This article provides an overview of the legal standards for determining employment relationships with individuals who have exceeded the statutory retirement age.
The Labor Contract Law of China specifies that a labor contract terminates when a worker "begins to legally enjoy basic pension insurance benefits."
Meanwhile, the Implementing Regulations of the Labor Contract Law state that a labor contract terminates when a worker "reaches the statutory retirement age."
Furthermore, the Social Insurance Law of the People's Republic of China stipulates that a worker who has reached the statutory retirement age can only enjoy basic pension insurance benefits after having made cumulative contributions for a minimum of fifteen years.
Interpretations of Employment Relationship Status for Older Workers
Several interpretations exist regarding the employment status of individuals past the retirement age.
The first interpretation is that the Implementing Regulations provide further clarity to the Labor Contract Law and should take precedence.
Consequently, once a worker reaches the statutory retirement age, regardless of whether they are receiving a pension, their relationship with the employer is no longer considered a standard labor relationship but is instead classified as a service relationship.
The second interpretation views the two laws as establishing cumulative conditions.
Under this view, a labor contract terminates only when a worker reaches the statutory retirement age and is not legally receiving basic pension benefits.
If a worker is over the retirement age but not receiving such benefits, a special labor relationship may still be formed.
It is important to note that if the older worker is receiving urban and rural residents' pension insurance, this does not satisfy the legal termination condition, and a labor relationship may still be constituted.
This means the "basic pension insurance benefits" refer specifically to the basic old-age insurance for employees.
The third interpretation considers the two provisions as complementary.
For determining the nature of the relationship with an older worker, if they have reached retirement age and are eligible for a pension, retirement procedures can be initiated.
However, for those who have reached retirement age but cannot receive pension benefits, the reason must be examined to see if it is related to the employer.
If the reason is unrelated to the employer, the relationship is deemed a service relationship due to the worker exceeding the age limit.
If the reason is related to the employer, the labor relationship should be maintained.
This perspective is currently considered more scientific and is trending towards becoming the mainstream view in practice.
A fourth interpretation, which may represent a future trend, suggests that even if an older worker is receiving a pension, if the work they perform exhibits characteristics of subordination—such as clear management and supervision—a factual labor relationship should be recognized.
The determination should be based on the actual nature of the relationship, not solely on any written agreement between the parties.
Strategies for Compliance
To ensure legal compliance, employers should pay social insurance for active employees in accordance with the law and regulations in a timely manner.
It is crucial to stay updated on policy developments and understand the local interpretation of retirement rules.
For companies operating nationwide, it is advisable to review policies across different regions, monitor them closely, and ensure that employee retirements comply with local requirements to avoid disputes.
Employers should regularly review the basic situation of their workers, focusing on retirement milestones.
This involves checking employee ages and the duration of their social insurance contributions to confirm each individual's retirement date and whether they have met the minimum contribution period.
This process helps clarify the rights and obligations of both parties before an employee reaches retirement age.
For employees who have met the minimum contribution period and are eligible for flexible early retirement, confirmation should be sought within three years of their statutory retirement age regarding any desire to retire early.
If so, the employer should assist the worker with retirement procedures and subsequently terminate the contract, ending the labor relationship.
For employees who have not yet reached the statutory retirement age, it should be confirmed whether they can proceed with retirement and receive pension benefits, addressing any reasons for ineligibility, such as making supplementary contributions.
For employees who have reached retirement age and can normally receive pension benefits, retirement matters should be communicated one or two months prior.
A labor contract termination notice should be issued, and the necessary documents should be submitted to process the retirement.
Managing Re-Employed Retirees
For individuals re-employed after retirement, it is essential to sign a written agreement promptly, clearly defining the relationship as a service relationship.
This agreement should avoid language implying control and management typical of an employment relationship and specify that compensation is for services rendered, not a regular salary.
In accordance with local policies, employers should consider obtaining work-related injury insurance or commercial insurance, or a combination of both, for re-employed retirees.
It is important to avoid establishing a relationship of subordination with re-employed retirees.
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