How is the retirement age decided? – four major legislative models 

There are four major legislative models for the retirement age in APAC countries.  

Model 1: The employee’s retirement age is prescribed by the law 

This legislative model is straightforward in that the retirement age(s) are codified by legislation for all employees, without much room for company rules or contractual agreement.  

For example, in China, the law prescribes different retirement ages for male and female employees. According to the newly promulgated regulation, the retirement age for male employees is 63 years old while for female employees is 58 years and 55 years old, for managerial role and non-managerial role, respectively. 

In Vietnam, the law also sets mandatory retirement age for employees in normal working conditions, which is 62 for males by 2028 and 60 for females in 2035. 

Model 2: The law prescribes a minimum retirement age, however, the exact retirement age is determined by the company regulation/employment contract 

An interesting fact is that many countries/jurisdictions will prescribe a minimum retirement age and any company rules/contractual terms in contradiction will be void. 

Taking Singapore for example, the current minimum retirement age is 63 years old and employers are not permitted to ask the employees to retire before that age. Even for employees who have reached 63 can continue to be employed if they meet the re-employment criteria. 

In South Korea, the retirement age cannot be below 60, otherwise it will be deemed invalid under the Act on Prohibition of Age Discrimination in Employment and Elderly Employment Promotion. However, the exact retirement age must be set by the “rules of employment” of the company. 

Japan is a country that has similar rules and promotes continued employment. Although it is lawful for an employer to impose a mandatory retirement age as long as it is 60 or above, the law puts obligations on employers to re-employ employees who request employment after the mandatory age until they are 65 years old. 

In Malaysia, the minimum retirement age by law is 60 and any contractual agreement on age above 60 is permissible.  

Model 3: The law prescribes a mandatory retirement/pension age, however, the employment contract can agree otherwise 

In some countries, there is a mandatory retirement age/pension age set forth in the legislation however the employer has the flexibility to agree on the retirement age with the employee otherwise by employment contract.  

In the Philippines, the Labor Code provides for a mandatory retirement age of 65 years of age. However, the retirement age can be determined differently by employment agreement or collective bargaining agreement. 

In Thailand, currently, it is up to the employer and employee to agree on the retirement age in contracts or via work rules. Nevertheless, if the employee reaches the age of 60, they will be entitled to express their intention to retire to the employer and be eligible for pension allowance. 

Model 4: No statutory provision and retirement age is mainly agreed contractually 

For some countries/jurisdictions, there is no statutory retirement age while it is mainly subject to the employer and employee’s contractual agreement. 

For example, in Hong Kong, there is no law on mandatory retirement age (except for government officers). Such mode is heavily related to the region’s lifetime employment culture and the in-general at-will nature of employment relationship. Similarly, the general rule in Australia is that specifying a mandatory retirement age is not compliant in terms of anti-discrimination laws and there is no official retirement age by law. 

For India and Pakistan, the law is silent on retirement age for employees in the private sector, but it is permissible to contractually agree on a retirement age in the employment contracts or by company policies. 

What are the legal implications once an employee reaches retirement age? 

Different legislative models for retirement age may result in various employment law implications for employees who reach retirement age. There are a few issues to be considered: 

Implication 1: Employee status and eligibility to enter into an employment relationship 

A very rough inference is that once an employee reaches retirement age, he/she will no longer have the employee status and will lose the eligibility to enter into or continue an employment relationship. For example, in China, generally, employees reaching retirement age will trigger the retirement process and entitle the employee to retirement benefits (subject to the requirement of contribution years).  

If a company wants to hire a person who has already reached retirement age, it will enter into a contractor/consulting agreement which is governed by civil law but not employment law. And the people hired will not be legally protected in terms of the employment benefits. 

Nevertheless, such a conclusion is not universally applicable to all jurisdictions, especially for the regions where no mandatory retirement age is in place, or continued employment is encouraged. For example, in Hong Kong and Australia where there is no mandatory retirement age, employees can be continuously hired as long as agreed with the employer. 

In Japan, employees can still request continued employment after passing the retirement age set forth in the contracts. Similarly in Singapore, employees who have reached 63 still can request to be employed if they meet the re-employment criteria. 

Even in the countries where there is mandatory retirement fixed by law, reaching retirement age does not necessarily lead to the inability to conclude employment contract. As per Vietnam labor law, when an elderly person is employed, both parties may agree on the conclusion of multiple fixed-term employment contracts. And the elderly person can receive retirement pension as well as employment benefits by law and contract at the same time. 

