One of significant changes in the Labor Code 2019 which shall officially take effect from 01 January 2021 comparing with the current applicable law, Labor Code 2012, is to allow the employers (the “Employer”) and employees (the “Employee”) to unilaterally terminate their labor contracts (the “Labor Contract”) when the Employee reaches the retirement age. However, the Employee’s right and the Employer’s right to unilaterally terminate the Labor Contract in this above-mentioned matter shall differently be applied, wherein the Employee shall not be required to give the Employer any notification about termination in advance, unless otherwise agreements; in contrast, the Employer has to notify the Employee prior to termination within the statutory timeline under the law.  

Comparing with the same regulation in the Labor Code 2019, the Labor Code 2012 currently allows the Employer to terminate the Labor Contract due to the retirement age of the Employee when the Employee fulfills the following conditions: (i) the age of retirement; and (ii) the period of contributing social insurance in accordance with the applicable laws. As a result, there are shortcomings in the common practice in case that the Employee only reaches the age of retirement, but does not meet completely conditions for enjoying pension. Then if the Labor Contract is an indefinite Labor Contract, the Employer will not have any legal ground to automatically terminate the Labor Contract with the Employee and have to continuously perform the Labor Contract until the Employee is eligible for enjoying the pension as stipulated by the laws.

Thanks to this change, the Labor Code 2019 will make a pretty favorable condition for both the Employee and the Employer to terminate their employment relationship due to the Employee’s retirement age and result in the proactive management in employment usage and plans for the Employer. Meanwhile, this change also overcomes the shortcomings of the current applicable laws which restrict the Employer’s right to terminate the Labor Contract with the Employee reaching the age off retirement but not satisfying the period of contributing the social insurance.