Tax blow for HK staff on mainland
With foreign employees having to pay into a social security fund from July 1, industry chiefs fear the extra burden will force out thousands of companies
A policy that requires overseas employees on the mainland to pay up to 22 per cent of their wages into the country's social security fund threatens to drive thousands of companies and professionals out of business.
The deputy chairman of the Federation of Hong Kong Industries, Stanley Lau Chin-ho, described it yesterday as the last straw for manufacturers already struggling with rising prices, soaring wage bills, a strong yuan and chronic power and labour shortages.
It comes into effect on July 1.
"If manufacturers are lucky, they may be able to pass some of the extra costs to customers," Lau said, but it would be survival of the fittest.
Under the Social Insurance Law passed last October, all overseas people who have worked on the mainland for more than six months will have to pay social security insurance.
While details of the regulations are still being worked out, officials have made it clear that only foreign nationals whose countries have signed bilateral social insurance agreements with the mainland will be exempted. Only Germany and South Korea have signed such treaties with Beijing. Hong Kong has no such arrangement and to do so would require the city to change its Mandatory Provident Fund policy to exclude mainland workers.
A spokesman for the Constitutional and Mainland Affairs Bureau said it was not responsible for negotiating such an agreement and had no idea which department would handle such a task.
Alex Fong Chi-wai, chief executive of the Hong Kong General Chamber of Commerce, said it had submitted its members' concerns to the mainland authorities but had not received a reply.
The Chinese General Chamber of Commerce said it was consulting members for their opinions.
"If the law is broadly applied, this will raise the operation costs of all foreign nationals, including Hong Kong people working on the mainland," Fong said. "We hope the regulation will contain a special waiver."
The new law was formulated six years ago as Beijing took steps to establish a social security network. It was first tested in Guangdong on a voluntary basis. Now Beijing wants to make it compulsory and extend it to the rest of the country.
It is estimated there are 600,000 foreign workers on the mainland. This does not include the 200,000 Hongkongers.
Anyone evading the payment risks a hefty fine of up to three times the due contributions.
Overseas workers would be eligible for payments after contributing to the scheme for over 15 years. They could also arrange for their children to inherit their pension accounts
Alex Pun Wing-kit, a 31-year-old civil engineer from Hong Kong who will be posted to Nanjing in November, said the new policy would force him to rethink his job.
"I'm not happy to see a significant portion taken out of my pocket after already contributing to Hong Kong's retirement pension. It's unlikely that I will work on the mainland permanently. I don't know when and how much I am getting back in return after all of the money is taken out," Pun said.
"I'd seriously look into staying in Hong Kong if I have to bear the extra social security burden myself."
It will be employers, however, who will bear the brunt of the new law with contributions for their overseas employees on the mainland. In some cases it could amount to 40 per cent of workers' salaries.
David Hui Cheung-wing, who runs factories in Guangdong, said that since 2005 they had already been asked to pay the equivalent of 20 per cent of their Hong Kong workers' monthly salaries into local social security funds. He said politicians in the city seemed to know little about it.
"About a year ago, I asked Rita Fan Hsu Lai-tai [NPC Standing Committee member] about the rule, and she said it had not been passed yet," Hui said. "But authorities have been charging me for years. This is puzzling."
Hui said he had to pay an additional HK$1.2 million a month for the insurance funds.
Many employers are expected to transfer the extra costs to their employees, possibly leading to more labour strife and office rebellions.
Tsui Li, managing director of a Hong Kong-based logistics firm with six branches on the mainland and two Japanese staff working in its Shanghai office, said the new regulation would significantly drive up operational costs.
"I'm quite angry to hear this as no concrete details have been released, except one line of ambiguous regulation," said Tsui, whose company had tried preparing for the law six months ago but was unsure where to start.
"I'm quite angry to hear this. Mainland government officials are shifting the responsibility of providing social security for its people to corporations. It is not fair for businesses to shoulder that much."
She said her foreign staff would not be able to make use of local public medical services anyway even after contributing to social insurance due to language barriers.
"With the law coming into effect at such short notice, we are worried that the work visas of our foreign staff might not be extended all of a sudden after July."
Joe Leung Cho-bun, professor of social administration at The University of Hong Kong, said the mainland's pension rate was one of the highest in the world and it was a concern that the system was solely operated by the government without an independent monitoring body.
He said other jurisdictions around the world, such as the United States, Singapore and Hong Kong, required foreign workers to contribute to social insurance or retirement provident funds.
But Leung said the system on the mainland was extremely complicated and also lacked transparency. "Contributions made by corporations and the labour force today are being pooled to subsidise retiring workers. The government may run out of money to cover workers' retirement pensions in the future."
But the mainland authorities regard the new law as a move to help foreign workers there.
Lu Xuejing , a social security expert at Capital University of Economics and Business, told China Daily that although the government's move would increase the burden on employers, bosses should take the chance to realise that it was their responsibility to pay social security for everyone they employed, no matter where they were from.
Lu said the rule would also help foreign workers from developing countries who were not covered by expatriate packages to access subsidised local medical services.
Additional reporting by Adrian Wan