Update: Labor Law in China 2025 – New Rules, New Obligations

1. Retirement Age and Contribution Periods Increase

Since January 1, 2025, the statutory retirement age is being raised gradually:

• Men: from 60 to 63 years
• Women: from 50/55 to 55/58 years (depending on the sector)

By 2030, the minimum contribution period for pension insurance will increase from 15 to 20 years.

A flexible retirement option has been introduced:

• Early retirement: up to three years before the statutory retirement age; employees must submit an application three months in advance.
• Delayed retirement: up to three years after the statutory retirement age; a written agreement with the employer must be signed at least one month in advance.

Even if an employee has reached the retirement age but not the minimum contribution period, labor protections still apply, and the employer must continue paying social insurance contributions.

Example: A female employee born in 1971 can retire in 2029 instead of 2026 if she continues working and contributing. If the company wishes to keep her employed beyond this, a new employment contract must be signed; otherwise, disputes over wages and social insurance contributions may arise. The relationship is then treated as a civil service contract rather than a regular employment contract.

Practical tip: Employers should carefully manage transitions from work to retirement, especially for expats or executives who plan to stay longer.

2. Social Insurance: Zero Tolerance for Deviations

Punctual and full payment of social insurance contributions is mandatory. Any agreement reducing or suspending contributions is invalid, according to the Supreme People’s Court of China. Employees may terminate employment immediately and claim damages if contributions are not correctly made.

Responsibility for collecting social insurance contributions now lies with the tax authorities, not the social security administration. They have full access to employer and employee data and can issue back payments, interest, and fines without any statute of limitations.

Example: If a company reports only the base salary of employees while ignoring bonuses, all contributions must be retroactively paid once discovered. Employees may also claim full pension points and severance.

Practical tip: Companies should conduct quarterly internal audits and have contribution obligations verified by local HR service providers.

3. Public Holidays and Overtime Pay

Since 2025, China has 13 statutory public holidays – two more than before, one additional to the Chinese New Year and one to Labor Day.

Employees working on public holidays receive 300% overtime pay (totaling 400% of regular pay). Time off in lieu is not allowed.

These rules also apply to foreign employees working in China, regardless of nationality. Clauses about “flexible working hours” do not override public holiday rules.

Example: A production worker earning 300 RMB/day works on October 1 (National Day). The employer must pay 1,200 RMB; a simple day off in lieu is insufficient.

Practical tip: HR and payroll should budget for holiday work in advance. Avoid scheduling work on Chinese public holidays unless absolutely necessary.

4. Right to Permanent Contracts after Successive Fixed-Term Contracts

Under Chinese labor law, employees automatically gain the right to an indefinite contract after two consecutive fixed-term contracts, if they wish to continue working and no valid termination reason exists.

The Supreme People’s Court clarified that “consecutive” includes automatic renewals or circumvention strategies, such as switching the contracting entity within a corporate group.

For foreign employees, a fixed-term contract may last a maximum of five years. Chinese employees have no such limit, but after 10 years in a company, they are generally entitled to an indefinite contract.

Example: An engineer employed by a Shanghai subsidiary, after completing a second fixed-term contract, is formally transferred to a sister company in Suzhou. A court may consider this a consecutive fixed-term contract and grant indefinite status.

Practical tip: Companies should systematically monitor contract terms and decide early whether to extend or renegotiate.

5. Employee Assignments within Related Companies

When employees work across multiple entities in the same group, legal relationships can be unclear. It may be difficult to determine which entity is responsible for wages and social contributions.

Without a clear written agreement, all involved companies can be held jointly liable.

Example: A sales director officially employed by WFOE Shanghai works regularly for the Hong Kong headquarters. In a dispute, he can sue both companies.

Practical tip: A tripartite agreement (employee – sending company – receiving company) ensures legal certainty and avoids double contribution payments.

6. Non-Compete and Retention Agreements

Non-compete agreements during employment are valid even without special compensation.

Post-employment non-competes require compensation. If no fixed amount is agreed, it must be at least 30% of the average monthly salary over the last 12 months, paid monthly. Non-competes post-employment are only allowed for executives and specialists, must be reasonable in scope, duration, and geography, and are limited to two years.

Example: A senior engineer leaves a company and works for a competitor three months later. The court may reduce an excessively long non-compete from two years to six months, requiring partial repayment of compensation.

Practical tip: Agreements should also include contractual penalties for breaches. Retention agreements tied to training or relocation costs are also permitted.

Example: An employee trained in Germany at company expense may be contractually required to stay at least two years; otherwise, costs must be partially reimbursed.

Practical tip: Such agreements should be clear and limited to key personnel.

7. Employment with International Connections

Strict rules remain for foreign employees regarding work and residence permits, working hours, location, and job scope. Visa barcodes contain all employee information for scanning. Employment without a valid work permit constitutes illegal work.

Representative Offices of foreign firms are not legal entities but can be party to labor disputes, and the parent company may also be liable. Notices delivered to the office are effective for the parent company.

Example: A German expat is paid by the German parent but works for the Shanghai office. A court may hold the parent liable for severance and bonuses.

Practical tip: Employment contracts should clearly define the employer, ideally with a local contract and secondment agreement aligned with tax and visa requirements.

8. Political Perspective – EU Chamber Position Paper

The HR Working Group of the EUCCC calls for comprehensive reforms:

• More flexible working hours and locations
• Uniform interpretation of labor law nationwide
• Improved conditions for foreign specialists
• Promotion of practical education and soft skills

Example: A German engineering firm wants an employee permanently in Chengdu, although the headquarters is in Shanghai. Current law creates social insurance and visa challenges. The EUCCC advocates more flexibility.

Practical tip: Pilot projects (remote work, cross-province work) should only start after legal review, and legislative developments should be closely monitored.