Introduction
China, as one of the fastest-growing economies and most populous countries, plays a critical role in business, industry and politics. However, many outsiders encounter significant difficulty understanding Chinese employment law and find themselves in challenging and uncomfortable situations. This may be due to the law’s specificity and scope, which forms a labyrinth of interconnected regulations and rules governing minutia ranging from severance to trade unions. Routine tasks in other jurisdictions can be much more dramatic affairs in China. This can be daunting, but our hope is that after reading this article, you will have the tools and foundation to successfully navigate Chinese employment law.
Employment law generally refers to the rules and regulations governing employment relationships and other social relationships that are closely connected with employment relationships. Chinese employment law applies to all businesses, individual economic organisations, private non-profit entities, etc. in the People’s Republic of China (the “PRC”) and the individuals who have employment relationships with such entities and organisations. Employment relationships between government offices, public institutions and social groups and their employees are also governed by Chinese employment law. Employers and employees (except part-time employees) are required to establish employment relationships by entering into written employment contracts. However, even if the parties fail to execute valid written employment contracts, an employment relationship can still be deemed to exist if the parties act as if they are bound by such a contract.
Legal framework
Employment law in China is not codified in a singular piece of legislation and actually draws from a variety of sources. The main sources that comprise China’s employment laws are:
- the Chinese Constitution;
- national laws, in particular the Labour Law and the Employment Contract Law;
- administrative regulations promulgated by the State Council;
- regulations promulgated by the Ministry of Human Resources and Social Security (the “MOHRSS”) and other ministries and commissions of the State Council;
- judicial interpretations released by the Supreme People’s Court; and
- local regulations and decrees of provinces, autonomous regions, municipalities directly under the central government and other large cities.
In addition, judicial documents from local courts and procuratorates, rules and regulations of communities and industries, as well as customs and more can also serve as references in labour cases.
New Developments
These years, Chinese government has made some legislative breakthroughs regarding employment law. Under the background of the revision of the Anti-Unfair Competition Law and the Promulgation of the Interpretation (II) of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Labor Dispute Cases, entities doing business shall pay timely attention to these legislative developments.
- The New Judicial Interpretation concerning labour disputes
On September 1st, 2025, the Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (II) (the “Interpretation (II)”) came into effect. With 21 articles in total, the Interpretation (II) focuses on a number of controversial issues in labour disputes, such as the validity of agreements on non-payment of social insurance, the abuse of non-compete clauses, the boundaries for application of double wages for untimely conclusion of employment contracts, the identification of employers’ responsibilities in complex employment arrangements (e.g., subcontracting, affiliation and mixed employment), and the determination of continuous conclusion of two fixed-term employment contracts.
The Interpretation (II) is the first systematic judicial interpretation issued by the Supreme People’s Court in the field of labour disputes following the consolidation of the previous four judicial interpretations into Interpretation (I) in 2021. Over the past two years, labour disputes concerning issues such as non-compete clauses, welfare benefits and social insurance have been on the rise, urgently requiring unified legal application standards. The promulgation of the Interpretation (II) helps to standardize judicial discretion, protect the legitimate rights and interests of employees, promote high-quality and full employment, maintain social harmony and stability, and advance the development of a harmonious employment relationship.
For employers, the Interpretation (II) reinforces the requirement of substantive compliance in management. It signals a judicial trend toward scrutinizing the true nature of employment arrangements, thereby raising the compliance bar. Employers are expected to enhance internal governance, ensure contractual clarity, and avoid relying on formalistic arrangements to circumvent legal obligations. The Interpretation (II) ultimately encourages a proactive, good-faith approach to employment practices, reducing legal uncertainty and fostering stable industrial relations.
For employees, the Interpretation (II) strengthens the protective framework for employees by clarifying and expanding access to remedies in ambiguous or abusive employment scenarios. It enhances job security and ensures that employees can effectively assert their statutory rights, particularly in cases involving unfair contract terms or disguised employment arrangements. The Interpretation (II) reaffirms the legislative intent of safeguarding the basic rights and benefits of employees, promotes fair treatment in the workplace, and contributes to a more predictable and just legal environment for resolving labour disputes.
- Trade Secret Protection and employment management
In recent years, several key legal instruments have been issued that collectively reshape the interface between trade secret protection and employment governance in China. The State Administration for Market Regulation has issued Trade Secret Protection Provisions while the Ministry of Human Resources and Social Security has issued the Compliance Guidelines for the Implementation of Non-Compete Agreements by Enterprises. Together with the Interpretation (II), these instruments create an integrated framework that aligns unfair competition law with employment law. The goal is to establish a coherent, balanced regime that protects genuine business interests while respecting individual professional freedom. This regulatory development signals a fundamental shift from formal compliance to substantive fairness in managing talent mobility.
