China Employment Law Update March 2018

Executive Summary

1. "Measures for Enterprise Annuities" are further amended.
2. Foreign Talent may apply for "R" visa to work in China.

Since the PRC issued Tentative Measures for Enterprise Annuities in 2004, the number of enterprises adopting enterprise annuities has increased significantly, reaching 76,000 by the end of 2016. On 18 December 2017, the Chinese Ministry of Human Resources and Social Security ("MOHRSS") and the Ministry of Finance issued new Measures for Enterprise Annuities which came into effect on 1 February 2018.

The main differences between the new measures and 2004's tentative measures are as follows:

• The upper limits on fees paid by enterprises are reduced

Under the new measures, annuity contributions paid by an enterprise must not exceed 8% of the enterprise's total annual payroll figure. This cap was set at 8.33% in the tentative measures. The total aggregate annuity contributions paid by an enterprise and its employees may not exceed 12% of the total annual payroll figure, as against 16.67% in the tentative measures.

• There is a restriction on the distribution gap

The new measures stipulate that any contribution made by an enterprise to an individual employee's annuity account in the current month should not be more than five times the average allocation for that period.

• There are new provisions in respect of amendment, termination, suspension and continuity of enterprise annuity plans

The new measures state that, upon consultation, an enterprise and its employees may amend an enterprise annuity plan to better suit the circumstances of the enterprise, subject to state policies. The amended enterprise annuity plan should be submitted to the employee representatives' assembly or to all of the employees, for discussion and adoption, and then filed with the administrative department of human resources and social security.

If an enterprise is dissolved, declared bankrupt, a force majeure event happens or any other termination circumstances stipulated in the enterprise annuity plan occur, the enterprise annuity plan should be terminated.

Furthermore, if an enterprise cannot continue to make contributions for a particular period due to operating losses, reorganisation, mergers and acquisitions or other reasons arising after the implementation of the enterprise annuity plan, the enterprise may suspend annuity contributions upon consultation with its employees. Once the issue is resolved or the process completed, the enterprise and employees can resume making annuity contributions and may, if the financial health of the enterprise allows, make supplementary contributions to make up for the contributions not made to the enterprise annuity plan during the period of suspension. The amount of supplementary contributions and the period for which they are made should not exceed the term and amount of actual suspended contributions.

• There are new rules of attribution

The new measures provide that contributions made by an employee to his/her individual annuity account and the returns on investment of such contributions should be the property of the employee from the outset.

As regards contributions made by an enterprise to an employee's individual annuity account and the returns on investment of those contributions, the enterprise and the employee may agree that such contributions and returns be the property of the employee from the outset. Alternatively, contributions and related returns on investment can be gradually transferred to an employee during his/her employment, provided that all contributions and related returns on investment should be completely transferred to the employee after no more than eight years.

• The conditions for receiving enterprise annuities are relaxed

The new measures state that an employee who has completely lost his/her capacity to work can also receive enterprise annuities. This contrasts with the tentative measures under which only an employee who has reached the State prescribed retirement age can receive enterprise annuities.

• Methods of receiving enterprise annuities are improved

The new measures stipulate that a qualified employee may make withdrawals from his/her individual annuity account on a monthly basis, either in instalments or a lump sum, or may use some or all of his/her savings to purchase commercial pension insurance products.

• The scope of the measures is expanded

The tentative measures stipulate that only an enterprise can adopt the enterprise annuity system and that this may be on a voluntary basis. By contrast, under the new measures, all employers, other than enterprises and their employees who participate in the basic endowment insurance scheme, can adopt the annuity systems provided for. This means, for example, that individual businesses will now be able to contribute to an enterprise annuity scheme.

In November 2017, the State Administration of Foreign Experts Affairs ("SAFEA"), the Ministry of Foreign Affairs ("MFA") and the Ministry of Public Security ("MPS") jointly issued Measures for Implementing the Visa System for Foreign Talent. Following its promulgation, several provinces and cities, such as Beijing, Shanghai and Guangdong, have begun implementing the Visa System. Under the new measures, foreign nationals who wish to live and work in China in the capacity of "foreign talent" need to apply for the "R" class visa.

The procedure for applying for a foreign talent visa is broadly as follows:

• First, any foreigner applying for an "R" class visa must satisfy the requirements for high-level foreign talent (Category A) under the Criteria for Classifying Foreigners Working in China (tentative). The SAFEA must, in concert with the MFA and the MPS, adjust the criteria for identifying high-end foreign talent on a timely basis, in order to reflect China's need for economic and social development and its supply of, and demand for, talent resources.
• Then, if a foreigner meets the requirements for high-level foreign talent, the relevant provincial administration of foreign experts affairs should, within five business days, issue to the Chinese employer of such foreigner an online confirmation letter for High-level Foreign Talent. The information contained in the confirmation letter should then be exchanged with the Chinese embassy or consulate in the applicant's country or region of domicile, or other overseas offices authorised by the MFA. At the same time, the SAFEA must exchange the relevant information with the MFA and the MPS. Once the foreigner is in receipt of the confirmation letter, he/she can apply for an "R" class visa.
• Any foreigner who has obtained an "R" class visa and wants to work in China must apply for a work permit for foreigners working in China. This application is made with the administration of foreign experts affairs under the people's government at either the place where the employer is located or the agency of the administration.
• Finally, the visa holder must also apply for a foreigners' residence permit with the local exit and entry administration. The local public security bureaux must provide a visa and residence service for foreign talent in China, in accordance with the law.

The implementation of these measures makes the procedure for applying for the "R" class visa for foreign talent clearer and more explicit and should help to encourage the introduction of foreign talent to China.