Practical Guidelines for the Management of Retirement

Among all kinds of labor disputes, the retirement dispute is the fewest. However, there are many details regarding the management of retirement. Here is a Q&A list for those details for reference. (* The retirement age is a complicated topic, and we have analyzed in the previous article, so this list will not mention this topic.)

Q1: When will a labor contract of a retiring employee be terminated?

A1: There are two choices, that is, an employee enjoys basic pension insurance benefits or reaches retirement age. However, when an employee reaches retirement age before he/she could enjoy basic pension insurance benefits, can the employer terminate the labor contract? There are different opinions in practice. In order to reduce the risk of disputes over the termination time of labor contracts, it is recommended that employers should handle retirement procedures for those employees in advance or in a timely manner.

Article 44 of the “Labor Contract Law” stipulates that if a worker has started to enjoy basic pension insurance benefits in accordance with the law, the labor contract shall be terminated. Article 21 of the “Implementation Regulations of the Labor Contract Law” stipulates that if a worker reaches the statutory retirement age, the labor contract shall be terminated. Because of the aforementioned two different provisions, there are disputes in judicial practice regarding the termination date of labor contracts. Taking Beijing and Guangdong for example, both the “Minutes of the Seminar on the Application of Law in Labor Dispute Cases by the Beijing Higher People’s Court and the Beijing Labor Dispute Arbitration Commission (II)”, and the “Opinions of the Guangdong Higher People’s Court and the Guangdong Labor and Personnel Dispute Arbitration Commission on the Connection between Labor and Personnel Dispute Arbitration and Litigation” stipulate that, a labor contract will be terminated when an employee enjoys basic pension insurance benefits or reaches retirement age. Taking Shanghai for example, the “Guidelines for the Trial of Labor Dispute Cases by the Shanghai Higher People’s Court (I)” stipulates that, employers should prove that employees have reached retirement age and completed retirement procedures in accordance with regulations.

Q2: Should employers pay full monthly salary in the month of retirement?

A2: The Shanghai Municipal Bureau of Human Resources and Social Security states that employees can be paid according to their actual working hours in the month of retirement. In the (2016) Jing Min Shen No. 4594 Ruling, the Beijing Higher People’s Court ruled that the employer did not have to pay the full monthly salary in the month of retirement to the employee based on the fact that the employee did not provide services to the employer after reaching retirement age. In order to reduce the risk of disputes over the amount of the last month salary, it is recommended that employers make clear provisions in the internal rules and regulations, labor contracts, or collective agreements regarding the salary payment standards for the month of retirement.

Article 17 of the “Opinions of the State Administration of Labor on the Implementation of Several Specific Issues in the Interim Measures of the State Council on Retirement and Resignation of Workers (Draft)” stipulates that, when workers retire, their wages for the month of retirement shall be paid as usual, and the retirement allowance and retirement living allowance shall be paid from the next month. This provision becomes the so called “legal basis” used by many courts to order employers to pay full monthly wages. However, on the one hand, this provision is not an effective provision; on the other hand, if an employee ceases to provide labor on the day he/she reaches retirement age, and the employer is still required to pay full monthly wages, it goes against the principle of fairness.

Q3: Does the employer have to pay social security for employees in the month of retirement?

A3: The answer is positive. Because social security is paid on a monthly basis, there is still a labor relationship between the employer and the employee when handling retirement procedures.

Q4: When can employees receive their pension?

A4: For eligible individuals, they can receive their pension in the following month after the application procedure for pension has been completed. Article 2 of the “Notice on Further Regulating the Socialization of Basic Pension Payment” (Lao She Ting Fa [2001] No. 8) stipulates that, the calculation and review procedures for basic pension insurance benefits must be strictly implemented, and new retirees shall receive basic pension from the following month. ”

Q5: Are retiring employees entitled to annual leave for the last working year?

A5: The answer is positive, and the annual leave should be converted according to the law. Article 12 of the “Implementation Measures for Paid Annual Leave of Enterprise Employees” stipulates that, the annual leave should be converted upon the termination of the labor contract. It is recommended that employers do not forget to arrange annual leave, or legally convert the unpaid portion of their salary when settling the last month’s salary.