workers

By Qin Wen, Rui Bai Law Firm; Wilson Dong, Xin Bai Law Firm
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In the evolution of social insurance, 2018 is a significant year. A series of signals, including tax authorities collecting premiums for social insurance and centralization of old-age insurance, indicate that the state has raised its compliance requirements further for the segment. Although the “one reserve” in the “five insurances and one reserve” does not spike currently, compliance requirements for housing reserve are no less stringent than for social insurance. In particular, an enterprise neglecting to make contributions to the housing reserve for migrant workers possibly faces unexpected legal risks.

秦文  QIN WEN  瑞栢律师事务所合伙人  Partner  Rui Bai Law Firm
QIN WEN
Partner
Rui Bai Law Firm

As a concrete example, Company A, which had been operating locally for over two decades, faced relocation following a requisitioning of the land it occupied. On learning of the news, its employees promptly arranged for various claims before the company in the hope of securing substantial additional compensation. Among them were several employees whose household registrations were in the countryside when they joined the company and, as such, were migrant workers.

In October 2004, the authorities of Company A’s home province decided to abolish the distinction through household registrations on a province-wide basis. The company attempted to make contributions to the housing reserve for the migrant workers, but the housing reserve management centre’s response was that these were not necessary. At the request of its employees, the company again applied to open accounts and make contributions to the housing reserve for themselves in November 2016, at which time it was successful. Last December, the employees suddenly filed a report with the housing reserve centre to demand that the company make up for the shortfall in the housing reserve for the period between their entry into the company and November 2016. The housing reserve centre accepted the report and issued a notice ordering rectification, demanding the company make back-payments into the housing reserve for the workers, with dues for the earliest employees stretching back to the time when the Administrative Regulations for Housing Reserves (ARHR) took effect in April 1999. An initial estimate showed that Company A had to make back-payments up to several million renminbi.

As is widely known, contributing to the housing reserve is an employer’s statutory obligation, but why did Company A in this case fail to make contributions for its employees, who were migrant workers?

Firstly, from the legal perspective, the original intent for creating the housing reserve was to assist employees of entities located in urban areas in purchasing and leasing housing. Both the employer and the employee make contributions to the reserve fund. At the outset, when the system was established, because the rural population collectively owned the land made available for the construction of housing, there was no need to consider their purchasing or leasing of housing.

董传羽  WILSON DONG  信栢律师事务所律师  Associate  Xin Bai Law Firm
WILSON DONG
Associate
Xin Bai Law Firm

From the perspective of state regulations and policy, the ARHR does not expressly require payment into the housing reserve for migrant workers. A notice, called the Guiding Opinions on Several Specific Issues Concerning the Administration of Housing Reserves, issued on 7 January 2005, specifies that in qualified regions, where an urban company engages migrant workers, both parties can contribute to the housing reserve. Another notice from State Council on 27 March 2006, called Several Opinions on Resolving the Issue of Migrant Workers, states that, in qualified regions, both parties may contribute to the housing reserve, which migrant workers may use to lease or purchase housing they will occupy.

From the perspective of local policy, the government of the province where Company A is located at one time issued a document emphasizing that a migrant worker with a relatively stable job in a city and his employer could, for the time being, open a housing reserve account at a relatively low contribution percentage. It also set a target that, by 2017, migrant workers, with a stable employment relationship, were essentially to be brought within the scope of coverage of the housing reserve system. From this, it is evident that housing reserve contributions for migrant workers were mandatory.

Secondly, many years ago, the mobility of migrant workers with their own farmland was relatively high. They often headed for the cities to find work during difficult times and returned home during busy times, unable or unwilling to remain and live in the cities. They did not want contributions in their names to the housing reserve. So, over time, companies ceased to make the contributions for them to the housing reserve, thus planting the seeds for the subsequent disputes.

In fact, although the ARHR does not expressly require migrant workers to contribute to the housing reserve, based on current judicial precedents and certain cases appearing in newspapers, “active employees” are not differentiated on the basis of their household registrations. Add to that the increasing pace of urbanization in recent years, where some formerly rural areas on the outskirts of cities, through implementation of the “village into community” policy, had gradually become urban areas, causing a similar need for residents, whose household registrations were originally rural, to purchase and lease housing. Therefore, bringing migrant workers within the scope of those who contribute to the housing reserve was the logical next step.

However, Company A had not failed to pay into the housing reserve in bad faith. The attitude towards housing-reserve contributions for migrant workers remains one of encouragement rather than being mandatory. After the province’s October 2004 policy to abolish distinction by household registration, employees in this case ceased to have the status of migrant workers and became people for whom contributions were mandatory. Ultimately, based on the arguments we presented, the housing reserve management centre changed the starting point for the housing-reserve contributions to October 2004.

Although the tax authorities has been collecting social insurance premiums, the housing reserve still does not fall within their jurisdiction. With the adjustment of the base figures for social insurance, employees may start paying closer attention to check if the base figures for the housing reserve are compliant, giving rise to the possibility of more disputes or reports being filed. We would recommend that, when employees collectively demand back-payments of contributions, the enterprise should promptly seek legal advice and avoid overreacting or submitting documents exceeding the scope of its responsibilities.

Qin Wen is a partner at Rui Bai Law Firm and Wilson Dong is an associate at Xin Bai Law Firm

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