Shanghai Lockdown 2022 HR Policies

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Understanding Labor Law During China’s 2022 Lockdown

Following the sudden recent escalation in COVID-19 cases throughout China, many regions and cities have been placed under lockdown and the restrictive policies have presented new challenges for both employers and employees. In the interest of upholding fair standards and protecting rights of employees and employers during such unprecedented times, new labor regulations have been put forth by the central government. In this article we will emphasize the rights and recourse of recent labor laws surrounding salary payments, recruitment and financial support for businesses.

How Wages for Employees Should Be Paid during Lockdown (Rights and Terms for Reduced Pay)

Chinese labor laws imposed to safeguard employees and ensure appropriate pay during lockdown can vary based on the city or region and can be subject to changes throughout time.

The following rules have been imposed in Shanghai:

Employment Situations – There have been 3 distinct situations defined:

  • Workers who are able to provide normal labor via internet or telephone – should be paid normal wages.
  • Workers able to provide reduced or limited services from home – encouraged to take annual leave or another type of leave and will receive wages according to the provisions of that leave.
  • Workers unable to provide normal or reduced labor – companies should consult with their employees on payment terms. For the first payment cycle, normal payment should be received, whereafter a reduced pay policy can be introduced.

Termination – in the case of an employer wanting to terminate employment services, they CANNOT terminate an employment relationship if the worker is legally under lockdown and unable to provide normal labor.

Suspected Cases – If an employee is considered a patient, disease carrier, suspected patient, close contact etc., which results in the employee’s inability to provide normal labor, the company is required to pay their employees their wages according to the normal agreement during the quarantine period.

Treatment Period – During the treatment and isolation period an employee must be paid sick leave wages for the duration.

Employee Recourse

Employees are protected by the right to initiate an arbitration process or lawsuit against the employer if salary payments are not paid through during the prolonged lockdown period. In the case of capital turnover difficulties, wage payments can be postponed with the agreement of the employee and the time limit of delayed payments is determined by the individual administrative labor departments throughout each respective province or municipality within China.

How Employee Onboarding Should be Handled in the Event of Lockdown

The establishment of an official employment relationship is marked by the date in which an employee is able to provide corresponding labor and service to the company. Regardless of the nature and timing of onboarding procedures, labor relations should only be recognized once employment services are carried out. Therefore, if an employment offer is accepted under lockdown circumstances and the employee is unable to carry out relevant services and labor, it should be in the best interest of the enterprise to communicate a clear starting time so both parties are in general agreement.

How the Government is Assisting Businesses Financially

The zero-tolerance approach towards the COVID-10 pandemic is having a harsh economic toll on businesses operating in China, with small businesses reporting significantly worse conditions than medium and large sized enterprises. Lockdowns that last for two months are forecasted to cut overall growth by 0.3 to 0.5 % and measures that last over the period of the third quarter are expected to reduce GDP by up to 2%.

The central government has implemented policies and relief measures for businesses affected the most by the coronavirus and the associated mass-lockdowns. As announced by Premier LI Keqiang at the “two sessions” meeting in early March, over 2.5 trillion yuan in tax reductions will be imposed. Small taxpayers with monthly revenue of less than 150,000 yuan will be exempt from Value-added tax (VAT) and annual income tax will be reduced by 50% if total payments are between 1-3 million yuan. Furthermore, small-scale enterprises and self-employed individuals in certain areas and who meet certain conditions, will be exempt from rental payments for three months and up to six months for higher risk areas.

Local support measures for Shanghai, the country’s financial hub and largest city, have been released during its phased-lockdown period. Notably, financial institution have been encouraged to provide greater credit services at lowered interested rates to businesses. Additionally, various internet platforms and telecommunication providers have also been prompted to reduce service fees in an attempt to reduce financial burden for businesses.

Businesses directly affected by the COVID-19 pandemic and associated containment policies will continue to receive governmental support. Tax cuts are expected to be carried out to reduce pressure in addition to the introduction of increased loans. Further relief will be imposed on especially hard-hit industries such as tourism and retail, with measures such as subsidies and an extension of pension contributions for employees. Overtime, the central government is expected to adjust policies to further ease financial pressures for businesses.

With unprecedented lockdown measures being imposed and a great deal of uncertainty as to when it will end, businesses and individuals are being met with a number of challenges. MSA is offering special consulting services regarding the lockdowns and measures businesses can implement to ensure they remain compliant with local regulations and understand all procedures that need to be followed. Get in touch with us today and let our consultants provide you with the solutions your business needs.