China's Social Security Conundrum: Why Proxy Payment Schemes Persist

As a result, many people, including freelancers, job seekers, or those who are between jobs, are forced to rely on proxy payment services to maintain continuity in their social security payments. This is particularly true in major cities like Beijing and Guangzhou, where the length and amount of social security payments are often linked to qualifications for buying houses, cars, and education for children. The requirement for continuous social security payment can lead to a loss of relevant qualifications, making it difficult for individuals to access essential public services.

Experts suggest that the government should gradually relax the restrictions on household registration for participation in social security programs, enabling more individuals to participate in the program, reducing the reliance on proxy payment services, and ultimately promoting a more equitable and sustainable social security system. Additionally, the government can explore alternative solutions, such as reducing the thresholds for flexible employment participation or implementing more flexible payment options, to better cater to the needs of the growing number of flexible employees and freelancers, and reduce the risks associated with proxy payment services.

Despite the temporary solution that social security "挂靠代缴" (agency payment) provides to the problem of interrupted social security payments, it is an illicit behavior that poses numerous risks. According to relevant regulations, social security agency payment falls under the category of "insurance fraud," and violators may face fines of up to five times the amount paid, or even criminal liability in severe cases. Furthermore, agency companies may abscond with funds, resulting in personal financial losses, information leaks, and damage to one's credit score.

The practice of individuals paying social security fees through an agency or intermediary, rather than through their actual employer, can lead to a range of problems, including fake employment relationships, unpaid social security fees, and difficulties in accessing social security benefits. The risks associated with "挂靠代缴" are significant, and individuals who engage in this practice may face severe consequences, including financial losses and damage to their credit score.

To address the issue of "挂靠代缴," it is essential to understand the underlying reasons behind its persistence. One key factor is the lack of effective social security coverage for flexible employment personnel, such as delivery personnel and ride-hailing drivers. These individuals often lack a fixed employer and are unable to access comprehensive social security benefits, making them vulnerable to illicit agency payment schemes.

To combat "挂靠代缴" and provide effective social security coverage for all individuals, it is crucial to reform and improve the existing labor security system and mechanisms. This includes implementing a scientific and reasonable funding mechanism that allows all laborers and social members to pay social security fees conveniently and securely. Experts propose a gradual lifting of hukou restrictions on personal social insurance payments, which can be achieved through a step-by-step approach, starting with easier reforms and progressively moving towards more complex ones.

Perfecting the national pension insurance information system and establishing a unified national social insurance public service platform would also enable nationwide networking and cross-provincial "one-network processing," increasing the convenience of social insurance participation for flexible employment personnel. By doing so, the government can promote a more inclusive and efficient social insurance system, ultimately reducing the need for proxy payments and ensuring that all individuals, regardless of their hukou status, have equal access to social insurance benefits.

In future reforms, the government should also reduce the contribution rates and base amounts for flexible employees, alleviating their financial burden and increasing their enthusiasm for participating in social insurance programs. Furthermore, the government should gradually abolish the linkage between the social insurance contribution status of unemployed individuals and their eligibility for benefits such as enrolling their children in school, obtaining residency, buying cars, or purchasing homes. By doing so, flexible employees will have more freedom to choose their employment and lifestyle, promoting greater labor market mobility and social equality. This reform direction is crucial in addressing the long-standing issue of 社保挂靠代缴 (social insurance proxy payment) and ensuring that all workers, regardless of their employment status, have access to basic social security benefits.