Legislative Developments
As we step into the year 2025, several legislative developments have either come into effect or are set to take effect in China.
1. Gradual Increase in the Statutory Retirement Age
The Measures of the State Council on Implementing a Gradual Increase in the Statutory Retirement Age (the“Measures”) was announced on 13 September 2024 and has come into force on January 1, 2025.
According to the Measures, over a period of fifteen years, the retirement age will be gradually delayed. For female employees originally set to retire at 50, their retirement age will increase by one month for every two months that pass; for female employees in management positions and male employees, their retirement age will increase by one month for every four months. Ultimately, the statutory retirement age for male employees will be gradually increased to 63 years old, and the statutory retirement age for female employees and female employees in management positions will be gradually increased to 55 years old and 58 years old respectively.
In addition to age, the number of years of basic-pension insurance contribution is another vital factor that impacts employee’s retirement. As from January 1, 2030, the minimum number of years of contribution for employees to receive basic pension on a monthly basis will be gradually increased from 15 years to 20 years with an increase of six months each year. Employees may voluntarily opt for flexible early retirement when they have reached the minimum contribution period. However, neither should their retirement age be lower than the original statutory retirement ages of 50 years or 55 years for female employees, and 60 years for male employees, nor should their earliest retirement date exceed three years prior to the standard retirement age.
This complexity of employee retirement ages can be a challenge for workforce management. Employers may consider an internal check to track each employee’s retirement date and survey employees about their plans for early retirement to have a clearer picture of the company’s future workforce arrangement.
2. Flexible Retirement System
The Interim Measures for the Implementation of the Flexible Retirement System (the “Interim Measures”) announced on December 31, 2024, came into effect on January 1, 2025. The Interim Measures covers both the topics of voluntary early retirement and voluntary delayed retirement, serving as a document to help landing The Measures of the State Council on Implementing a Gradual Increase in the Statutory Retirement Age.
The Interim Measures suggest that an employee who has reached the minimum number of years of contribution to receive a monthly basic pension may voluntarily choose to retire early and flexibly for a period of up to three years from the statutory retirement age, which shall not be less than the original statutory retirement age of 50 and 55 for female employees and 60 for male employees. If an employee chooses to retire early, the employee shall inform the employer in writing at least three months prior to the employee’s choice of retirement time.
If an employee reaches the statutory retirement age and the employer and the employee reach a consensus, the employee may flexibly delay the retirement for a period of no more than three years from the statutory retirement age. The employer and the employee shall specify in writing the time of delayed retirement and other matters one month in advance. During the deferral period, the employment relationship shall continue, meaning that the employment laws and regulations will remain applicable and social insurance contributions should still be paid on time.
3. Increasing Days for Public Holidays
The Measures for Holidays on National Annual Festivals and Commemoration Days (the Fourth Amendment) (the “Fourth Amendment”) has been effective since January 1, 2025. The highlight of the Fourth Amendment is that the total number of public holidays will be increased by 2 days, of which one day has been added to the Spring Festival (Chinese New Year) and one day to Labour Day. Public holidays may be arranged in a reasonable and unified manner to actually form longer holiday periods, by combining them with leave in lieu or statutory annual leave or by other policies. The Fourth Amendment also specified that the consecutive working days before and after public holidays shall generally not exceed 6 days, except for special circumstances.
The change of average statutory monthly attendance days is a hard-to-notice yet significant consequence of the increasing public holidays. As the number of public holidays increases from 11 to 13 days, the corresponding number of average monthly statutory attendance days for employees decreases from 20.83 days to 20.67 days, which affects workforce management in several aspects. For example, under the comprehensive working hours system, since the standard statutory working hours become less, with providing the same amount of labour, it will be easier for employees to obtain overtime wages. For some labour-intensive enterprises, this will result in a significant increase in wage expenses.
4. Adjustment to be made by Foreign-Invested Company
According to Article 44 of the Regulation for Implementing the Foreign Investment Law of the People’s Republic of China (the “Regulation”), for existing foreign-invested companies that have not adjusted their organizational form, organizational structure, etc. in accordance with the current laws and regulations of China and have not completed the change of registration, the local market supervision administration shall not handle their other registration matters and shall make the relevant circumstances public. And this article has become effective on January 1, 2025.
According to Article 31 of the Foreign Investment Law of the People’s Republic of China, which has come into effect on 1 January 2020, the organizational form, organizational structure, and operational guidelines of foreign-invested enterprises shall be governed by the provisions of laws such as the Company Law of the People’s Republic of China and the Partnership Enterprise Law of the People’s Republic of China. With the new Company Law coming into effect on 1 July 2024, there is a series of changes regarding the foresaid aspects. For example, according to Article 68 of the new Company Law, a limited liability company with three hundred or more employees shall establish a supervisory board in accordance with the law and have employee representatives on the board or ensure that there are employee representatives among its board members. The employee representatives on the board shall be elected through the employee representative assembly, employee meetings, or other democratic forms by the company’s employees.
Nonetheless, as of now, we have not seen the State Council or the State Administration for Market Regulation issue implementation regulations and documents to provide detailed provisions for employee directors and employee supervisors. Therefore, we would suggest that employers may adopt a cautious and observational approach for the time being, paying attention to the policy trends from national or local authorities and making preparation accordingly.
5. Revision of the Classification and Catalogue of Occupational Diseases
On 11 December 2024 the National Health Commission, the Ministry of Human Resources and Social Security, the National Disease Control Bureau, and the All-China Federation of Trade Unions jointly issued a new version of the Classification and Catalogue of Occupational Diseases (the “Catalogue”), which will come into effect on 1 August 2025.
Compared to the previous version, the Catalogue adjusts the original 10 major categories of 132 occupational diseases to 12 major categories of 135 occupational diseases (including 4 open-ended clauses), which mainly include two new categories of occupational diseases (i.e., occupational musculoskeletal diseases, and occupational mental and behavioural disorders) and adjustments to several existing categories of occupational diseases to maintain the consistent classification of occupational diseases.
6. Unified Regulations on Disability Pension Allowances
The Interim Measures for Disability Pension Allowances under the Enterprise Employee Basic Pension Insurance (the “Interim Measures”) published on 18 October 2024 has come into force on 1 January 2025.
According to the Interim Measures, participants of the enterprise employee basic pension insurance who are assessed as completely losing the ability to work due to illness or non-work-related injury before reaching the statutory retirement age will be eligible to apply for monthly disability pension allowances. The monthly standard and payment period of these allowances will be determined based on the applicant’s age and accumulated contribution years and will be adjusted in accordance with the uniform adjustment of the national basic pension level. Individuals receiving disability pension allowances shall no longer pay the enterprise employee basic pension insurance contributions when they receive the allowances. If they resume employment and make contributions as stipulated, the payment of disability pension allowances will cease from the month following the resumption of contributions. It is also notable that Article 4 mentions the concept of flexible early retirement, which implies that the Interim Measures have been made coherent with the gradually increased retirement age-related policies.
The Interim Measures provide a national wild unified standard and guidance for how to implement the Disability Pension Allowances prescribed in Article 17 of the Social Insurance Law more than a decade ago. Local regulations have been made to fix practice difficulties due to years of legislative blankness at the national stage, which inevitably leads to differences and divergences in local practice. With the Interim Measures, local practice may gradually become integrated and unified, bringing convenience for both employer and employees.
