PRC: Key changes and implications of the new retirement policy

Measures of the State Council on Gradually Raising the Statutory Retirement Age ("New Retirement Policy") was officially released on 13 September 2024. This policy, which is set to take effect from 1 January 2025, marks a significant shift in the retirement age for employees in Mainland China. This update summarises the key points of the new policy.

Retirement Age

Under the provisions of the existing Social Insurance Law, individuals who have contributed to the basic pension insurance scheme for a cumulative period of 15 years are eligible to receive pensions upon reaching the statutory retirement age. Under the existing retirement policy, the statutory retirement age is 60 years for male employees, 50 years for female employees in ordinary roles, and 55 years for female employees in managerial positions.

These statutory retirement ages will be gradually raised under the New Retirement Policy. Starting from 1 January 2025, the statutory retirement age for male employees and female employees in managerial positions will be raised by one month for every four months, gradually increasing to 63 and 58 years respectively by September 2039. For ordinary female employees who were initially set to retire at 50 years, the statutory retirement age will be extended by one month every two months, progressively increasing to 55 years by November 2039.

Minimum Contribution Period for Pension Insurance

Under the New Retirement Policy, the minimum contribution period required for pension will also be gradually increased from the current requirement of 15 years up to 20 years. Starting from 1 January 2030, the minimum contribution period will be raised by six months on an annual basis, until the minimum contribution period reaches 20 years in 2039. 

Employees who reach the statutory retirement age but fall short of the minimum number of years of contribution will have the option to either continue their contributions or make a lump-sum payment to fulfil the minimum contribution period, thereby ensuring their eligibility to receive pensions.

Flexible Early or Postponed Retirement

The New Retirement Policy also incorporates provisions for flexible early or postponed retirement.

Employees who have fulfilled the minimum contribution period have the option to voluntarily opt for early retirement, as long as the employee's age at early retirement is not (i) three years less than the new statutory retirement age; and (ii) less than the current statutory retirement ages (i.e, 50 years or 55 years for female employees and 60 years for male employees).

Furthermore, employees who have reached the statutory retirement age have the option to postpone their retirement up to a maximum of three years, provided there is mutual agreement with their employer.

Notably, the New Retirement Policy emphasises that employers must respect the wishes of their employees when implementing flexible early or postponed retirement. Any form of coercion or indirect compulsion forcing employees to choose their retirement age is strictly prohibited.

Key Takeaways

The increases to the statutory retirement age and minimum contribution period not only impacts when employees start receiving their pensions, but also when the employment relationships between employees and employers end. Under PRC employment laws and regulations, the employment contract between an employee and an employer ends when the employee reaches retirement age or begins receiving pensions. Subsequent to this, if the employee continues working for the employer, the relationship would be defined as a service relationship regulated under the Civil Code rather than an employment relationship under employment laws. Employers should reassess the retirement age and contribution status of each employee under the New Retirement Policy in order to ensure more accurate and efficient management of employment.