How to claim social insurance as an expatriate leaving China?
Social insurance was introduced for expatriates in China in October 2011, where it was implemented initially in Beijing, and a few geographical pockets, and slowly other parts of the country have implemented since then or are in the process of implementing. MSI's Chinese accounting member LehmanBrown International Accountants provides an overview.What Exactly can be Withdrawn from the Social Insurance?
Expatriates who do not consider drawing a Chinese pension upon retirement (assuming the criteria are met) can cash-out their personal accounts certain amounts paid for their Social Insurance. Specifically, they can withdraw their Pension and Unemployment Insurance that they had contributed over the years by paying their social welfare and taxes in China after resigning or completing their contract. Unfortunately, expatriates can only cash out and close their Social Insurance account and collect back personal contributions, but will not be able to collect back any of the Social Insurance that the company has paid for their part of the expatriate’s Pension and Unemployment Insurance. Effectively, most expatriates choose to either collect their part of the withdrawable Social Insurance or keep the account until they meet the retirement age of China (at the time of writing, 60 men and 55 for women). To qualify for the Chinese pension an expatriate should have contributed 15 years’ worth of pension contributions. Theoretically, there is a pro-rata payment of pension for anyone that has paid over 15 years. As the rules were only brought in 2011, no expatriate has yet paid 15 years for obtaining a full Chinese pension. However, considering the rules in 2011 say that it would be the same as local Chinese citizens, the pension is considerably low after 15 years. Hypothetically after 15 years, if the expatriate worked in Beijing, their pension in 2021 could be more than 900 RMB[1]; if they worked in Shanghai, they could expect more than 1200 RMB[2]. To receive a larger salary the expatriate would have to work and contribute to their pension for much longer. For either outcome, an expatriate would have contributed a lot more over 15 years or more if their remuneration was above the city cap on contributions. The government department managing pensions do not have a clear system for allowing expatriates to claim their pensions in the future, and so an expatriate needs to consider whether or not it is worth waiting until the criteria met and they have retired, or they withdraw their person contributions upon exiting China.Medical Insurance is Separate
Another source of income that expatriates often miss out on is their Medical Social Insurance which can be withdrawn by using their red account book whenever they want during their professional career in China. If an expatriate already has private healthcare insurance, they can withdraw from that account from time to time as they would already be covered medically.What is the Process for an Expatriate to Cash Out their Social Insurance?
The first step is to inform the company that the expatriate works in China that they intend to leave and would like to begin their labour contract termination process. Generally, that includes submitting a letter of resignation one month before the planned time to leave. Once the company in China is informed, the labour termination process begins and should take HR less than a month to do via their government-approved websites, which inform the status of the individual. The expatriate should also inform HR that they would like to close their Social Insurance account as more documents will have to be filled and downloaded into a USB for the expatriate to present to the Social Insurance bureau. Generally, a good HR department will help the expatriate close the Social Insurance account to avoid any problems or misunderstandings. However, if unaccompanied, the expatriate will have to bring the documents and USB provided by their HR to the Social Insurance bureaux on the day of their booked appointment. Documents normally include:- ID card of the handler
- Company seal
- Business License
- Copy of original passport of foreign nationals
- Departure certificate
- Proof of Resignation
What can an Expatriate Expect to Receive?
The personal Pension and the Unemployment Insurance are the only parts that can be taken when closing the social insurance account, the rest and the part that the employer provides will effectively be lost. In the case study below, the expatriate earned 20,000 RMB per month for four years in a company based in Beijing and paid the social insurance, 8% for the Pension and 0.2% for the Unemployment Insurance. The example will also include the Medical Insurance portion assuming the expatriate has not withdrawn any.| City | Beijing |
| Social Insurance Breakdown | Expatriate’s Part |
| Salary | 20,000 RMB |
| Pension | 1,600 RMB (8%) |
| Medical Insurance (Maternity Included) | 400 RMB (2%) |
| Unemployment | 40 RMB (0.2%) |
| Total Monthly Social Insurance | 2040 RMB (10.2%) |
| Withdrawable Social Insurance after 3 Years | 73,440 RMB |