What China employers should know about salary obligations during the coronavirus crisis

The outbreak of the coronavirus in China has resulted in a number of national and local government measures to tackle the virus and address its related effects on society, including the normal operation of businesses.  For domestic enterprises, salary payment mandates for employees who are affected by such prevention and control measures are established in the Notice on the Issue of Labour Relations during the Prevention and Control of Infected Pneumonia caused by New Coronavirus outbreak (“Notice”) issued by the Ministry of Human Resources and Social Security on the 24 January 2020.

During this time of facing the epidemic, enterprises are highly encouraged to well-familiarize themselves and adhere to the measures outlined in the Notice, and be reminded that those who do not adhere to its mandates could be at risk for breaching relevant regulations and their labour obligations toward Labour Law. In this article, we highlight the main takeaways of the Notice.

Primary purpose of the Notice

In order to strengthen the prevention and control of coronavirus outbreak, the Notice was issued for the purposes of:

  • Managing labour relations during epidemic prevention and control;

  • Safeguarding the legitimate rights and interests of employees;

  • Maintaining normal production and operation of enterprises; and

  • Promoting of harmonious and stable labour relations.

Who is entitled to receive a salary based on the Notice

As mandated by the Notice, employers are obliged to pay employees under the following conditions:

  • The employee is confirmed as having been infected with the coronavirus, suspected of being infected with the coronavirus and/or in close contact with an individual or individuals who are confirmed infected with the coronavirus.

  • The employee cannot provide normal labour during the period of isolation treatment or medical observation and/or due to the implementation of isolation measures or other emergency measures by the government.

It is important to note that employee payment calculation is provisioned by the provincial or municipal authorities across the country. For example, in Shanghai municipality, a Notice on Implementing Support and Safeguard Measures in Response to the Outbreak of Pneumonia caused by New Coronavirus was issued by the Shanghai Municipal Bureau of Human Resources and Social Affairs mandating that employers are obliged to pay employee salaries during the extended Spring Festival holiday. For those employees who provide normal work attendance during the extended Spring Festival holiday, their employers shall arrange compensatory leave or pay overtime wages as required.

If the production or business operation is of an enterprise is suspended under the Notice, the Notice provides three scenarios as a guiding mandate:

  • If the work suspension period falls within a salary payment period, the employee shall be paid according to the standards stipulated in their labour contract.

  • If the work suspension period falls beyond one salary payment period, and the employee provides normal work to the enterprise, the salary payment shall be paid at a rate no lower than the local minimum wage.

  • If the work suspension period falls beyond the salary payment period, and the employee cannot work, the employer shall pay the employee’s living expenses based on the calculation prescribed by local governmental provisions.

Can employers terminate labour contracts with employees affected by the coronavirus?

In accordance with Articles 40* and 41** of the Labour Contract Law, labour contracts cannot t be terminated by employers. Where the labour contract expires during the period that the employee cannot provide work, the termination date will be postponed till the end of the employee’s medical period, the medical observation period, the quarantine period, or during emergency measures taken by the government.

*Article 40 In one of the following circumstances, an employing unit may revoke the labour contract, if it notifies in writing the worker of its intention 30 days in advance or after paying him an extra one month salary:

(1) The worker is unable to take up his original work or any other work arranged by the employing unit on the expiration of the specified period of medical treatment for illness or for injury incurred when not at work;

(2) The worker is incompetent for the post and remains incompetent after receiving a training or being assigned to another post; or

(3) The objective conditions taken as the basis for conclusion of the contract have greatly changed, so that the original labour contract cannot be performed and, after consultation between the employing unit and the worker, no agreement is reached on modification of the contents of the labour contract.

**Article 41 If, in any of the following circumstances, an employing unit needs to cut employment by more than 20 persons, or by less than 20 persons, which, however, accounts for more than 10 per cent of the total number of the enterprise’s employees, it may do so after it explains the situation to the trade union or all of its employees 30 days in advance, solicits opinions from among them and submit its plan for cutting employment to the administrative department of labour:

(1) The enterprise is to undergo reorganization pursuant to the provisions of the Law on Enterprise Bankruptcy;

(2) The enterprise is in dire straits in production and management;

(3) The enterprise changes its line of production, introduces a major technological updating or adjusts its business method, and, after modification of the labour contracts, still needs to reduce its personnel; or

(4) The objective economic conditions taken as the basis for conclusion of the labour contracts have greatly changed, so that the original labour contracts cannot be performed.

When cutting employment, the employing unit shall continue to employ the following persons by giving priority to them:

(1) persons who have concluded fixed-term labour contracts for a relatively long term with the employing unit;

(2) persons who have concluded open-ended labour contracts with the employing unit; and

(3) persons none of whose other family members has a job or who have an elder or minor depending on his support. If an employing unit that has cut its employment pursuant to the provisions in the first paragraph of this Article goes to recruit employees anew within six months, it shall give notification to the laid-off persons and, under equal conditions, recruit them before others.

If you have questions or concerns related to China Employment Law or other HR matters, please contact Horizons at talktous@horizons-advisory.com to schedule a consultation session. From RMB 1,500 per session, Horizons can provide insight, expertise and the right solutions for you. 

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