Managing HR in China during the Coronavirus Outbreak

January 30, 2020 Posted by China Briefing Reading Time: 5 minutes

By Vivian Mao, Dezan Shira & Associates

This article seeks to provide clarity on the delay of work resumption and annual leave entitlement in China as the government works to contain the spread of the coronavirus outbreak by restricting immediate public movement.

The Chinese State Council has announced the extension of the 2020 Chinese New Year holiday to February 2, 2020. Each city or province has followed this up with detailed implementation rules for their specific regions.

Shanghai, Jiangsu, Zhejiang, Guangdong, and other cities / provinces have formally required enterprises (except those organizations involved in providing basic services for residents and those involved in combating the spread of the virus) to not resume work prior to the February 10.

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This is only the second time that the Chinese Central Government has extended a holiday period (the first was for the celebration of the 70th anniversary of the end of World War 2 in 2015). The current situation is a reaction to preventing the spread of the coronavirus.

However, many China HR professionals are facing awkward legal questions from employees related to this holiday extension.

For example, should the extended days be treated as statutory public holidays or rest days, or should annual leave be deducted, or should deferred working days be arranged at weekends? Can enterprises arrange employees to work at home before resuming work? Should overtime payments should be made if enterprises ask employees to work during the extended days? These types of question have quickly become hot topics for businesses operating in China.

We will address these issues in this article.

Shanghai’s Municipal Human Resources and Social Security Bureau answered these questions at a press conference on January 28, 2020.

The State Council and Shanghai Municipal Human Resources and Social Security Bureau’s regulations are summarized as below. We also add our own interpretations based on our best understanding at the current time:

According to the “Notice on Extension of 2020 Chinese New Year Holiday” issued by the China State Council on January 26, 2020, this Chinese New Year Holiday will be extended to February 2, 2020 (this coming Sunday). If employees are unable to rest during this period due to prevention / control of the epidemic, rest in lieu should be arranged or remuneration should be paid in accordance with the related policies.

In practice, should the extended days of holiday be treated as statutory public holidays or rest days, and how should overtime payments be calculated?

In 2015, to celebrate the 70th anniversary of the end of World War II, the PRC central government decided to add one day of holiday on September 3, 2015. At that time the Ministry of Human Resources and Social Security of the People’s Republic of China stipulated that if the employer asked employees to work on the special holiday, rest in lieu should be arranged or remuneration should be paid at 200 percent of the employee’s standard salary. Therefore, in our opinion, the same calculation standard should apply to this 2020 holiday extension unless otherwise advised.

Meanwhile, the Shanghai Municipal Human Resources and Social Security Bureau has also explained that the extended days should be treated as rest days. Enterprises should pay salary to staff not working during this period; and arrange rest in lieu or pay double salary to those staff having to work.

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The Shanghai Municipality has advocated enterprises to arrange work-at-home during the extended days. Working at home as required by the enterprise should be treated as overtime work on a rest day. Rest in lieu should be arranged or overtime payment should be made.

However, this still poses questions. Are there differences between the Chinese New Year holiday extension (from January 31, 2020 to February 2, 2020) announced by the State Council and the delay of work resumption (from February 3, 2020 to February 9, 2020) announced by the Shanghai Municipality and other regional / municipal governments?

If those persons involved in providing basic services to residents and those involved in combating the spread of the virus need to work from February 3, 2020 (Monday) to February 7, 2020 (Friday), no rest in lieu or overtime payment should be arranged.

On the contrary, if those persons worked during the period from January 31, 2020 to February 2, 2020, either rest in lieu should be arranged, or overtime payment should be made.

The purpose for the Shanghai Municipality to require enterprises not to resume work earlier than February 10, 2020 is to reduce the risk of crowd gathering, rather than to increase the length of the Chinese New Year holiday.

China HR professionals may further ask whether it is possible to arrange and deduct annual leave for the period from February 3 to 7, 2020, considering that the enterprises are not allowed to resume work. This has not been specified in any announcement or explanation yet.

However, we may refer to Article 5 of the “Announcement of the State Council on the Regulations of Paid Annual Leave of Employees” in which it is stated: “Enterprises shall coordinate and arrange for the annual leave of employees on the basis of the specific conditions of production and work, and the individual preference of employees.”

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It means that enterprises have autonomy to arrange the annual leave. Meanwhile, the employees’ individual preference should be taken into consideration.

Therefore, if enterprises internally arrange annual leave during this period (because the business is interrupted by the coronavirus issue) in our view, it does not break the Shanghai government’s rules from the legal perspective.

In practice, it is recommended to obtain a consensus with your employees on the annual leave arrangement. Of course, if the enterprises are willing to take more social responsibility in this difficult time, this will have knock on effects concerning future staff retention and reputation enhancement. Employees want to know their employer is acting responsibly and will look after and protect them.

Apart from the Shanghai government, the Beijing Municipal Human Resources and Social Security Bureau also issued the “Notice on Maintenance of Stable Labor Relationship During Epidemic Prevention and Control Period” on January 23, 2020. The salaries to be paid in the treatment period, quarantine period, and work resumption period are specified in this Notice:

Employees suffering from coronavirus should be granted a treatment period. Enterprises should pay for sick leave according to the labor contract or collective contract. The sick leave payment should not be lower than 80 percent of the minimum salary standard of Beijing Municipality;
Employees in the quarantine period and / or medical observation period should be paid by their employers as normal; and
For any employees failing to return to Beijing and therefore unable to resume work on time due to the epidemic situation, the employer can treat the absence as annual leave. In case of failing to resume work for a long time, the staff can be arranged to be furloughed by consensus. During the furlough period, the enterprises should pay a basic allowance of not lower than 70 percent of the Beijing minimum salary standard.

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For those staff currently on business travel who fail to return to Beijing due to the epidemic, the enterprises should pay salary as normal.

Note we have provided guidance on the technical aspect of having staff working from home in the article “How to Operate Your China Business Remotely during the Coronavirus Outbreak” (see here).

It is important to note that the advisories given have thus far been issued by Beijing and Shanghai. Other provinces and cities may reasonably be expected to follow these examples and interpret the local rules in the coming days; however, there may be variations.

Please check with your China consultants concerning regional regulatory employment compliance or email our firm at HR@dezshira.com with any questions.

Vivian Mao is in-house legal counsel at Dezan Shira & Associates Shanghai and is a partner of the firm. She has a law degree in International Economic Law from East China University of Political Science and Law, holds the Certificate of Lawyer’s Qualification, and is a member of International Bar Association. