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Recently, the outbreak and spread of Covid in Shanghai and other cities in China made the epidemic situation serious. Most of the companies are forced to suspend operation due to the government lockdown policy, which has inevitably caused economic losses. In addition, employees of the company are not able to work in the office as usual. Now the question is how the company shall pay the employees who are not able to work as usual during the suspension of operation?

Relevant Rules promulgated by the Ministry of Human Resources and Social Security of the People's Republic of China (“MOHRSS”)

In fact, after initial outbreak of Covid in 2020, MHRSS issued the Notice by the General Office of MOHRSS Concerning Properly Handling Labor Relations during the Prevention and Control of the Outbreak of Novel Coronavirus Pneumonia (COVID-19) (No.5[2020] of the General Office of the MOHRSS, hereinafter referred to as the “Notice”). According to the Notice, if the suspension of operation of the company is within one salary payment cycle, the company shall pay salary to the employee according to the criteria as agreed in the employment contract. However, if the suspension of operation of the company exceeds one salary payment cycle, in the event the employee has provided normal working service, the company shall pay the employee with salary no less than local minimum salary. In the event the employee does not provide normal working service, the company shall pay living fee, which criteria shall be implemented according to the rules of various provinces, autonomous regions and municipalities directly under the central government.

Confused Issue

The Notice above provides general guidance for the company in terms of salary payment during the suspension of operation. However, some dispute has arisen relating to the understanding of “one salary payment cycle”, which even has caused confusion.

Some people are of the opinion that “one salary payment cycle” shall start from the first day of suspension of operation until the end of the calendar month the suspension of operation started, namely, the month the suspension of operation started shall be defined as one salary payment cycle, and the next month shall be the one beyond “one salary payment cycle”. According to this understanding, for instance, if March 15, 2022 is the first day of suspension of operation, then the month of March 2022 shall be defined as “one salary payment cycle” and the salary for March shall be paid as usual. If the suspension of operation continues in April 2022, the company is allowed to pay salary less than the normal salary.

However, another opinion insists that the length of “one salary payment cycle” shall be one month starting from the first day of suspension of operation, even beyond the month the suspension of operation started. According to this understanding, for instance, if March 15, 2022 is the first day of suspension of operation, then “one salary payment cycle” shall start from March 15, 2022 until April 14, 2022, and during this period, the company shall pay normal salary as usual.

Correct Understanding and Practice

In this regard, we have reviewed relevant court cases since 2020, particularly the typical labor dispute cases jointly announced by MOHRSS and the Supreme People’s Court in 2020, which gives analysis on the understanding of “one salary payment cycle”.

By comparison, the second opinion above is in line with the purpose of legislation.

It should be pointed out that if the suspension of operation is not a continuous one within one salary payment cycle, which means the suspension of operation is intermittent, whatever the number of days of suspension within one salary payment cycle, the salary thereof shall be paid as usual.

How the salary shall be paid beyond one salary payment cycle

If the suspension of operation continues beyond one salary payment cycle, then the scenarios in terms of payment of salary may include:

(a) If the company does not assign any work tasks to the employee during the suspension of operation, the company can pay living fee only. The amount of living fee in Shanghai is equivalent to 80% of the minimum salary (the minimum salary in Shanghai in 2021 is RMB 2590), namely, RMB 2590*80%=2072;

(b) During the suspension of operation, if working from home can be arranged according to the position of the employee, the company is allowed to pay salary according to his/her actual working time by reference to the daily salary or hourly salary, but in any event, no less than the minimum salary.

(c) Either in scenario (a) or (b), the social insurance and housing fund of the employees shall still be paid by the company during the suspension of operation.

This article is published solely for the interest of friends and clients and should not be relied upon as the legal advice of any kind from us. Should you have any questions about this article, please contact the partner of Mylink Law Office.