January 2025
Contents
Spotlight on News
1. Ministry of Human Resources and Social Security and other departments jointly issued the Interim Measures for the Implementation of the Flexible Retirement System.
Legislation Updates
1. Ministry of Human Resources and Social Security released the Notice on Issues Related to Employees' All-Year Average Monthly Working Hours and Wage Calculations.
2. State Administration for Market Regulation issued the Guidelines for Compliance in Preventing Commercial Bribery Risks by Pharmaceutical Companies.
Case Study
- Shanghai Qingpu District Court: Although the company’s internal regulations allow for termination due to performance issues, if no training or reassignment is provided, such termination by the company will be deemed unlawful.
2. Supreme Court Database Case: Employers should assess the reasons for personal leave applications and exercise prudent labor management in accordance with public morals and societal norms.
Spotlight on News - Ministry of Human Resources and Social Security and other departments jointly issued the Interim Measures for the Implementation of the Flexible Retirement System.
On December 31, 2024, the Ministry of Human Resources and Social Security, the Organization Department of the Communist Party of China Central Committee, and the Ministry of Finance jointly issued the Interim Measures for the Implementation of the Flexible Retirement System (the "Interim Measures"). Building on regulations such as the Decision on Gradually Delaying the Statutory Retirement Age and the State Council’s Measures on Gradually Delaying the Statutory Retirement Age, the Interim Measures provide detailed implementation rules for flexible early or delayed retirement.
Effective January 1, 2025, employees who meet the minimum contribution years for receiving basic pension benefits may voluntarily opt for flexible early retirement. The retirement age can be up to three years earlier than the statutory retirement age but no lower than the original statutory age (50 or 55 for female employees; 60 for male employees). Employees are required to provide their employers with written notice at least three months prior to their intended early retirement date.
Additionally, employees who have reached the statutory retirement age may, by mutual agreement with their employers, opt for flexible delayed retirement for a period up to three years. The terms must be confirmed by the parties in writing at least one month in advance. Once established, the flexible delayed retirement period cannot be extended. During this period, the labor relationship continues, and both parties are required to make full social insurance contributions in accordance with applicable regulations. The agreement may be terminated upon mutual consent, after which standard retirement procedures will apply. Individuals already receiving pensions are not eligible for flexible retirement.
However, the Interim Measures do not clarify whether employers can require employees to confirm flexible early retirement decisions more than three months in advance or whether employees are permitted to unilaterally amend previously agreed-upon early retirement dates. These issues require further elaboration through national or regional legislation.
For further information on the reform, refer to: Understanding New Rules for Delaying Retirement in China.
Legislation Updates - Ministry of Human Resources and Social Security released the Notice on Issues Related to Employees' All-Year Average Monthly Working Hours and Wage Calculations.
On January 1, 2025, the Ministry of Human Resources and Social Security issued the Notice on Issues Related to Employees' All-Year Average Monthly Working Hours and Wage Calculations (the "Notice"). This Notice introduces updated methodologies for calculating employees' all-year average monthly working hours and wages.
According to the State Council's Decision on Amending the Regulations on Public Holidays and Commemorative Days (State Council Order No. 795), the number of statutory public holidays has been increased from 11 to 13 days. Consequently, the Notice adjusts the all-year average monthly working days for employees from 250 to 248 days, the quarterly working days from 62.5 to 62 days, and the monthly working days from 20.83 to 20.67 days. However, the monthly wage calculation standard remains unchanged at 21.75 days.
While the unchanged wage calculation days imply no significant changes in the calculation bases for daily wages, hourly wages, overtime pay under the standard work hour system, or compensation for unused annual leave, the adjustment of average working hours will directly affect the number of working days under the comprehensive work hour system and medical leave calculations in certain regions. Employers operating under the comprehensive work hour system may face increased overtime costs and should take prompt action to adjust and optimize work hour management in response to these changes. - State Administration for Market Regulation issued the Guidelines for Compliance in Preventing Commercial Bribery Risks by Pharmaceutical Companies.
On January 14, 2025, the State Administration for Market Regulation released the Guidelines for Compliance in Preventing Commercial Bribery Risks by Pharmaceutical Companies (the "Guidelines"). The Guidelines, comprising four chapters and 49 articles, provide recommendations for pharmaceutical companies on building compliance management systems, identifying and preventing commercial bribery risks, and addressing compliance-related issues.
