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New forms of employment call for social insurance reform

WANG XIAOTANG | 2022-12-16 | Hits:
Chinese Social Sciences Today

A courier delivers food in downtown Beijing. Photo: Chen Mirong/CSST

As the sharing economy thrives in recent years, new forms of employment arising from internet platforms have rapidly extended to service industries like travel, food delivery, freight and logistics. As a result, the numbers of ride-hailing drivers, takeout deliverymen, and couriers have soared. 

According to the China Sharing Economy Development Report 2021, released by the State Information Center, the number of participants in the sharing economy reached approximately 830 million across China in 2020, including about 84 million service providers, up roughly 7.7% from the previous year. While this new economic form is galvanizing consumption, vitalizing the market, and creating job opportunities, the internet platform-based employment model, with “gig workers” representing the majority of the labor force, has posed challenges to current labor and social security systems. 

In light of the situation, the report to the 20th CPC National Congress urged efforts to “improve labor laws and regulations, the mechanisms for labor relation consultations and mediation, and the systems for safeguarding workers’ rights and interests, and do more to protect the rights and interests of those in flexible employment and new forms of employment.”

Outdated system

China’s labor, labor contract, and social insurance laws were promulgated many years ago, and have to some extent become outdated with respect to new forms of employment. The internet platform-based employment model is characterized by low thresholds, complicated forms, flexible workplaces and working hours, incomes with an extreme quantitative nature, and high mobility. 

In this model, laborers are disadvantaged in the relationship with internet platform enterprises, as opposed to conventional workers who enjoy an advantage in typical labor relations. Therefore, traditional elements like management, control, and domination can hardly become criteria for determining legal relations between employer and employee. If mechanically applied, they will easily lead to the conclusion that gig workers and platform enterprises completely lack proper labor relations. 

More importantly, the current social security system, which is tightly coupled with labor relations, faces difficulties in adapting to such an employment model, so many laborers in new employment forms are marginalized in the system. 

In practice, some platform enterprises don’t insure laborers at all. Despite commercial insurance for some circumstances, a gap exists between commercial insurance and social insurance in terms of the degree of security. Moreover, problems such as inapplicable insurance policies, individualized premium payments, limited scope and duration of insurance, and low claim amounts are universal in commercial insurance, resulting in incomprehensive and ineffective safeguarding of laborers’ rights and interests. 

If laborers sustain work or work-related injuries, a lack of relief from work injury insurance will seriously impact their rights to life and development. In the current context, reforming the existing social security system and incorporating this group of workers into the social insurance system has become an urgent issue.


Realistic factors to consider

In July 2021, eight Chinese government departments, including the Ministry of Human Resources and Social Security, jointly released the Guiding Opinions on Protecting Labor and Social Security Rights and Interests of Workers Engaged in New Forms of Employment. This provides preliminary guidance on social insurance, particularly on protection in case of occupational injuries, for workers employed in new forms. However, some realistic factors must be considered in the implementation of the policy and in the design of a set of flexible and feasible schemes that highly align with the internet platform-based employment model. 

First, social insurance is a long-term commitment. Since the contribution payment model is “bundled,” it is basically not permitted to limit contributions to a single type of insurance, or to make partial contributions. [In China, the social insurance system consists of basic old-age insurance, basic medical insurance, work injury insurance, unemployment insurance, and maternity insurance.] Employers and individual employees jointly contribute to old-age and medical insurance at the rates required, while maternity, work injury, and unemployment insurance contributions are undertaken by employers. 

If internet platform enterprises contribute to social insurance for their employees, there will be little cost differences between the new and traditional employment models. At the operational level, registration for social insurance entails a workflow, requiring monthly, rather than daily, contribution payments, as well as a certain period of payments cumulatively. As many gig laborers usually work on a short-term basis, it is impractical for platform enterprises to insure them, which even adds an unnecessary managerial burden. 

Second, a fair number of laborers are concerned only about their short-term interests. They engage in new forms of employment simply as a temporary or transitional option, prioritizing practical disposable interests. Thus, they place little demand on platforms to make social insurance contributions on their behalf. Deductions from their wages for monthly social insurance contributions will reduce their take-home earnings. 

