Special Disclaimer: This article is an original work by Attorney Shao Shiwei. It reflects only the author’s personal views and does not constitute legal consultation or legal advice on any specific matter. For article reprints, legal consultations, or business exchanges, please add: sswls66

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Should you sign a commitment waiving social insurance? A friend recently consulted me on this issue. Given its broad relevance, I summarize the key points here to inform friends who may encounter similar situations.

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Scenario 1:

To reduce costs, the company does not wish to pay social insurance contributions for employees and requires employees to sign a statement waiving social insurance.

Scenario 2:

The employee has limited legal awareness and believes that only money received in hand is truly their own. The employee requests that the company not pay social insurance contributions and instead pay the amount that would have been contributed as part of the employee’s wages.

 

So the question arises: Should you sign or not?

 

In either scenario, if both parties intend to continue their employment relationship, there is only one answer to this choice:

Sign.

 

Therefore, what are the advantages and disadvantages for employees and companies when signing such agreements?

 

Employees:

1. They can no longer claim economic compensation.

Although, pursuant to Article 38, Paragraph 3 of the Labor Contract Law, where an employer fails to pay social insurance contributions for an employee, the employee may terminate the labor contract and claim economic compensation,

judicial practice holds that where an employee voluntarily signs a commitment letter waiving the payment of social insurance, such act constitutes a disposition of the employee’s own rights. Consequently, if the employee subsequently claims economic compensation on the ground that the company failed to pay social insurance contributions on their behalf, the court will not support such claim.

2. On the surface, it may appear that the employee receives more take-home pay; however, in the event of circumstances such as a work-related injury, the social insurance agency will refuse benefits because no social insurance contributions were paid for the employee. The employee would then be limited to seeking compensation from the company. If the company refuses, the employee would have to embark on a protracted path to enforce their rights.

3. Labor arbitration commissions and courts do not accept requests by employees requiring employers to pay or fully pay social insurance contributions.

 

For the Company:

1. If an employee claims compensation for losses on the ground that the company failed to handle social insurance procedures and that the social insurance agency cannot make retroactive payments, thereby preventing the employee from enjoying social insurance benefits, the company may face legal liability for compensating such losses.

As mentioned above, this includes the risk of employees asserting claims for work-related injury insurance benefits.

Some companies purchase commercial insurance for employees in an attempt to mitigate such risks. However, for employees, claims under commercial insurance and work-related injury insurance may be pursued simultaneously without conflict. Therefore, the company’s liability for compensation cannot be avoided.

 

2. The risk that employees may later file complaints with the labor inspection authorities or the social insurance bureau.

 

The company should be aware that even if an employee signs a written statement waiving social insurance, such waiver is invalid because its content violates mandatory provisions of law. The company remains obligated to pay social insurance contributions for the employee.

 

If an employee files a complaint with the labor inspection team, the employer must provide relevant materials for verification by the inspection authorities, such as the employee roster and records of social insurance contributions. If the inspection authorities suspect that the employer may have failed to pay or underpaid social insurance contributions, they may conduct an on-site inspection. If it is confirmed that the company indeed failed to pay or underpaid social insurance premiums, it will

face the following consequences: the labor security administrative department or the tax authority will order payment within a specified time limit; if payment is still not made within such period, late payment fees will be imposed and fines may be levied.

Based on the substantial volume of consultations received by our lawyers over an extended period, it remains relatively common for companies to fail to pay social insurance contributions for their employees or to underpay such contributions. Risks persist indefinitely; as for the choices made, both parties, after weighing the advantages and disadvantages, will ultimately select the option that is optimal for their respective interests.

Legal Basis:

Interim Regulations on the Collection and Payment of Social Insurance Premiums (2019 Revision)

Article 13: Where a contributing entity fails to pay social insurance premiums or to withhold and remit such premiums as required, the administrative department of labor and social security or the tax authorities shall order it to make payment within a specified time limit. If payment is still not made upon expiration of the time limit, in addition to making up the arrears, a late payment penalty of 2‰ per day shall be imposed from the date on which the arrears arose. The late payment penalties shall be incorporated into the social insurance fund.

Article 23: Where a contributing entity fails to handle social insurance registration, change of registration, or cancellation of registration as required, or fails to declare the amount of social insurance premiums payable as required, the administrative department of labor and social security shall order it to make corrections within a specified time limit. In serious circumstances, the persons directly in charge and other directly responsible persons may be fined

not less than RMB 1,000 but not more than RMB 5,000; in particularly serious circumstances, the persons directly in charge and other directly responsible persons may be fined not less than RMB 5,000 but not more than RMB 10,000.

Article 24: Where a contributing entity violates laws, administrative regulations, and relevant state provisions concerning finance, accounting, and statistics by forging, altering, or intentionally destroying relevant account books and materials, or by failing to maintain account books, thereby rendering the base for calculating social insurance premiums indeterminable, in addition to administrative penalties,

disciplinary sanctions, and criminal penalties imposed in accordance with the relevant laws and administrative regulations, collection and payment shall be carried out in accordance with Article 10 of these Regulations. In the case of delayed payment, the administrative department of labor and social security or the tax authorities shall decide to impose late payment penalties in accordance with Article 13 of these Regulations, and impose a fine of not less than RMB 5,000 but not more than RMB 20,000 on the persons directly in charge and other directly responsible persons.

fine.

Social Insurance Law of the People's Republic of China (2018 Amendment)

Article 86: Where an employer fails to pay social insurance premiums in full and on time, the agency responsible for collecting social insurance premiums shall order it to make payment or to make up the shortfall within a specified time limit, and impose a late payment penalty of 0.05% per day from the date on which the arrears arose. If payment is still not made upon expiration of the time limit, the relevant administrative departments shall impose a fine of not less than one time but not more than three times the amount of the arrears.

Regulations on Labor Security Supervision

Article 30 Where any of the following acts occurs, the labor security administrative department shall order rectification; for acts specified in item (1), (2), or (3), a fine of not less than RMB 2,000 but not more than RMB 20,000 shall be imposed:

(1) Unreasonably resisting or obstructing the labor security administrative department from carrying out labor security supervision and inspection in accordance with the provisions of these Regulations;

(2) Failing to submit written materials as required by the labor security administrative department, concealing the true facts, providing false testimony, or concealing or destroying evidence;

(3) Refusing to make rectifications after being ordered to do so by the labor security administrative department, or refusing to comply with the administrative handling decisions made by the labor security administrative department;

(4) Retaliating against whistleblowers or complainants.

Where a violation of the preceding paragraph constitutes an act violating public security administration, the public security organ shall impose public security administration penalties in accordance with the law; where it constitutes a crime, criminal liability shall be investigated in accordance with the law.

Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (I)

Article 1 The following disputes arising between workers and employers shall be deemed labor disputes. If the parties refuse to accept the arbitral award rendered by the labor dispute arbitration institution and file a lawsuit in accordance with the law, the people's court shall accept the case:

(5) Disputes arising where a worker claims compensation for losses from the employer on the grounds that the employer failed to handle social insurance procedures for the worker, and the social insurance agency is unable to make retroactive arrangements, thereby preventing the worker from enjoying social insurance benefits;