The Social Insurance Waiver Is Void, and You Still Pay

Why a Signed Waiver Is Worthless

Foreign employers often see it as a win-win: the employee takes home more, the company saves on contributions, and everyone signs a waiver. Since September 2025 China's Supreme People's Court has made clear that the waiver is void, and the bill arrives anyway.

Social insurance is mandatory for employers and employees alike, and an employer is expected to register a new hire within 30 days of the start of employment. None of that is new. What changed on 1 September 2025 is the certainty about what a waiver is worth.

The Setup: A Cash Allowance Instead of Contributions

Company C, a German industrial-equipment maker, hired a sales engineer in Suzhou through a local intermediary that handled payroll. Before signing, the candidate made an unusual request: skip social insurance enrolment and pay him the equivalent in cash. He said he already had coverage in his hometown and preferred a higher monthly income.

HQ saw an easy trade. The employee would be happier, and the employer-side contributions, which add a meaningful amount on top of salary, would disappear. The intermediary went along. On his first day the engineer signed a short voluntary waiver letter, which also said he would return the allowance if enrolment ever became necessary, and a monthly cash allowance was added to his pay.

The Turning Point: A Resignation Letter Citing Article 38

Two years later, with the Supreme People's Court's new interpretation in force, the engineer accepted an offer from a competitor and resigned in writing, citing Company C's failure to pay his social insurance. He claimed severance and filed a complaint with the local social insurance agency.

Company C's answer felt airtight: he asked for it, he signed a waiver, and he was paid extra for it. The tribunal was not persuaded.

What Judicial Interpretation II Changed

Article 19 of the Supreme People's Court's Judicial Interpretation II, in force since 1 September 2025, says three things that matter here.

• An agreement between employer and employee, or an employee's own promise, that social insurance need not be paid is void.
• If the employer fails to pay, an employee who resigns under Article 38(1)(3) of the Labor Contract Law can claim severance, and courts will support the claim.
• If the employer later makes a lawful back payment, it can ask the employee to return the cash paid in lieu of contributions, and courts will support that too.

What the Court's Own Typical Case Showed

The published typical case looked a lot like Company C's: a waiver signed right after hiring and a monthly cash subsidy in place of contributions. The court held the agreement void and the employee entitled to severance on resigning.

That outcome matters for planning. A waiver does not shift the obligation to the employee; it simply removes the employer's only written evidence that it knew the rule.

The Cost Beyond the Severance

The social insurance agency can order back payment within a deadline and charge a late fee of 0.05% per day on the arrears. If the arrears remain unpaid after the order, authorities can also fine the employer one to three times the amount owed.

• Back payment of the missing contributions for the whole period, plus late fees of 0.05% per day on the arrears.
• Severance for the resigning employee: one month's pay for each year of service, with partial years rounded under the statutory rules.
• Fines of one to three times the arrears if they stay unpaid after the agency's order.
• The cash allowance, recoverable in principle once a lawful back payment has been made, though collecting it from a former employee is a separate exercise.
• The risk that only surfaces later: if an unenrolled employee suffers a work injury, the employer pays the benefits the work-injury fund would have covered.

What It Actually Cost Company C

Company C ended up paying the arrears, the late fees and roughly two to three months' pay in severance, and then had to open a separate claim to try to recover the cash allowance it had paid for two years.

Legally the employer of record carried the liability. Under typical service agreements the cost flowed back to the client, which is the standard shape of these disputes.

What to Do Instead

Every step below is cheaper than remediation after a resignation letter.

• Decline the request, however voluntary it sounds. Explain that enrolment is mandatory and that a waiver has no legal effect. The employee's consent does not cure the problem, because the employee's own promise is void too.
• Meet the underlying need lawfully. If the employee wants more take-home pay, adjust the salary package or discuss the net figure openly, and explain what the coverage provides: medical, pension and work-injury protection.
• Enrol from day one and on the correct base. Register new hires on time and contribute on the actual salary. Contributing on an artificially low base while paying the rest in cash creates similar exposure.
• Ask your EOR or payroll provider directly whether it would ever accept a waiver arrangement. A provider that says yes is taking a risk that, under typical service agreements, ends up on your side of the ledger.
• If waiver arrangements already exist, fix them before a resignation letter forces the issue. Involve PRC counsel to plan the remediation, because late fees keep running, and keep clear records of any cash paid in lieu in case you later seek its return.

Bottom Line

A waiver signed by the employee feels like protection. In China it is just paper: social insurance is mandatory, and an agreement to skip it is void. The saving you pocket today becomes a bill that grows every month, and it usually arrives the day the employee leaves.

Company C is a composite, illustrative case, not any specific client. Consult qualified PRC employment counsel for case-specific guidance.

About Rowint

Our company is a China-based, one-stop recruitment + EOR provider, helping international companies hire, employ, and manage teams in China, compliantly and efficiently, from drafting employment contracts and social insurance compliance to termination and layoffs. If any of this sounds familiar, reach out to us for a free compliance check-up.