Payroll Issues during Lockdown in Shanghai

Starting in early March of 2022, Shanghai has tightened quarantine policies to prevent the COVID-19 variant Omicron from spreading. Since April 1st, 2022, the whole city has gone into lockdown. During this time, residents must stay inside, most can only work from home, and some cannot work at all. Our attorneys have received countless enquires concerning how the Chinese labor laws and regulations may apply to the situation. In this chaos, we have summed up some certainties both employers and employees can use for reference.

1. Are employees entitled to their full salary when working from home, i.e., work remotely during the lockdown?

Yes.
In this case, the employees of course are entitled to their full salary. This applies to those who continued to work remotely regardless of if he/she has tested positive of COVID and /or has labeled as a “close contact”.

2. Should employees get paid, in full or partially, when they can’t work from home due to the lockdown?

Yes.
If an employee couldn’t work remotely, the employer may make arrangement for the employee to take annual leave, exchange shifts. And if most employees couldn’t work by telecommunicating, the employer may even announce to stop the production and/or operation in compliance with relevant laws and regulations. In those cases, the employee may not get paid in full.

If the employer announced to stop the production and/or operation due to the impact of epidemic, the employer may negotiate with its employees by following: 1) wages must be paid normally within a wage payment cycle; 2) for more than one wage payment cycle, wages may be paid according to the agreement made between the parties that based on the actual labor provided by the employee, but shall not less than the minimum wage standard set by the governing local authority; and 3) if the employee did not provide normal labor, the employer may pay a living wage at the minimum wage rate.

3. Should the employee get paid, in full or partially, when he/she has tested positive for COVID and/ or has been labeled as a “close contact”?

Yes.
If the employee couldn’t work due to the government’s implementation of quarantine measures and other emergency measures, e.g. sent to isolation, the employer must pay wages and compensation to the employee based on normal attendance as compared to previous situation.

According to Clause 41 of “Law of the People’s Republic of China on Prevention and Treatment of Infectious Diseases” During the period of isolation, the people’s governments that take isolation measures shall guarantee the daily necessities of the persons under isolation; and if such persons have their own units, the units, which they belong to, shall not stop the payment of their wages during the period of isolation.

If the employee had been dismissed from the quarantine isolation but still could not work from home, the employer may pay the employee based on sick leave regulations.

4. Can the employer defer paying wages due to the epidemic?

Yes.
If the employer reached an agreement with the labor union and/or representative of the employees, the employer then may defer the payment.

According to Clause 10 of “Measures for the Payment of Wages by Enterprise: Where an enterprise has difficulties in its manufacturing and business operation which affect its cash flow and thus it is unable to pay wages on time temporarily, upon discussion and agreement with the enterprise’s labor union or the employees’ representatives, the enterprise may make deferred wage payment to its workers within one month, and the deferred date of wage payment shall be made known to all its workers.

5. Can the employer adjust the employee’s working position and/or lower the employee’s wage unilaterally due to operation difficulties resulting from the epidemic?

No.
The employer cannot unilaterally adjust the employee’s working positions and lower wages, with exception that: 1) there is an agreement reached between the employer and the employee; or 2) there is an agreement reached between the labor union and/or representative of the employees.

6. Can employers make economic redundancies during the epidemic? Are there any restrictions?

Yes, and yes.
Affected by the epidemic, employers may lay off employees and shall try to lay off as few as possible.

Under no circumstances, the economic layoffs should not be made for pneumonia patients with novel coronavirus infection, suspected patients, close contacts during their isolation and treatment or medical observation, as well as for employees who cannot provide normal labor due to isolation measures or other emergency measures imposed by the government.

7. Can an employee get economic compensation if he/she chose to terminate his/her labor contract on the ground that the employer deferred paying his/her wages?

No.
Provided that the employer can prove that delay in paying wages does not occur maliciously, then the employer does not need to pay economic compensation, and it does not constitute a violation of Article 38 of “Labor Contract Law of the People’s Republic of China”.

8. Can the employer retrieve the “Offer Letter”? Can the employee get paid when the employee hasn’t started the job?

No and No.
The employers can’t withdraw an offer letter without bearing civil liabilities. Once employers send an offer letter and employees confirm, the offer letter binds both parties. Thus, the employer might constitute behavior of “contracting fault” and bare civil responsibility.

According to Article 500 of “The Civil Code of the People’s Republic of China” A party shall be liable for compensation if it falls under any of the following circumstances in the course of concluding a contract, thereby causing losses to the other party:(III) Other acts that violate the principle of good faith.

Nevertheless, Employers do not need to pay wages since the labor relationship has not been established in the sense of PRC labor contract law, i.e. the employee had not started to work.

According to Clause 7 of “Labor Contract Law of the People’s Republic of China”: An employer shall be deemed to have established a labor relationship with a worker with effect from the date of commencement of work. Employers shall establish a register of employees for inspection purposes.


The Q&A listed above are not covering all scenarios. If you need assistance in applying the Chinese labor law, we could be reached at eva@evaslaw.com

Written by Mrs. Eva Gao, Attorney-at-law
Mr. Jack Meng, Attorney-at-law

Legal research reference (include but not limited to):

  1. 《中华人民共和国劳动法》
  2. 《中华人民共和国劳动合同法》
  3. 《中华人民共和国民法典》
  4. 《中华人民共和国就业促进法》
  5. 《中华人民共共和国传染病防治法》
  6. 《中华人民共和国传染病防治法实施办法》
  7. 《上海市企业工资支付办法》
  8. 上海市人力资源和社会保障局《关于应对新型冠状病毒感染脑炎疫情实施人力资源社保保障支持保障措施的通知》(沪人社办【2020】38号)
  9. 关于印发《本市人社领域全力支持抗击疫情的若干政策措施》的通知  沪人社规【2020】10号
  10. 上海高级人民法院上海市人力资源和社会保障局《关于疫情影响下劳动争议案件处理相关指导的意见》

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