Generally speaking, employees may lose employee status after reaching retirement age. However, exceptions exist under different legal frameworks and employers may continue hiring the employee who has passed the retirement age. 

Implication 2: Eligibility for pension benefits 

Reaching retirement age has a loose connection with eligibility for pension benefits. When employees reach retirement age, it may indicate that they are eligible for pension benefits but there are a number of exceptions:  

• Not meeting the minimum contribution years: In most jurisdictions, to be eligible for retirement/pension benefits requires a minimum number of years’ contribution to the pension fund. For example, in China, employees who reach retirement may still not be able to receive pension allowance until they have contributed to the social insurance scheme for at least 15 years in aggregate (as mentioned above the minimum contribution period will gradually increase to 20 years starting from January 1, 2030).  

  A relevant issue is that there is even dispute over whether the employment relationship terminates upon reaching the retirement age; or, upon the employee becomes eligible to receive the pension allowance, given the China Employment Contract Law and its Implementation Regulations have different provisions. 

  This is why in some countries, the concept of “pension age” is commonly used. 

• No retirement age is prescribed by law and eligibility to pension is subject to other factors. For example, in some jurisdictions like Hong Kong and Australia, the eligibility to withdraw MPF or superannuation may relate to the employee’s age or contribution years but not necessarily the retirement because there is no retirement age set by law. 

• Employee choosing to continue the contribution to the pension scheme: In Singapore, although there is a minimum retirement age, individuals may choose to continue working beyond that age and contribute to their pension further. 

To conclude, employees may not necessarily be eligible for pension benefits even if they have reached the retirement age and the eligibility depends on other factors like the contribution years, the employee’s option to continue contributing to the pension scheme, etc. 

Implication 3: Severance payment  

Retirement, although being a reason for employment termination in the majority of the APAC regions, is quite different from other termination reasons, especially in terms of employee benefits. One notable difference is that retirees normally are not eligible for statutory severance but will be eligible for pension benefits instead provided they meet the eligibility criteria. 

However, that is not always the case. For example, in Thailand, employees who retire are also entitled to statutory severance based on their length of service same as other types of employment termination. In Indonesia, if the employer has not included the retiree in a pension program, or if the retirement benefit that the employee gets as a single lump-sum payment at retirement turns out to be lower than twice the amount of the statutory severance pay, the employer is obliged to pay the retiree twice the amount of statutory severance pay.  

Therefore, in most jurisdictions, retirees are not entitled to statutory severance upon retirement, while the opposite case exists in some countries.  

Key takeaways for employers 

During the hiring stage, companies should pay attention to the candidate’s age. Although we have discussed that the fact of reaching/being above retirement age does not necessarily manifest the inability to enter into an employment contract, it is still a crucial factor for employers to consider during recruitment.  

In some countries like China, it is technically impossible to hire an employee who has already reached retirement age into a legally protected employment relationship. While in some countries like South Korea and Japan, employers should note if the employee has reached the retirement age set forth by the employment rules of the company. 

Further, the employers should also handle properly if the employee reaches or is close to the employment age. 

First, employers should consider if termination, early retirement, or continued employment is applicable. 

In jurisdictions where law or employment contract/company rules prescribe retirement age, once the employee reaches or is near the retirement age, normally the employer will support the retirement procedure as per the applicable regulation and discharge the obligations upon employment termination. 

However, as discussed, exceptions exist in multiple regions including continued employment beyond retirement age (e.g., Japan, Singapore) or hiring of elderly people (e.g., Vietnam). 

In a lot of countries, early retirement, i.e., retiring before the mandatory/agreed retirement age is also possible subject to certain conditions. Based on China’s new policy, employees may request to retire early or later, both up to a maximum of three years only.  

Therefore, employers should be prepared to deal with the employee’s request for continued retirement as well as early retirement. A good practice is implementing solid employment rules under the legal framework. 

Second, employers should pay attention to its legal obligation, e.g., paying severance, if required by law. If the employment will terminate by reason of retirement, employers should also check if there is a legal obligation by the country law to pay any retirement benefits/severance upon retirement.  

Last, provided that continued hiring is possible and permitted by law, employers should also check the relevant legal requirements. For example – 

• whether a contractor/consultant agreement should be entered into instead of an employment contract due to the loss of employee status by virtue of the law, e.g., China; 

• whether it is obliged to contribute to social insurances for people past retirement age; 

• whether there is any legal protection for elderly employees, e.g., in Vietnam, employers must not assign elderly employees to do laborious, toxic or dangerous work, and are responsible for taking care of the health of elderly employees at the workplace.