Furthermore, many laborers working in cities are from rural areas, and have participated in China’s New Social Endowment Insurance System for Rural Residents and New Rural Cooperative Medical Care System in the locality of their household registration. These laborers are normally not entitled to social insurance schemes for urban employees. Even if they enroll in both the rural and urban social insurance systems, it would be an either-or situation in future reimbursement. 

Third, the current Social Insurance Law gives priority to full-time employees, with additional consideration to urban and rural residents. If internet platform enterprises don’t pay social insurance for workers who have the demand, insurance models adopted by the employees themselves are usually inappropriate or less cost-effective. 

As a first option, workers can participate in the social insurance program for employees as “flexibly employed workers.” However, in this channel, they are qualified only for pension and medical insurance, and must make contributions themselves, generally in the place of household registration. A second option is to affiliate with a third-party institution. Though laborers are entitled to all the five kinds of insurance in the Chinese social insurance system, the expenses are higher and must all be borne by the workers themselves. Third, they can enroll in the social insurance scheme for residents, but this scheme contains merely pension and medical insurance, and no work injury insurance. In addition, the medical insurance benefits they will receive are lower than benefits for regular employees. 


To adapt the social security system to the employment model based on internet platforms, advancements should be made in the following three aspects. 

First, it is necessary to abolish the premise that traditional labor relations are the fundamental principle for social insurance participation, make innovations to labor relation theories, and divorce labor relations from social insurance. Second, efforts are needed to change the “package” model for contributions to the five kinds of insurance to separate them in light of the match between supply and demand. Contribution payments for single insurance or certain kinds of insurance under some conditions should be allowed. Third, attention should be paid to removing institutional barriers for laborers engaging in new forms of employment, and to improving the social insurance sharing and transfer mechanisms between the place of employment and that of permanent residence or household registration, thereby increasing the convenience and efficiency of social insurance transfer and alleviating some workers’ concerns. 

Regarding the marginalization of laborers in new forms of employment in the social insurance system, it is first essential to take into account both enterprises’ cost burden and individuals’ labor security. Given the vast number of workers in new forms of employment, enterprises naturally face a significant increase in employment costs if they are to cover the contributions for their employees’ social insurance holistically. This will not only hinder industrial development, but also affect employment space and opportunities in the market. Adaptive reforms to the social security system should be based on industrial characteristics and the practical needs of laborers, consider individuals’ real incomes, labor rights and interests protection, as well as enterprises’ employment costs and industrial development, to strike a balance of interests between respective parties. 

Second, as enterprises and individuals share social insurance contributions, government subsidies can be introduced when necessary. Despite diverse forms of employment in internet platform enterprises, they are obligated to distribute laborers’ work tasks and remuneration. As the immediate employers, these enterprises should serve as the principal subject of assuming responsibilities for their employees’ social insurance. In some industries, if it is difficult for enterprises to bear all the costs, the government can grant moderate social insurance subsidies to lessen their employment burden. Some regions in China are already piloting a subsidy system for accidental injuries, in which local governments will subsidize internet platforms or individuals in defined proportions according to the payment amounts they have contributed. This is a practical approach, but it is still worth pondering whether the approach should be integrated into the social insurance system or juxtaposed with it. 

Third, the government’s leadership and market allocation should be combined to build a synergistic, complementary mechanism involving social insurance and commercial insurance. The government should unveil supporting policies to encourage commercial insurers to develop targeted insurance products for issues that social insurance can’t and shouldn’t cover. It is important to explore a path of promoting commercial insurance to meet wider social demands, thereby building a multilevel and multichannel labor insurance system and enhancing overall insurance coverage and adaptability. 

Fourth, compulsory and voluntary participation in social insurance programs should be combined to realize differentiated arrangements for mandatory and flexible needs. To extend social insurance effectively to workers in new forms of employment, it is crucial to clarify the scope of social insurance contribution collections. For example, work injury and medical insurance, which concerns this group of workers directly, should be compulsory, and the contribution payment rates should be reasonably defined for enterprises and individuals, respectively. Meanwhile, the system should also be flexible, permitting laborers to contribute to other kinds of insurance voluntarily based on their own needs or replace them with commercial insurance.  

Wang Xiaotang is from the School of Law at Anhui Normal University.