Providing additional benefits to employees may bring risks to companies?

In practice, some companies may provide additional benefits to employees, such as additional annual leave, enterprise annuities, and so on. Many people believe that such additional benefits are not statutory obligations of companies, so companies could grant, adjust or revoke those benefits at their own discretion without any legal risks.

This perception is incorrect. If handling additional benefits improperly, companies may encounter troubles and burdens. Then how to handle additional benefits properly?

Firstly, it is recommended to formulate clear rules for additional benefits. These rules should cover the eligible recipients or eligibility criteria, specific content, payment methods and timelines of the benefits, as well as revocation rules, among other details. Otherwise, if disputes arise over issues such as eligibility, it would be difficult for companies to eliminate those disputes. In addition, if the rules are not clear enough, the implementation of those rules will bring risks to companies.

Take additional annual leave as an example, Article 13 of the “Measures for the Implementation of Paid Annual Leave for Enterprise Employees” stipulates that if the annual leave days and/or wage compensation agreed upon by both labor and management parties or specified in the internal rules and regulations of an enterprise is higher than the statutory standard, the agreed or specified terms shall prevail. Therefore, in principle, additional annual leave shall be implemented in accordance with the agreements between labor and management parties or the internal rules and regulations of the enterprise. In the absence of such agreements or provisions, there are many dispute cases involving the order of taking statutory annual leave and additional annual leave, as well as compensation for unused leave. Judicial authorities have not yet formed a completely unified judgment standard on this issue. Regarding the order of taking leave, the mainstream judicial tendency is that statutory annual leave shall be taken first. However, in individual cases, it is held that in the absence of agreed or specified rules, an interpretation unfavorable to the company shall be adopted, which means the additional annual leave shall be taken first (e.g., (2021) Jing 03 Min Zhong No. 12973). In terms of compensation for unused leave, the mainstream judicial tendency is not to support conversion at three times the statutory annual leave wage standard, but to support conversion at the normal wage standard (e.g., (2019) Jing 0108 Min Chu No. 59471, (2023) Hu 0105 Min Chu No. 15965, (2023) Yue 01 Min Zhong No. 22172).

Secondly, for the vast majority of additional benefits beyond statutory requirements, there is no mandatory requirement requires to go through democratic consultation/notification procedures. However, even if democratic consultation is not conducted, companies must still notify employees and retain relevant evidence. This is to prevent employees from claiming that they are unaware of the relevant rules and thus refusing to accept adverse changes when the companies revoke such benefits for some or all eligible recipients. However, a few special additional benefits are legally required to go through democratic consultation procedures, such as the enterprise annuities.

Article 7 of the “Measures for Enterprise Annuities” stipulates that participation in an enterprise annuity shall be determined through collective consultation between the enterprise and its employees, and the enterprise annuity plan shall be submitted to the employee representative congress or all employees for discussion and approval. Articles 9 and 10 further stipulate that the enterprise annuity plan shall be submitted to the human resources and social security department at or above the county level where the enterprise is located, and shall not take effect until the relevant department raises no objection. It can be seen that although enterprise annuities are additional benefits beyond statutory requirements, the law has formulated detailed provisions for them because such benefits are not a one-way expenditure by the enterprise, but a joint investment by both the enterprise and its employees. However, in December 2025, the “Opinions of the Ministry of Human Resources and Social Security and the Ministry of Finance on Further Improving the Work of Enterprise Annuities” (MOHRSS Announcement〔2025〕 No. 77) stipulated the simplification of procedures for establishing enterprise annuities, which only require discussion and approval by the employee representative congress or all employees, and no longer take the opinion of the competent human resources department as a prerequisite for entry into force.

In practice, some companies fail to perform democratic consultation procedures in accordance with the law, or some companies bear the employee’s share of the annuity, which is equivalent to a special savings for employees, so they believe that it is not necessary to go through statutory procedures, and thus also ignore issues such as the scope of application, contribution standards, withdrawal standards and termination conditions of the annuity. If a company has not formulated an annuity plan or reached an agreement with employees on the annuity, is it required to go through democratic consultation procedures when it intends to lower the standards or revoke the annuity? According to MOHRSS Announcement〔2025〕No. 77, a company may unilaterally decide to revoke the annuity without going through democratic consultation procedures in case of “insufficient sustainable contribution capacity”. However, if the enterprise is operating normally without losses, it shall still go through the statutory democratic consultation/notification procedures.

In summary, it is definitely a win-win thing for employees, companies and society for providing additional benefits beyond statutory requirements. Nevertheless, companies must fully consider the risks of lowering the standards or revoking such additional benefits after they are granted. Therefore, it is necessary to attach great importance to the formulation of rules, as well as the handling of consultation/notification procedures and the retention of evidence in practice.