Key Updates on China’s Retirement and Overtime Pay Regulations, Effective 1 January 2025

by Zhengwei Yang & Jiayi Ji

Important regulatory changes just came into force in China on January 1st, impacting both retirement policies and overtime payment regulations. In this article, Zhengwei Yang and Jiayi Ji from our Labor & Employment team discuss how these changes will affect China’s employment landscape.

I. Flexible Retirement Measures

In 2024, China’s legislature raised the retirement age for the first time since 1978. The decision officially came into effect on January 1st and the retirement age will rise gradually over the next 15 years. For further insights and key takeaways, please refer to our article on China’s new retirement age.

Additionally, on January 1st, the Ministry of Human Resources and Social Security, the Central Organization Department, and the Ministry of Finance jointly issued the Interim Measures for Implementing the Flexible Retirement System (“Interim Measures”). These measures outline a flexible retirement framework that enables employees to adjust their retirement age under specified conditions.

1. What Flexible Retirement Does and Does Not Mean:

It is important to clarify that while delayed retirement allows employees to retire up to three years later than the statutory age, when employees opt for early retirement, they still cannot cross the threshold of their pre-reform statutory retirement age. For example, post-reform, a man born in July 1971 has a statutory retirement age of 61 years and 8 months. While he could, if he and his employer mutually agree to it, delay his retirement age to 64 years and 8 months, early retirement will still only allow him to retire at the pre-reform statutory retirement age of 60 years old – “three years early” does not mean he can retire at 58 years and 8 months.

Scroll to the bottom of this page to download a table that provides all the new retirement ages and pension contribution requirements for employees in China through 2039.

2. Key Features of China’s New Flexible Retirement System:

Employers needs to be aware of these changes as they will directly affect workforce planning, employee retention, and pension management.

a) Flexible early retirement. By giving prior written notice to employers, employees can opt to retire earlier than the new statutory retirement age, subject to the following conditions.

(i) Notice period. Employees must inform their employer at least three months before their desired early retirement date.

(ii) Pension contributions. Employees must meet the pension contribution requirements for the year they desire to retire. These requirements are discussed in our previous article and laid out in our downloadable table (at the bottom of this page). Employees who reach the statutory retirement age before they have paid the minimum number of contributions can pay their contributions out of pocket either monthly or in a lump sum to qualify for a pension.

b) Flexible delayed retirement. Subject to mutual agreement with their employers, employees can extend their retirement age by up to three years beyond the statutory retirement age. The employer and the employee can agree to terminate the delayed retirement arrangement at any time during the extension period. The requirements for Flexible Delayed Retirement are as follows:

(i) Written confirmation. Employers and employees must confirm the arrangement in writing at least one month before the statutory retirement age.

(ii) Pension contributions. Before the employee can qualify for delayed retirement, both the employee and the employer must make the required pension contributions for the employee’s statutory retirement age.

c) Employer responsibilities. Employers must submit the employee’s retirement application to social insurance agencies (i.e., the agencies who handle applications for pension disbursement) within the employee’s selected retirement month.

3. How Will This Play Out in Practice?

As for the practical enforcement of the Interim Measures, particularly how social security agencies will handle flexible retirement requests, we will have to wait and see. However, during a recent Q&A session hosted by the Ministry of Human Resources and Social Security, it was clarified that social security agencies will offer pre-retirement guidance and early processing services to individuals approaching the statutory retirement age.

4. Key Takeaways for Employers

a) Update internal HR policies and retirement procedures. Employers should review and update their employee handbooks and retirement policies to include guidance on flexible retirement options.

b) Prepare standardized templates for early and delayed retirement agreements.

c) Maintain up-to-date records of each employee’s statutory retirement age.

d) Monitor and accommodate employee retirement preferences. By surveying employees about retirement, setting clear communication channels, and ensuring employees understand early and delayed retirement, employers can better plan staffing and support employee decisions.

e) Provide HR training for managing flexible retirement. HR teams should be trained on the legal requirements of the flexible retirement system, including pension contribution periods and retirement notifications, managing sensitive retirement discussions, ensuring proper documentation, and submitting retirement information to social insurance agencies.

II. Overtime Pay During National Holidays

Judicial practice has historically been inconsistent regarding the calculation of overtime pay for employees working during national holidays, particularly in whether the overtime rate should be 2x or 3x their regular salary.

1. A New Notice Clarifies that Holiday Overtime Pay = 400% of Salary

On 1 January 2025, the Ministry of Human Resources and Social Security issued the Notice on Implementing the Decision on Modifying the Regulations on Public Holidays and Commemorative Days (“Notice”), which clarifies that employees working during national holidays are entitled to no less than an additional 300% of their regular daily or hourly wage as specified in their labor contract. Therefore, employees working on statutory public holidays should receive a total of 400% of their regular salary. This includes the 300% overtime pay plus the 100% base salary for the work performed on the holiday.

2. Key Takeaways for Employers

Employers should review and adjust their payroll systems to ensure compliance with this updated regulation and calculate overtime payments accordingly.

Nevertheless, given the highly localized nature of labor-related judicial practices in China, judicial interpretations and enforcement may vary. It remains uncertain whether this standard will be uniformly adopted by local courts and arbitration committees across different regions. We will continue to monitor relevant cases and provide updates on the evolving judicial stance to keep you informed of any developments.