According to the 2023 National Aging Development Bulletin released by the Ministry of Civil Affairs and the National Aging Office on October 12, 2024, China's elderly population aged 60 and above, as of the end of 2023, has surged to 296.97 million, making up 21.1% of the total population. To address the challenges posed by the aging population, China is now implementing a new legal regime to gradually raise the retirement age.
Effective January 1, 2025, the newly-issued regulations, the Decision of the Standing Committee of the National People's Congress on Implementing the Gradual Raising of the Statutory Retirement Age (Decision on Implementing the Gradual Raising of the Statutory Retirement Age), the Measures of the State Council on the Gradual Raising of the Statutory Retirement Age (Measures of the State Council), and the Circular on the Provisional Measures for Implementing the Flexible Retirement System, have come into effect. These three regulations mark China's official adoption of a new retirement legal regime.
Chapter 1 - Gradual raising of the statutory retirement age
In accordance with Article 1 of the Decision on Implementing the Gradual Raising of the Statutory Retirement Age, over the next 15 years, the statutory retirement age for male employees will gradually increase from 60 to 63 years old. For female employees, the statutory retirement age will be raised from 50 to 55 years old for non-management positions, and from 55 to 58 years old for those in management positions.
The Measures of the State Council further explain how the statutory retirement age will be gradually increased. Basically, the gradual increase in the statutory retirement age primarily impacts male employees born between January 1, 1965, and August 31, 1976, as well as female employees born between January 1, 1970, and August 31, 1981 (for management positions), and those born between January 1, 1975, and October 31, 1984 (for non-management positions). (To quickly calculate the gradually-raised statutory retirement age, the National Social Insurance Public Platform has provided a quick calculator. Please click here for details.)
For male employees born after September 1, 1976, the statutory retirement age will be 63 years old. For female employees in management positions born after September 1, 1981, the retirement age will be 58, and for those in non-management positions born after November 1, 1984, it will be 55.
Chapter 2 - Flexible early and delayed retirement
The Measures of the State Council have introduced a flexible early retirement mechanism for employees who have met the minimum contribution period of pension, provided that:
- the period for early retirement does not exceed three years, and
- their flexible retirement age cannot be lower than the original statutory retirement age, which is 50 and 55 years old for female employees, and 60 years old for male employees.
The Circular on the Provisional Measures for Implementing the Flexible Retirement System further requires that the employees who voluntarily opt for flexible early retirement must notify the company three months in advance in writing. Employees do not need to obtain the company's consent to opt for early retirement.
On the other hand, upon the mutual agreement by the employee and the company, the employee who reaches the statutory retirement age may also choose to have his/her retirement postponed, provided that:
- the postponed time cannot be more than three years from the statutory retirement age, and
- the company and the employee should specify matters such as the postponed time of retirement in writing one month in advance. Once the postponed time of retirement is confirmed, it cannot be further extended.
Key consideration for the company to pay special attention to
a. For the drafting of flexible delayed retirement agreement
It is suggested to keep record of all communications between the employee and the company regarding his/her retirement age. Article 11 of the Circular on the Provisional Measures for Implementing the Flexible Retirement System emphasizes that companies are prohibited from coercing employees into selecting a specific retirement age or making such decisions against the employee's will. This means the company cannot influence whether the employee opts for early retirement, but it can reject the employee's proposal to postpone retirement.
Since the flexible delayed retirement agreement requires negotiation and mutual consent between the company and the employee, the company may impose specific conditions on the delayed retirement. For instance, the extension of the retirement age could be contingent upon the employee meeting certain performance standards, etc.
To facilitate the process for companies and employees to handle flexible early retirement and delayed retirement procedures, Beijing Municipal Human Resources and Social Security Bureau issued the Flexible Early Retirement Notice Template and Flexible Delayed Retirement Agreement Template on January 10, 2025 (click here to see the full text). The key terms of the Flexible Delayed Retirement Agreement Template are basically aligned with the Measures of the State Council.
b.For employees who refuse to retire and intend to continue to work for the company
In practice, some employees may wish to delay their retirement age with the company, even if the company does not intend to retain them for an extended period. In such cases, the company is not obligated to agree to the employee's request for delayed retirement and can proceed with the retirement application formalities. Even if the retirement application formalities cannot be completed due to reasons attributable to the employee, the company has no further obligation to retain them once they reach the mandatory retirement age.
On the other hand, for employees whom the company intends to retain, the company may choose to either sign a flexible delayed retirement agreement to extend the retirement age, or to enter into a service agreement with the employee after the employee is entitled to receive pension payments.
c. For the termination of employment relationship with an employee who chooses to delay retirement
It is also worth noting that during the postponed retirement period, if the company intends to terminate the employment relationship with such employee, it can only do so based on legal grounds as stipulated by law or to terminate the flexible delayed retirement agreement based on mutual consent so that the company and the employee may go through ordinary retirement formalities.
To mitigate the risks associated with retaining an employee during the delayed retirement period, the company may consider setting the term of the flexible delayed retirement agreement to one or two years. While the Circular on the Provisional Measures for Implementing the Flexible Retirement System stipulates that the agreed extension period cannot be extended, we notice from the online instruction of Chaoyang District Bureau of Ministry of Human Resources and Social Security that a second-time record filing of the flexible delayed retirement agreement is acceptable. Therefore, it is recommended to check with the local labor authority in the district where the company is registered to confirm whether, in practice, the flexible delayed retirement period of one year can be extended once or twice, up to a limit of three years.
d. For expatriate employees
For expatriate employees, local cities adopt different policies on whether they can be treated the same way as employees who are PRC residents and subject to the retirement age. In Beijing, companies can terminate the employment relationship once expatriate employees reach their statutory retirement age. However, in Shanghai, the local labor authority respects the intention and willingness of both parties. If the parties renew the employment contract before the expiration of employment relationship when it's close to the expatriate employee's statutory retirement age, the general view in Shanghai is that the expatriate employee can continue to work for the company on the basis of the Chinese employment contract during the validity period of his/her expatriate working permit.
It's suggested for companies to check the specific local rules to confirm whether the company can terminate the employment relationship with expatriate employees after they reach retirement age.
Chapter 3 - Increase of pension contribution period
Regardless of whether an employee opts for flexible early retirement or flexible delayed retirement, they must reach the minimum contribution period corresponding to their chosen retirement time, in order to be eligible to the retirement pension.
According to the Measures of the State Council, starting from January 1, 2030, the minimum contribution period of pension insurance will gradually increase from 15 to 20 years, with an increment of six months each year. Employees who reach the statutory retirement age but have not met the minimum contribution period can still receive their monthly basic pension after fulfilling the required years through extended contributions or a one-time payment, in accordance with the Measures of the State Council.
This means that, starting from January 2039, an employee will only be eligible to receive a pension after retirement if he/she (1) reaches the gradually increased statutory retirement age; and (2) have completed the minimum pension contribution period of 20 years.
These reforms urge companies to strategically manage employment relationships with employees nearing retirement. Employers should monitor pension contribution periods and engage in proactive discussions regarding early or delayed retirement preferences to maintain compliance and plan for workforce transitions effectively.
