Asia-Pacific employment law bulletin 2025

China

News rules to raise retirement age from 2025

New rules on retirement and pension came into force on 1 January 2025.

These rules, named as the Measures on Incrementally Raising the Statutory Retirement Age (Measures), were approved and published by the Standing Committee of the National People’s Congress of China in September 2023, after a few years of discussions on this topic. They introduce a number of changes that will impact employers and employees:

• Gradually raising the statutory retirement age for the first time since the 1950s. Over the next fifteen years, the retirement age of male employees will rise from 60 to 63; and that of female employees, will increase from 55 to 58 for those in management or technical positions, and from 50 to 55 for those in other positions.
• Specific schedules to achieve this. Starting from 2025, the retirement age will increase by one month every two or four months, depending on the gender and position group.
• New mechanism to delay payment of pension from the basic pension fund under China’s mandatory social insurance scheme. Currently, employees are eligible for pension payment after making social insurance contributions for 15 years cumulatively. But, starting from 1 January 2030, the minimum contribution period for pension payment will gradually increase by six months each year until 20 years of contributions have been paid.

Separately, the Measures (along with another set of measures on flexible retirement, also effective as of 1 January 2025) offer options to those who choose to retire early. Early retirement is allowed if it is not earlier than the current statutory retirement age (i.e., 50, 55, or 60, depending on the applicable group). For this, the employee needs to submit a written application to the employer three months in advance. However, regardless of early retirement, these employees will not receive pension payment until they have contributed to the basic pension fund for the minimum required years. Additionally, for those who do not wish to retire at the statutory retirement age, retirement can be extended once by up to three years, with the employer’s agreement.   

Employers would need to integrate the new retirement rules into their internal policies and procedures. Additionally, it is advisable for employers to provide training sessions to employees to help them understand the new mechanisms.

New challenges in appointing and managing employee directors

The Company Law (Law) has recently been amended and became effective from 1 July 2024. Among other requirements, limited liability companies with more than 300 employees must ensure that they have at least one employee representative on their board of directors, unless they have a board of supervisors (not mandatory under the Law) that includes employee representatives.

Prior to this amendment, only certain state-owned companies were required to have employee directors. The new requirement extends to a broader range of companies, which need to take immediate actions for compliance.

However, implementing this requirement may prove challenging in practice. First, the election process could be onerous. The Law stipulates that employee directors should be elected by the company’s employee representative congress (an employee representative body organised pursuant to relevant regulations and typically seen in state-owned enterprises) or other democratic processes, but it does not elaborate on further details. In 2016, the All-China Federation of Trade Unions (ACFTU) provided some guidance on the election process of employee directors through the employee representative congress. However, many private companies in China do not have employee representative congresses (or labour unions that could organise or lead such elections), and there is a lack of guidance for these companies on how to establish a proper process for the valid election and removal of employee directors.

An employee director has the same duties and responsibilities as other directors, including voting rights on matters involving the company’s strategy and operation, and the engagement of senior management. Companies would prefer an employee director with the necessary experience in the relevant industry or sector and who is familiar with the company’s business operations to vote on such matters. However, it is unclear whether a company can set certain qualification requirements (such as education background and work experience) in its constitution document for employee directors.

Companies should also carefully handle the employment of the employee director. For example, when evaluating work performance, the time reasonably spent performing director duties should not be viewed as an absence from work. According to the ACFTU 2016 document, if the employment contract expires before the end of the employee director’s office term, it should be extended accordingly.

We expect implementing rules or guidance to be issued in the coming year to help companies implement this new requirement of the Law. Meanwhile, it remains to be seen how this requirement will be enforced in practice, and its implications on employees’ interests and on companies’ internal governance.