China officially approves proposal to raise Retirement Age

Discussions over the extension of the statutory retirement age in China have been ongoing for years. On 13 September 2024, China officially approved the draft proposal to gradually raise the statutory retirement age starting from 1 January 2025.

Currently, the statutory retirement age for male employees is 60. The statutory retirement age for female employees in managerial position is 55 and for those in non-managerial positions is 50. According to the newly published regulation, for male and female employees in managerial positions, the statutory retirement age shall be extended for 1 month of every four-month period. For female employees in non-managerial positions, the statutory retirement age shall be extended for 1 month of every two-month period. For example, a man born in January 1965 could retire at the age of 60 years and 1 month; and a man born in May 1965 could retire at the age of 60 years and 2 months. This change will be carried out over 15 years, with the statutory retirement for men gradually rising to 63, and 55 and 58 years old for female employees in non-managerial and managerial positions respectively. The retirement age can further be extended for 3 years at most if agreed upon by the employer and the employee. A chart detailing the specific retirement age for individuals at different ages has been released along with the regulation. The regulation can be accessed by the link.

Another significant change is that the minimum years of basic pension contributions required to receive a pension after retirement will be gradually raised from 15 years to 20 years at the pace of an increase of six months annually, starting from 2030. According to the new regulation, individuals who have reached the minimum year of basic pension contributions could retire earlier after consultation with their employer, however, it can be no earlier than 3 years before reaching the statutory retirement age.

It is advisable for companies in China to collect information on the employees' date of birth and closely monitor the statutory retirement age for each employee, so as to terminate the employment relationship with their employees and complete retirement formalities in a timely manner. If companies fail to do this, it is possible that the employer and the employee may be deemed to have agreed to extend the retirement age further so that the relationship shall continue being an employment relationship, and companies may have to continue to bear responsibility and liability as an employing entity.

For female employees, companies have the right to decide whether they are holding managerial positions or not. However, changing this designation may require consent from the employee. Therefore, if a female employee's position is not obviously a managerial position, companies are advised to categorize the employees as being in non-managerial positions, and only convert to managerial positions in the event that they would definitely like to retain their employees for another 5 years.

Companies can engage individuals who have already reached statutory retirement age by entering into a labor service agreement, which shall be governed by PRC civil laws rather than labour laws. Under such an agreement, the obligations and liability borne by the companies shall be less than what they are required to bear under an employment contract e.g. social security contributions, etc. Furthermore, the company shall have more liberty to terminate the labor service agreement as the individuals are no longer eligible employees under employment laws and regulations after reaching retirement age. To engage individuals who allege to be retirees, the companies should make sure those individuals have properly completed retirement formalities and started to obtain their pension.

Ying Wang of Shanghai Kaiman Law Firm also contributed to this article.