A New Chapter for China’s Workforce: China’s Retirement Age Increase takes effect from 1 January 2025
On 13 September 2024, the Standing Committee of the National People's Congress (“Standing Committee”) voted to adopt the Decision on the Implementation of a Gradual Extension in the Statutory Retirement Age ("Decision"). This Decision outlines a 15-year plan to gradually raise the retirement age to 63 for male workers and to 55 and 58 for female workers, respectively. Additionally, the Standing Committee approved the Measures of the State Council on Gradual Extension of the Statutory Retirement Age ("Measures"), which detail how the gradual extension will be implemented. Both the Decision and the Measures will take effect on 1 January 2025, marking the start of the long-awaited retirement extension policy. Below, you will find a brief introduction to the key aspects of this policy and its impact on the business community.
Detailed Arrangements for the Gradual Extension of the Statutory Retirement Age
Currently, the statutory retirement age for workers in China is 60 for men and 50 (for ordinary positions) or 55 (for managerial and technical positions) for women. According to the Measures, during the 15-year period from 2025 to 2039, the retirement age will be gradually raised to 63 for male employees, and to 55 for female employees in ordinary positions and 58 for those in managerial and technical positions.
This will be conducted as follows: starting from January 2025, the retirement age will be gradually increased as follow:
- For male employees and female employees who currently retire at 55: the retirement age will increase by one month every four months; and
- For female employees who currently retire at 50: the retirement age will increase by one month every two months
As a result:
- Male employees born in January 1965 or later will see their retirement age gradually rise to 63 years;
- Female employees in managerial and technical positions born in January 1970 or later will see their retirement age gradually rise to 58 years; and
- Female employees in ordinary positions born in January 1975 or later will see their retirement age gradually rise to 55 years.
For your convenience, we have summarised the arrangements for the gradual increase in the statutory retirement age in the table below:
As shown in the table above, the statutory retirement ages will differ for employees affected by the new retirement extension policy. Both companies and individuals can check the table in the annex to the Measures for a detailed comparison of the new retirement ages. Alternatively, for a quick reference, you can use the statutory retirement age calculator provided by the Ministry of Human Resources and Social Security (scan the QR code below).
Extension of the Minimum Number of Years of Social Insurance Contributions
Along with the extension of the statutory retirement age, the minimum number of years of social insurance contributions is also being extended. Under the PRC Social Insurance Law, individuals who have participated in basic pension insurance can receive a basic pension on a monthly basis if they have accumulated 15 years of contributions by the time they reach the statutory retirement age. According to the Measures, starting from 1 January 2030, the minimum number of years of social insurance contributions required to receive a pension will gradually increase to 20 years as part of the statutory retirement age extension. Specifically, from 2030 to 2038, the minimum number of contribution years will be extended by six months each year. From 2039 onwards, the required minimum will be 20 years. Employees who have reached the statutory retirement age but do not meet the minimum contribution period may, in accordance with relevant regulations, achieve the required contribution years by extending their contributions or making a lump-sum payment.
Flexible Retirement Arrangement
The Decision emphasises that the gradual extension of the statutory retirement age will follow the principles of “small-step adjustment, flexible implementation, classification and promotion, and overall consideration.” Accordingly, the Measures also introduce some flexible arrangements for the retirement age of employees, including:
- Early retirement: Provided they have met the minimum number of years of contributions mentioned above, employees may opt to retire early, up to three years before the new statutory retirement age. The minimum retirement age in this flexible arrangement cannot be lower than the current statutory retirement age, which is 60 years for males and 50 or 55 years for females.
- Delayed retirement: Employees who have reached the statutory retirement age may, after consultation and agreement with their employer, flexibly delay their retirement for up to three years.
Although the statutory retirement age has raised, the Decision provides more flexibility for employees. They may retire early (or even at the current statutory retirement age) or delay their retirement upon reaching an agreement with their employer, as long as they meet the necessary conditions. However, early retirement is solely up to the employee and does not require the employer's consent. Conversely, delayed retirement requires mutual agreement between the employee and the employer.
For most enterprises, if they wish to continue employing staff after they reach the statutory retirement age, they should consider which employment method to adopt based on amicable consultation with the employees.