For employers, the new framework imposes enhanced obligations and refined compliance standards. Employers can no longer rely on blanket non-compete clauses applied across broad categories of employees. Overbroad, unjustified, or disproportionate restrictions risk partial or full invalidation by labour arbitration tribunals or courts. Furthermore, employers must provide reasonable economic compensation during the non-compete period. If the employer fails to pay the non-competition compensation, the employee is entitled to rescind the non-compete agreement, which would in turn jeopardize the protection of the employer’s trade secrets. On the other hand, the framework also strengthens employers’ legitimate rights by clarifying that employees who actually access trade secrets and violate non-compete obligations can be held liable. Thus, the new rules incentivize precise internal governance, reduce litigation uncertainty, and reward employers that adopt tailored, good-faith trade secret protection practices.
For employees, the new framework provides substantially stronger safeguards against unreasonable restraints on career mobility. The most significant change is that non-compete clauses are no longer binding merely because they appear in an employment contract, instead they must be substantively justified by the employee’s actual access to legitimate trade secrets. Employees who possess only general industry knowledge, common skills, or routine operational information cannot be subjected to non-compete obligations, even if they signed such clauses. This protects employees’ fundamental right to pursue their profession and earn a living. Additionally, the new rules make it easier for employees to challenge non-compete clauses on grounds of lack of trade secret access, shifting the burden to the employer to prove. Consequently, employees enjoy greater clarity, reduced risk of abusive litigation, and more meaningful bargaining power in employment negotiations.
- Progressive Delay of the Statutory Retirement Age
On 13 September 2024, the Standing Committee of the National People’s Congress adopted the Decision on the Implementation of Progressive Deferment of the Statutory Retirement Age (the “Decision”), approving the State Council’s Measures for the Progressive Delay of the Statutory Retirement Age (the “Measures”). Meanwhile, on 31 December 2024, the Ministry of Human Resources and Social Security, together with the Organization Department of the Central Committee of the Communist Party of China and the Ministry of Finance, issued the Interim Measures for the Implementation of the Flexible Retirement System (the “Interim Measures”). All three instruments took effect on 1 January 2025. Together, they establish a progressive delay of the statutory retirement age, accompanied by a flexible retirement mechanism that allows employees to retire early or later than the statutory age under certain conditions.
Under the new regime, the statutory retirement age is delayed progressively over a fifteen-year period. From 1 January 2025, female employees whose original statutory retirement age was 55 years old and male employees shall have their statutory retirement age delayed by one month for every four months, gradually to 63 years old and 58 years old, respectively. Female employees whose original statutory retirement age was 50 years old shall have their statutory retirement age delayed by one month for every two months, gradually to 55 years old. The minimum contribution period for receiving a basic old-age pension remains 15 years from 2025 to 2029 inclusive. From 1 January 2030, it shall gradually increase from 15 years to 20 years at a pace of six months per year.
Beyond the progressive delay, the most significant innovation introduced by the new framework is the flexible retirement regime. Employees who have reached the statutory minimum contribution period may voluntarily elect early retirement, provided that the early retirement period does not exceed three years and the actual retirement age is not lower than the original statutory retirement age. Early retirement is the right of the employee, requiring no employer approval, but the employee must notify the employer in writing at least three months prior to the chosen retirement date. Conversely, an employee who has reached the statutory retirement age may elect deferred retirement only if the employer and the employee mutually agree. During the deferred retirement period, the employment relationship continues, and both the employer and the employee shall continue to pay social insurance contributions in full and on time.
The new framework also introduces important protections for employees working beyond the statutory retirement age. It provides that an employer shall guarantee the fundamental rights of employee who has exceeded the statutory retirement age, including the right to remuneration, rest and leave, labour safety and health, and work-related injury protection, which signals a departure from the prior practice where such relationships were generally characterized as non-employment relationships.
In summary, the retirement reform introduces a progressive delay of statutory retirement age combined with a flexible retirement regime that provides choice and flexibility for employees while imposing enhanced compliance obligations on employers. Employers must update their retirement management practices, ensure accurate calculation of each employee’s statutory retirement age under the progressive schedule, and manage the negotiation process for deferred retirement in good faith. Employees gain increased choice and flexibility in retirement timing and enhanced protection if they choose to work beyond statutory retirement age. The reform ultimately contributes to a more flexible, sustainable and protective employment regime for an ageing workforce in China.
