In brief

On 13 September 2024, the Standing Committee of the National People’s Congress announced its “Decision on Implementing the Gradual Extension of the Statutory Retirement Age” (“Decision“). On the same date, the State Council issued its “Measures on the Gradual Extension of the Statutory Retirement Age” (“Measures“), which go into more detail on how the new retirement policy will be implemented.

In light of China’s rapidly aging population, the Chinese government has for many years now been discussing extending the statutory retirement age, which is low by global standards. China’s state-run pension system is facing an imminent shortfall in funds due to the growing number of people enjoying pension benefits combined with the gradual reduction in the working age population. However, up until now, the government has been hesitant to implement what many observers say is a necessary reform, because of fear of a political backlash similar to what happened in France when it raised its retirement age.

Currently, the statutory retirement age for male employees is 60 years; for female employees in “cadre” positions (generally interpreted to mean managerial and senior technical job positions) it is 55 years; and for ordinary female workers, it is 50 years.

In order to receive state pension benefits, generally an employee will have had to make contributions to the state-run social insurance system (including the pension fund) for at least 15 years in aggregate. An individual may work past their statutory retirement age, though generally they would not be considered an “employee” protected by statutory employment rules and instead would be hired under a labor service agreement governed by general civil law rather than employment law. Some cities have also implemented their own local policies regarding deferred retirement and how to treat workers who keep working past the retirement age.

Detailed implementation rules

Under the Decision, which will take effect on 1 January 2025, the statutory retirement age will be gradually increased over a 15-year period, until the statutory retirement age reaches 63 years old for men, 58 years old for women in managerial and technical roles, and 55 years old for women in ordinary worker roles. The Measures go into more detail regarding how the new retirement policy will be implemented, as summarized below:

• For all men and for women in managerial or technical roles, the retirement age will increase by one month for every four months that pass, starting from 1 January 2025 until the statutory retirement age reaches 63 and 58 years, respectively. For women in ordinary worker roles, the retirement age will increase by one month for every two months that pass, starting from 1 January 2025 until the statutory retirement age reaches 55 years.
• Helpfully, the Measures also include appendices that specifically detail what the new statutory retirement age will be for an employee based on when they were born, so employers will not have to manually calculate this based on the above implementing principle. For example, a male employee born in January 1970 will have a new retirement age of 61 years and 4 months, so they will reach retirement age in May 2031.
• The other major change is that individuals will need to contribute to the basic pension insurance fund for a longer minimum period of time before being eligible to receive pension benefits. Currently, an individual generally must contribute for 15 years before being eligible for pension benefits. Starting from 1 January 2030, the minimum period of time for pension contributions will increase by six months every year until the minimum period of time reaches 20 years. The Measures also include an appendix chart that provides specific details on how this will work during the implementation period (e.g. in the year 2032, an employee will have to have contributed to the state-run pension fund for at least 16 years and 6 months before becoming eligible for pension benefits).
• Another provision in the Decision is that if employees reach the minimum period of pension contributions before reaching the new statutory retirement age, they can apply to retire early, but only up to a maximum of three years early and in no event can it be earlier than the original statutory retirement age under current law (i.e., 60 for men, 55 for women in senior managerial and technical roles, and 50 for ordinary female workers). The provision also states that if an employee wishes to extend their retirement age, they can do so by up to three years, with the mutual agreement of the employer.
• Finally, even if an employer hires someone who has already passed the statutory retirement age, the employer should still ensure the individual’s basic interests regarding remuneration, rest and leave, work safety and hygiene, work injury, etc.

Key takeaways

As more people reach retirement age, the number of disputes related to and questions arising from retirement issues has of late significantly increased, particularly in light of the fact that the law lacks clarity in certain key respects. For example, disputes over whether a female employee’s retirement age should be 50 or 55 have become quite common, as the law does not provide a specific or detailed definition of “cadre” and “worker”; this will be key for determining when they lose employment law protections, particularly protections against termination. There are also disputes regarding whether an employee’s employment will automatically end simply upon reaching their statutory retirement age or whether they also need to start enjoying pension benefits before their employment automatically ends, since the Employment Contract Law and its Implementing Regulations contain different provisions on this issue.

Employers will need to be mindful of when employees will reach their statutory retirement age under the new policy and when they can be eligible for pension benefits, since this will determine when their employment automatically ends and they therefore lose employment law protection. Companies should also be aware that different cities may continue to have their own local policies or court practices on how to deal with various retirement-related issues within the above national framework, as national law is still silent or unclear on certain key questions. Finally, companies should be prepared to handle special requests from employees who are near retirement age — either requests to retire early or requests to extend their retirement age by up to three years (and continue receiving employment law protections and benefits) — and internally align on how to treat such requests so as to avoid being seen as arbitrary or unfair by their workforce.

For more information, please contact jonathan.isaacs@bakermckenzie.com, zheng.lu@bakermckenziefenxun.com or bofu.an@bakermckenziefenxun.com.

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