IMPORTANT NOTICE – Beijing Cancels Social Security Withholding and Payment Business

Written by
Fancy Fan – HR Specialist

Published on July 21, 2020

Recently, the Beijing Social Security Center issued the “Notice on Issues Related to Labor Dispatching Enterprises and Human Resources Service Enterprises Participating in Social Insurance”, which clearly stipulates that enterprises cannot entrust third-party human resources companies to operate social insurance withholding and payment.

In the past, if a company A registered in Shanghai had an employee working in Beijing, it needed to pay Beijing’s social insurance for the employee; it could be paid in Beijing in the form of labor dispatch through a human resources service company, or just entrust human resources service companies to pay for social insurance in Beijing (this mode of operation is common in the human resources industry).

Now, this way becomes illegal.

 

New Notice of Beijing Social Insurance Payment

Since July 5, 2020, labor dispatch companies and human resource service companies need to fill in the information of actual employers and relevant information on labor contracts when registering and adding new employees through the online service platform and the social insurance business system.

Interpretation of the Rules

In the future, human resource service companies and labor dispatch companies will face different problems:

  1. The operation will be complicated and cumbersome; the Beijing social security system was adjusted in July, requiring third-party human resources service agencies to enter the actual employment unit information of the hiring staff when adding staff, and it is required to match the organization code in the system;
  2. The social security payment model may be completely “ended”. Especially for companies that have not yet registered entities in Beijing (If the actual employer entered does not exist in the system, there will be a corresponding prompt, and it will not be possible to complete the insurance registration or increase the number of employees.);
  3. If the company still entrusts a third-party human resources company to withhold and pay, after enjoying the social security benefits, it will be considered “fictional labor relationship fraud”.

Solutions to Ensure Your Employees Social Security Compliance in Beijing

To solve this problem, companies have now two possible solutions. These are different depending on if the company has or not a legal entity in Beijing. Below you can read more details about them.

Option 1 – Set up a legal entity in Beijing

This solution is fit for companies that want to set up and maintain a legal entity in Beijing. You can choose to set up a branch office in Beijing which will be very fast to set up, and easy to maintain and controlled by the head office in other cities of China.
 
After the branch office is established in Beijing, you can have your Beijing employees be directly hired under the Beijing branch office, in the meanwhile, you can engage the HR agency or payroll company to handle your employees’ Beijing payroll and social securities on the name of Beijing branch to ensure the payroll and social security compliance in Beijing.

Option 2 – Fully Outsource Your Employee to a Human Resource Agency in Beijing

If you don’t want to have a legal entity in Beijing but would like to hire someone based in Beijing, the compliance way now is fully outsource your Beijing employee to a licensed Human Resource Agency in Beijing, which mean this HR Agency would directly hire this employee, sign the direct labor contract with him/her, handling the monthly payroll, individual income tax, and social securities as the employer in Beijing.

How HROne Can Help to Ensure Your Employees’ Social Security Compliance in Beijing

HROne is a fully licensed Foreign Enterprises Service Companies (FESCO) in China. 

We are specialized in helping companies with employment outsourcing / PEO solutionspayroll and tax management, social benefits administration. We can help companies to relieve the burden of handling complex HR and payroll processes, making sure that the employees’ labor relationships are compliant with China’s labor law.

HROne also has a registered office in Beijing that can help to ensure your employees’ social security compliance.

Contact us if you are interested to know more about these solutions.

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