China is at the center of a social security system overhaul that has left many employers and employees considerably frustrated. Last month, China’s Supreme People’s Court introduced a major shift in the nation’s social security policy, mandating that all employers begin making contributions to the social insurance for their employees. Effective September 1, 2025, employers can no longer opt out of making contributions and providing the support systems that workers can rely on in the future.
China’s mandatory social insurance policy should mark a monumental victory for employees, however, it has sparked widespread debate over the sustainability of such an abrupt shift in the narrative. With the pressures falling on HR to navigate compliance and hiring within the organization’s means, there is a lot to explore with how policy changes are critical for employers and their HR teams to keep up with.
The overhaul of regulations surrounding China’s social security system has sparked backlash from both employers and employees. (Image: Freepik)
China’s Social Security Overhaul Causes Confusion and Chaos Despite Good Intentions
For years, employers in China have taken advantage of a loophole in the social security system, allowing them to reach an agreement with employees to forgo making social insurance contributions in favor of more immediate payments and benefits that better serve employees in the short term. This informal arrangement allowed many employers to waive social insurance contributions, but the strategy is now banned. In an August 1 decision, the Court announced that such contracts with employees were no longer valid.
“We’ve found a few companies not contributing to social insurance in order to reduce labor costs, with some workers requesting employers to provide the social insurance contributions directly to them as subsidies in order to receive higher wages,” Zhang Yan, a judge in the court’s First Civil Division, said with regard to China’s decision to recast social security.
Why Is China’s Social Security Shift Receiving Backlash?
On the face of things, China’s social security overhaul is meant to support the country’s fast-aging population and create a safety net for its future. Amidst considerable economic uncertainties and rising unemployment, “Paying social insurance fees in the long term can help employees manage income disruptions during risks like old age, illness, work-related injuries, childbirth, and unemployment, securing their basic living needs,” Wu explained.
Despite the apparent benefits, many are worried about what this will mean for their careers. With the added expense to provide protection for the largest population around in terms of coverage, many employers could soon lay off employees and cut down their workforce to ensure their expenses don’t rise beyond their means.
This ruling also coincides with reforms such as raising the retirement age from 60 to 63 among men, from 55 to 58 for women in white-collar roles, and from 50 to 55 among blue-collar women. This may mean longer periods of payment to Social Security. Additionally, starting in 2030, workers must contribute to social security for at least 20 years to qualify for pensions by 2039, increasing financial pressures on both the employer and employee.
Is There a Silver Lining to China’s Mandatory Social Insurance Policy?
China’s social security changes may be receiving backlash, but there is one section of the population that could benefit from this. Reportedly, the policy has fueled a trend towards hiring retirees in China, with the number of job openings for them going up. Retirees who are exempt from social security contributions make for more appealing employees under the policy change, and with the aging population growing, many could continue to work into their later years to earn a living.
This also means that retirement will not be a pleasant outcome for many, who will have to continue working for as long as they are able, in order to support themselves. While it is too soon to tell if a significant number of retirees have been hired or benefited, reports suggest that this could soon be the case.
HR teams will have to pick up the slack and explore how their businesses can best navigate these changes, ensuring they are always compliant and not penalized for exploiting loopholes. This altered make-up of the workforce will create new challenges, and it will be essential to balance matters out with fresh talent that can keep up with the modern world.
Recommendations for HR Professionals Navigating Changes in Workforce Regulations
The stricter regulations on social security payments in China are only one example of how sudden changes to state and federal regulations can disrupt a workforce. HR teams are known for their adaptability, and in the face of such critical changes, it falls to them to keep the organization productive and whole. Some recommendations for HR include:
- Understand the policy changes in detail to explore the specifics of how it affects the organization in combination with other regulations
- Enhancing compliance systems, using HR software, and working with legal teams to ensure no details are missed
- Communicating effectively to ensure employees are aware of the policies and their impact on them
- Adapting recruitment strategies that fit the needs of the organization without missing out on talent
- Fostering inclusivity and togetherness within the diverse workforce
- Creating new benefit plans to suit the needs of the multi-faceted workforce
- Planning for long-term costs to ensure cost-efficient models are utilized properly
- Conducting any downsizing efforts with care and empathy while also ensuring the workforce is equipped to remain functional with the loss of talent
Strategic Workforce Planning Is Now More Important than Ever for HR
As China recasts its social security and creates stronger guidelines for payments to the fund, employers and their HR teams will have to collaborate to determine what happens next. From additional considerations in payroll and expense management to re-establishing contracts with workers, HR teams have their work cut out for them.
HR leaders must assess the financial impact of contributions on labor costs and adjust budgets accordingly. For example, construction firms previously hired ad hoc workers to avoid contributions, but the new ruling eliminates such practices. The HR team must now integrate the costs of social security into their long-term planning to understand how to proceed. A simple layoff is not a viable solution, as the work isn’t being cut down by any means.
With hints of the 996 culture making a comeback and the general struggles of unemployment among the youth, it will be doubly important for HR to adapt its policies for older employees to maintain productivity while ensuring that fresh, young talent also filters into the workplace with regularity.
What do you think about China’s social security overhaul? Is it too much too soon or an essential step for protecting the workforce? Let us know what you think. Subscribe to the HR Digest for more insights into the policies and practices reshaping the workforce around the globe.