Legal Protection in Case of Employer's Non-Compliance to Pay Social Security Contributions in China | Max-Planck-Institut für Sozialrecht und Sozialpolitik - MPISOC


Doctoral Group: "Adjudication of Social Rights"

Legal Protection in Case of Employer's Non-Compliance to Pay Social Security Contributions in China

The social insurance for employees in the People's Republic of China (PRC) currently insures a large number of employees. A serious problem is that employers often fail to fulfill their obligation to pay social insurance contributions. Although many legal regulations have already been adopted, they have only limited effect. The refusal of employers to pay social insurance contributions is the most common case of impairment of the social rights and interests of the insured, because if contributions are not legally paid by the employer, employees will not be able to qualify for any corresponding social benefits.

In 2018, a fundamental reform was planned to increase the effectiveness of the collection of contributions: From 1 January 2019, the social insurance contributions ought to be collected by the tax authorities (instead of by the social insurance executive organs). However, the reform plans met with broad resistance, especially from the economy sector. In reaction to this widespread opposition, in 2019, the State Council made it clear that the process of contribution collecting would “in principle” remain unchanged and that the introduction of an obligation to pay for contribution arrears should not become part of the reform. In addition, social insurance contributions should be reduced. These measures can be seen as a political concession granted to the opponents; yet, they are legally questionable.

The problem of the non-compliance of the employer's obligation to pay social insurance contributions is a good example of the difficulties that exist in the Chinese social insurance system. During the reform from the planned economy to the market economy, the roles of the state, of society, of enterprises and of individuals were fundamentally transformed. In times of the planned economy, social insurance benefits were granted mainly by the state enterprises. As "work units" they were given resources directly from the state according to plans, and they provided their employees with all the means necessary for social, political, economic and cultural life. With the introduction of the market economy, the enterprises were freed from their extensive social tasks, and their provisionary tasks were transferred to the state-built, contribution-financed social insurance. Due to restructuring measures, Chinese social insurance has experienced fundamental structural problems. There is no clear understanding of the purpose and the legitimacy of social insurance. The content and function of social rights for citizens between the conflicting priorities of provisionary self-responsibility and state responsibility also requires a clear specification.

A noticeable phenomenon in China is that in cases of non-compliance of the employer's obligation to pay social insurance contributions, the state has withdrawn from its responsibility to collect the contributions; and in order to protect the rights affected and thus to ensure social security, the courts are mainly concerned with civil liability of employers for compensation to cover the damages. Such a design or institution is problematic, however, in that the primary claims under public law are replaced by secondary claims under private law. The goal of protection through social insurance and the specific responsibilities of the state for the implementation of social rights are thus not fulfilled.

This thesis argues that it is the legal responsibility of the state to ensure social security for its citizens, albeit the fact that social insurance is to a large extent structured within the framework of labour law. The main aim of this study is to refute two basic assumptions that strongly shape the discourse on Chinese social insurance law. The first basic assumption presupposes a general “corporate social responsibility” and claims that an “employer benefit system” based on this corporate responsibility stands alongside the social insurance system based on state responsibility, and that the former guarantees social protection if the latter fails. This assumption is invalid due to the state's obligation to protect, resulting from the fundamental right to social security as expressed in Article 45, Paragraph 1 of the Constitution.

The second basic assumption is that the state should only guarantee basic security through social insurance. Therefore, it is concluded that the collection of contributions based on a minimum assessment level should be sufficient for the state to fulfill its responsibility. However, first, the state must align its social responsibility with the specific mandate of the fundamental right to social security. Second, if the state has already set up a contribution-financed social insurance system, the structure of the social insurance system must meet the criterion of effectiveness, that is, its protective purpose must be achieved with sufficient effectiveness. The purpose of protection is, on the one hand, assessed by way of a systematic analysis of the Chinese social security system including social insurance and social assistance. On the other hand, the purpose of protection is defined by the mandate of the fundamental right to social security and thus is not limited to basic security, but demands full insurance protection.

Finally, this thesis will provide an answer to the question of how the legal responsibility of the state can be implemented. It is to be shown that the state's obligation to protect in respect of the social insurance system in the PR China can be effectively met on the basis of the existing legal institutions. The prerequisite for this would be for the state to be held directly liable if it does not meet its obligation to collect social insurance contributions.


Yifei Wang