Cover Story: China’s Top Court Reaffirms Worker Rights in Social Insurance Disputes

China’s Supreme People’s Court introduced Interpretation II on Labor Dispute Cases on August 1, 2025, clarifying that any contract between an employee and employer to waive mandatory social insurance payments is invalid. If a worker quits because an employer failed to pay required social insurance contributions, the employer must compensate them. This interpretation, effective from September 1, addresses long-standing inconsistencies in the enforcement of social insurance requirements and aims to strengthen workers’ legal rights[para. 1][para. 2][para. 3][para. 4][para. 5].

Although the obligation to participate in and contribute to social insurance has existed in China’s Labor Law and Social Insurance Law for years, enforcement has been spotty, with local courts previously issuing conflicting rulings on related disputes. The new judicial clarification was prompted by growing numbers of benefit claims and disputes since the 2021 Civil Code. It unifies court practice nationwide, compelling all courts to uphold workers’ claims to compensation when denied legally mandated insurance, regardless of whether the waiver was voluntary[para. 3][para. 4][para. 5][para. 6][para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17].

For workers, this ruling delivers overdue protection, but many remain hesitant to assert their rights due to concerns about job security, retaliation, and legal costs. Real-world examples highlight that “waivers” are often signed by employees to secure or retain jobs, with many preferring immediate cash over deferred social benefits, especially among low-income and gig workers[para. 37][para. 38][para. 39][para. 40].

For businesses, especially small and medium-sized ones, the financial burden of full compliance is significant. Social insurance contributions can constitute up to 35% of wage costs (with employers contributing 16% to pensions and up to 10% to medical insurance)[para. 49]. This squeeze is exacerbated by rising average wages used as the contribution base. Many small employers are considering reducing staff, shifting workers to part-time, or outsourcing to evade the highest costs. Data shows that although coverage rates expanded rapidly after earlier reforms, growth has slowed, and the compliance rate for pension contributions fell from 85.2% in 2011 to 80.8% in 2022, with interruptions doubling in the same period[para. 51][para. 52].

China’s labor market remains fragmented: standard full-time contracts guarantee comprehensive benefits, while many workers are employed through part-time, dispatch, outsourced, or platform-based models, with fewer protections[para. 61]. Experts warn that stricter enforcement could deepen this division by pushing more work into informal or loosely regulated sectors, decreasing overall protection[para. 62].

At a structural level, China’s social insurance faces demographic and fiscal pressures, with pension funds projected to face shortfalls as retiree numbers outpace contributors. The government has responded by centralizing funds, raising the retirement age, and shifting more state assets to pension reserves. Yet, coverage expansion is now toughest among gig and informal workers, and simply increasing contribution rates is no longer seen as feasible given high existing rates[para. 69][para. 70][para. 71][para. 72][para. 73].

Scholars and economists suggest that rather than enforcing rigid rules, reforms should include greater flexibility: lowering thresholds for low-income workers, aligning contributions with actual income, and increasing direct fiscal transfers and subsidies. Already, the government has allowed temporary relief from some contribution requirements and proposed new protections for over-aged and non-standard workers[para. 85][para. 86][para. 87][para. 88][para. 89][para. 90][para. 91][para. 92][para. 93].

In summary, Interpretation II is less a new law and more an enforcement mechanism reaffirming social insurance as a non-negotiable right. It seeks to close loopholes, protect worker rights, and regulate employer practices, but broader reforms are necessary to balance worker protection, business sustainability, and the long-term health of China’s social insurance system[para. 16][para. 17][para. 23][para. 24][para. 67][para. 74][para. 94].