- Delayed retirement: If an enterprise consults with its employees to delay their retirement, it will increase the enterprise's financial burden, as it will need to continue contributing to social insurance and the housing fund for these employees. However, since the enterprise continues to contribute to work-related injury insurance (i.e. part of the social insurance contributions as required under PRC law), it bears relatively less responsibility in the event of work-related injuries. Most of the costs incurred due to work-related injuries (e.g. medical expenses) can be covered by the social insurance fund.
- Retirement and rehire: If an enterprise continues to employ an employee through a retirement and rehire approach after the employee's retirement, they establish a labour service relationship (as opposed to an employment relationship). On this basis, the enterprise does not need to contribute to social insurance and housing funds for these employees, thereby lowering the actual labour cost. However, without work-related injury insurance coverage, the enterprise needs to compensate retired employees according to personal injury compensation standards under civil law in the event of work-related injuries. This could impose a significant economic burden on the enterprise. Therefore, in practice, enterprises usually mitigate these risks by purchasing commercial insurance for their rehired retirees.
At the same time, it is encouraging to see that more and more regions (e.g. Shanghai, Guangdong Province, Sichuan Province, etc.) now allow enterprises to contribute to work-related injury insurance for rehired employees beyond the statutory retirement age. Considering that the cost of contributing to work-related injury insurance is much lower than that of commercial insurance, enterprises in these regions can mitigate their liabilities and risks from work-related injuries by contributing to work-related injury insurance for their retired and rehired staff.
What This Change Mean for Businesses
- Employment management and labour protection: The policy increasing the statutory retirement age and allowing flexible retirement will make managing retiring employees more challenging. Since the retirement age may vary among employees, enterprises should plan ahead by reviewing the retirement age of each employee and anticipating the timing of early retirements. Timely communication with employees is essential to understand their intentions regarding early or delayed retirement, allowing the enterprise to plan accordingly. With the gradual extension of the retirement age, the number of elderly employees in the workplace will likely increase. Therefore, the management and protection of these elderly employees (e.g. prohibition of age discrimination) will become increasingly important for HR teams.
- Employment relations: According to the PRC Employment Contract Law, employees who have worked for the same employer for fifteen years and are less than five years away from the statutory retirement age are entitled to special termination protection. This means that the employer may not terminate their labour contracts on certain statutory grounds (e.g. incompetence). With the new extended retirement policy, enterprises should carefully review the retirement age of employees when considering termination to confirm whether this special protection applies.
Notably, one statutory ground for terminating an employment contract under the Employment Contract Law is when an employee "starts to enjoy pension insurance benefits." However, the Regulations for the Implementation of the Employment Contract Law state that an employment contract shall terminate when an employee "reaches the statutory retirement age." In practice, some employees cannot enjoy pension benefits upon reaching the retirement age for various reasons, leading to disputes about the timing of employment contract termination. The Decision and the Measures do not resolve this conflict and may increase such disputes in the future due to the extended minimum contribution period for pension benefits to 20 years. This will bring new challenges for employers in managing the employment relations of retiring employees. Therefore, enterprises should proactively collect information on employees' contribution years and seek external legal counsel to avoid legal disputes. - Retirement age for female employees: The Measures continue the existing mechanism of two different retirement ages for female employees (i.e. 50 and 55 years old). This categorisation stems from the State Council's regulations on different retirement ages for female cadres and workers1. Presently, the retirement age for female employees in management and technical positions is generally 55, while for those in ordinary positions, it is 50. However, there is no uniform standard nationwide for defining management and technical positions, occasionally leading to disputes. Therefore, employers should specify in writing (such as in employment contracts or internal policies) whether a female employee's position is management or technical to avoid future disputes over retirement age.
- Social insurance compliance: With the announcement and implementation of the extended retirement policy, we foresee that employees will gradually pay more attention to social insurance contribution compliance. In practice, it is not uncommon for enterprises to be non-compliant regarding social insurance contributions (e.g. some enterprises only start contributing social insurance for their employees after the probationary period or use the incorrect social insurance contribution base, resulting in underpayment). Following the introduction of the extended retirement policy, the number of cases where employees request their employers to make compliant social insurance contribution and seek back payments for any shortfall in the contributions may increase. This will undoubtedly pose a challenge to enterprises with historical social insurance compliance issues.
Chinese lawmakers and regulators will likely introduce additional policies to support the extension of the statutory retirement age. We will keep a close watch and share any new legislative updates promptly.
