PRC authorities have recently issued several national notices to repeal the employment permit and work authorization requirement for Hong Kong, Taiwan and Macao residents (HTM residents) working in mainland China. Moreover, HTM residents are now eligible to receive residence permits, providing them with treatment more equal to mainland residents in terms of study, employment and housing.

HTM residents can use their previously issued and still valid employment permits as a proof of employment until 31 December 2018. After that, employment permits will no longer be valid or accepted as proof of employment. HTM residents can use documents such as the employer’s business licence, employee’s employment contract, proof of salary payment, or records of social insurance contributions as proof of employment. HTM residents may use such proof of employment to apply for a residence permit for them to receive basic public benefits (such as education and housing), if other required conditions are met. HTM residents have been permitted to apply for and receive residence permits as of 1 September 2018.

Although these changes significantly ease the regulatory burden on HTM residents wishing to work in mainland China, employers and potential employers of HTM residents are facing uncertainty because of the lack of a consistent approach adopted by local authorities and the lack of detailed supporting measures to implement the elimination of the work permit requirement. As the regulatory framework shifts, employers are uncertain about whether they should treat HTM residents exactly the same as mainland residents for all employment purposes, such as for housing fund contributions and entitlement to open-term employment contracts. In Shanghai, there is still uncertainty whether the changes will affect local authorities’ enforcement of social insurance requirements (in the past, local Shanghai authorities have not enforced social insurance requirements against foreign nationals).

On 25 October 2018, the Ministry of Human Resources and Social Security publicized a draft of the Interim Regulation on Social Insurance Contributions for Hong Kong, Taiwan and Macao Residents for public comment. In the draft regulation, employers are mandatorily required to make social insurance contributions (including contributions for pension insurance, medical insurance, maternity insurance, work injury insurance and unemployment insurance) for HTM resident employees. Employers should enroll HTM resident employees into the social insurance system by using HTM resident employees’ valid travel certificate/residence permit, employment contract, etc. as proof of employment. Although this draft has not been passed by the authorities, it indicates that government’s plan to have HTM residents who are working in China enrolled in the social insurance system.

Local authorities slow down pursuit of unpaid social insurance contributions

According to the national reform plan issued in July 2018, the tax authorities started to act for the social insurance authorities in collecting social insurance contributions on 1 January 2019.

The national reform plan made employers worried that the tax authorities would be more aggressive than the social insurance authorities in pursuing employers for unpaid and underpaid social insurance contributions since the tax authorities have greater access to the employee salary data used to calculate social insurance contributions.

But the Ministry of Human Resources and Social Security issued a notice on 21 September 2018 ordering local social insurance authorities to refrain from requiring employers to pay all unpaid or underpaid social insurance contributions at one time.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com