As the first national-level compliance guidance for the pharmaceutical industry, the Guidelines offer practical and operational recommendations for effective risk management. They highlight nine specific scenarios with a high potential for commercial bribery, including academic visits, business hospitality, consultancy services, outsourcing, discounts and commissions, donations, sponsorships, free equipment provision, clinical research, and retail terminal sales. For each scenario, the Guidelines provide detailed definitions, scope, regulatory requirements, and risk prevention measures.
In addition, the Guidelines, in conjunction with laws such as the Anti-Unfair Competition Law and the Drug Administration Law, categorize risks by their degree of illegality into three levels: prohibited, avoidable, and of concern. The document also provides guidance on situations where companies may voluntarily disclose their own violations, cooperate with regulatory investigations, and potentially benefit from leniency or reduced administrative penalties.
Case Study - Shanghai Qingpu District Court: Although the company’s internal regulations allow for termination due to performance issues, if no training or reassignment is provided, such termination by the company will be deemed unlawful.
Facts
On May 11, 2020, Liu joined a company as a key account manager. The employment contract specified performance-related clauses, stating that if sales personnel failed to make significant progress in their work, effectively develop new clients, or meet their performance targets over two consecutive assessment periods, the employer could terminate the employment contract without prior notice or economic compensation.
In 2022, Liu failed to meet his sales performance targets for four consecutive quarters. On February 5, 2023, the company sent a text message to Liu, informing him of the termination of employment due to his failure to meet performance goals in 2021 and 2022, citing the relevant clauses in the employment contract and company policies. A follow-up email confirmed the termination and reiterated that no compensation would be provided.
Liu filed for arbitration, seeking compensation for unlawful termination. The arbitration committee ruled in Liu’s favor, and the company subsequently filed a lawsuit before the Shanghai Qingpu District Court.
Judge’s Viewpoint
The court held that failure to meet performance goals constitutes an employee’s inability to perform their job satisfactorily, which falls under "incompetency for work" as stipulated by Article 40 of the Labor Contract Law. Under this provision, employers may terminate the employment contract upon giving 30 days' written notice or paying one month’s salary in lieu of notice, but only after providing additional training or assigning the employee to another position.
In this case, the employer unilaterally categorized poor performance as misconduct in its internal policies, circumventing the statutory requirement to provide training or reassignment termination. Such provisions in the employment contract and company policies violate the spirit of the Labor Contract Law and were deemed invalid.
Furthermore, the court noted that the company provided no evidence of offering Liu training or a transfer to address his unsatisfactory performance before terminating his employment. Therefore, the termination was unlawful. As a result, the court upheld Liu's claim for compensation due to unlawful termination. - Supreme Court Database Case: Employers should assess the reasons for personal leave applications and exercise prudent labor management in accordance with public morals and societal norms.
Facts
Li, a senior engineer, signed a labor contract with a development company’s Beijing branch, effective from February 26, 2021, to March 31, 2024. On January 21, 2022, Li’s father was diagnosed with terminal cancer. Li immediately notified his direct supervisor through WeChat and submitted a written leave application via email, requesting personal leave from January 24 to January 30, 2022, to care for his father.
Without waiting for formal approval, Li returned home to tend to his father’s condition. During this period, the employer requested additional documentation support the leave. Li promptly provided his father’s medical records via WeChat.
Unfortunately, Li’s father passed away on January 28, 2022. On the same day, the company issued a notice of termination, citing Li’s absence without formal leave approval as grounds for dismissal. The company argued that this constituted absenteeism, in violation of company policy. Li filed for labor arbitration, asserting that the termination was unlawful and seeking compensation. The arbitration committee ruled in Li’s favor, and later the company filed a lawsuit before Beijing Dongcheng District Court.
Judge’s Viewpoint
The court emphasized that employees are required to abide by company policies and obtain approval for personal leave. However, employers are also expected to exercise their management rights in good faith and in alignment with principles of reasonableness and fairness.
The court noted that Li’s request for leave stemmed from an emergency-his father’s terminal illness and subsequent death. The company was aware of Li’s circumstances, as he had communicated his situation and submitted supporting medical documentation. Despite this, the company rigidly applied its leave policies, refused to approve the leave retroactively, and dismissed Li without considering the humanitarian nature of his leave application. The court further highlighted that caring for a terminally ill parent and making funeral arrangements are in line with the cultural value of filial piety, deeply rooted in Chinese society. By failing to accommodate Li’s leave request under such exceptional circumstances, the company’s actions were deemed inconsistent with fairness, reasonableness, and the spirit of the law. Consequently, the court ruled that Li’s personal leave did not constitute absenteeism and that the company’s termination of his employment was unlawful.