Author: Erex Chen
More companies tend to use staffs reaching or over their retirement age (generally speaking, the retirement age for male staffs is 60 years old while 50 years old for female staffs). This is because these staffs are with skilled technology and working capability. More importantly, due to years of working experience in the company, most of them are the key management or technical personnel, who play an irreplaceable role in business production and development. However, for these staffs reaching or over retirement age, shall the company deem them as employees under labor relationship, or service providers under labor service relationship? This may bring some misunderstanding which may cause huge risk to the company once the dispute arises between the staffs and the company.
In fact, it is difficult to make a conclusion over the labor relationship or labor service relationship merely replying on the fact of the staffs reaching the retirement age.
The historical changes of the criteria under the laws and regulations
In fact, the criteria for differing the labor relationship and labor service relationship has gone through a historical change as below:
1.According to Article 44 of Labor Contract Law coming into force on January 1, 2008, the labor contract shall terminate from the date the employee starts enjoying the basic pension insurance treatment;
2.According to Article 21 of Implementing Rules of Labor Contract Law coming into force on September 3, 2008, the labor contract shall terminate when the employee reaches his retirement age;
3.According to Article 7 of Interpretation of Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Labor Dispute Three coming into force on September 14, 2010, in case of dispute between the company and its staffs who has started enjoying the basic pension insurance treatment or receiving pension and the dispute is brought to the court, the court shall deal with as labor service relationship.
Thus, obviously the current criteria to differ the labor relationship and labor service relationship shall be the fact whether the staff starts enjoying the basic pension insurance treatment or receiving pension.
Why reaching retirement age ≠ starting enjoying the basic pension insurance treatment or receiving pension
The above issue arises due to the limit of the conditions for enjoying basic pension insurance treatment or receiving pension as specified in the Law of Social Insurance.
1.According to Article 16 of the Law of Social Insurance, for individual who has joined the basic pension insurance program and the payment of social insurance fee has accumulatively reached 15 years when he reaches the retirement age, he is entitled to receive pension on a monthly basis. For individual who has joined the basic insurance pension program but the payment of social insurance fee has not accumulatively reached 15 years when he reaches the retirement age, he can only start receiving the pension on a monthly basis after the payment of social insurance fee reaches 15 years;
2.According to Article 2 of Several Regulations on Implementing the Law of Social Insurance of P.R.C, for individual who has joined the basic pension insurance program and the payment of social insurance fee is accumulatively less than 15 years when he reaches the retirement age, the payment of social insurance fee can be extended to 15 years.
According to the above laws and regulations, for staff who has reached the retirement age while the accumulatively payment of basic social insurance fee is less than 15 years, if the company intends to use the staff, a labor relationship, instead of labor service relationship, shall be established between the company and the staff, which shall continue until the staff is able to enjoy the basic social pension insurance treatment or receive the pension. After that, a labor service relationship shall be established.
The difference between labor relationship and labor service relationship
Many differences exist between labor relationship and labor service relationship. In short, from the perspective of the company, the labor relationship is subject to the state’s labor laws and regulations. The company is under the liabilities of payment of salary (including overtime payment), payment of social insurance fee, leave (sick leave, maternity leave, annual leave etc), work-related injury compensation, limits in terminating the labor contract unilaterally, payment of severance, labor protection etc.
Comparatively speaking, labor service relationship is a civil contract which is mainly subject to the Law of Contract. In Shanghai, for use of retirement persons, the local law requests that the aspects of working time, minimum salary and labor protection shall follow the Labor Law. However, both parties can agree with more flexibility on issue of the remuneration, termination, penalty etc.
Therefore, for the company, labor service relationship is a more flexible way to use the staff with less burden and risk.
According to above, it may bring positive meanings to understand and recognize the labor relationship and labor service relationship. Our suggestions are as below:
1.The company shall have a duly investigation that whether the staff who has reached or over the retirement age has started enjoying the basic pension insurance treatment or receiving the pension, and from that, determine a labor contract or a labor service contract shall be concluded;
2.For staff who has reached the retirement age but the payment of social insurance fee is less than 15 years, if the company wants to use the staff, then a labor contract shall be concluded;
3.For staff with a labor service contract to be concluded, the company is able to make flexible agreements with the staff except the issues of working time, minimum salary and labor contract, which shall be subject to the labor laws and regulations.
This article is published solely for the interest of friends and clients and should not be relied upon as the legal advice of any kind from us. Should you have any questions about this article, please contact the partner of Mylink Law Office.
Erex Chen, Managing Partner