China's Retirement Age Reform

In September 2023, the Chinese government announced the Measures of the State Council on Gradually Raising the Statutory Retirement Age (the Measures), aimed at increasing the statutory retirement age. Effective January 1, 2025, the retirement age for men will be raised to 63, while the retirement age for women will increase to 55 for non-managerial positions and 58 for managerial roles. These changes alter the current retirement ages of 60 for men, 55 for women in managerial positions, and 50 for women in non-managerial roles.

The Measures detail a phased increase in the retirement age, with male employees and female employees in managerial positions seeing their retirement age increase by one month for every four months of service. For female employees in non-managerial positions, the retirement age will increase by one month for every two months of service. The transition is set to be fully implemented over a 15-year period, with the statutory retirement age aligning with the new requirements by 2030.

Along with retirement age adjustments, the reform will extend the minimum years of pension contributions required to qualify for a pension. Starting in 2023, the contribution period will increase from 15 years to 20 years, with an increase of six months per year. Employees who have met the required minimum contribution period may still have the option to retire earlier, after consultation with their employer, though early retirement cannot occur more than three years before the statutory retirement age.

For female employees, the designation of managerial versus non-managerial roles, which determines their retirement age, will be decided by employers. This requires companies to classify employees and complete retirement formalities on time. Failure to do so may expose companies to employment liabilities linked to extended periods of service beyond the statutory retirement age.

Upon reaching the statutory retirement age, companies can continue to engage employees through labor service agreements. These agreements, unlike employment contracts, are governed by the civil laws of China and not by labor laws. This distinction reduces employer obligations, particularly regarding social security contributions, and allows companies more flexibility in managing retiree engagements, including termination processes. However, employers must ensure that retirement formalities are completed before entering into labor service agreements with retirees to avoid legal complications.

The reform addresses China’s aging population and workforce issues and aims to support the sustainability of the pension system. Employers are encouraged to monitor developments and adjust their retirement planning and employee management strategies.