"Buyout of seniority," to put it profoundly, means that companies offer a certain amount of "dismissal fee" to employees who have essentially worked their entire lives and then let them go.
"Buyout of seniority" was a measure used by some state-owned enterprises in China during the early stages of reform and opening-up to deal with surplus personnel. Under the then-existing social conditions where lifetime employment was practiced among state-owned enterprise employees and basic social security systems such as medical insurance, old-age insurance, and unemployment insurance had not yet been established, this measure played a positive role for many state-owned enterprises in resettling surplus employees. However, even at that time, it was only considered a short-term solution.
With societal progress and the implementation of the rule of law in China, various aspects of our work have entered a legal framework. Accompanying the promulgation and implementation of laws and regulations such as the **Labor Law of the People's Republic of China**, the **Labor Contract Law of the People's Republic of China**, the **Provisional Regulations on the Collection of Social Insurance Contributions**, and the **Unemployment Insurance Regulations**, China has now basically established a relatively complete system of basic social security including medical insurance, old-age insurance, and unemployment insurance. According to the law, companies must sign labor contracts with employees and legally participate in social insurance while paying contributions. If a company terminates its labor relationship with an employee, even if the employee cannot quickly find new employment, they can still legally enjoy social security benefits such as unemployment insurance, old-age insurance, and medical insurance. Therefore, there is no issue of employees being left unattended after leaving the unit, and thus there is no need for a "buyout of seniority."
In fact, both the **Notice on Implementing Two Regulations to Expand the Coverage of Social Insurance and Strengthen Fund Collection** issued by the Ministry of Labor and Social Security in 1999 and the **Notice on Some Issues Concerning the Sale of Small State-Owned Enterprises** issued by the State Economic and Trade Commission, the Ministry of Finance, and the People's Bank of China in 1999 emphasized that no unit may terminate the social insurance relationship of employees under the guise of a "buyout of seniority." It can be said that from both the legal and policy perspectives, this outdated measure of "buyout of seniority" has already been abolished. It no longer has any basis or conditions for implementation and should be eliminated and exit the historical stage.
However, some enterprises today are still ignoring the explicit prohibitions set out in national policies and regulations. They use the guise of restructuring and reforming state-owned enterprises to forcibly apply the method of "buyout of seniority" to terminate labor contracts with employees. What is the reason behind this? Employees who have worked for several decades, according to the Labor Contract Law, are eligible to sign open-ended labor contracts. Thus, it can be said that the initiative to terminate the contract lies with the employees. A "buyout of seniority" should be based on mutual voluntariness and legality. However, currently, enterprises are coercively forcing employees to terminate their contracts with an insufficient sum for maintaining a household. In the process of enterprise restructuring, if an enterprise needs to grow and terminate labor contracts with employees, the current Labor Law and Labor Contract Law have clear legal provisions regarding whether and how labor contracts can be terminated. Enterprises should proceed according to the law. Yet why do enterprises remain enthusiastic about using the abolished policy method of "buyout of seniority"? By avoiding legal procedures, they can achieve their goals at a lower cost, sacrificing employee interests, evading contribution payments, and bypassing the law to terminate labor contracts with employees for their own private gains. This is likely the true "goal" of the enterprise or its senior management.
Of course, despite widespread opposition in society, enterprises continue to repeatedly use this illegal method of "buyout of seniority." This is also related to the lack of strict enforcement of labor protection laws and regulations by administrative supervisory agencies and insufficient investigation and punishment of such illegal methods. For enterprises, it allows them to assume fewer responsibilities or even no responsibility while easily achieving their illegal objectives. Why wouldn't they do it?
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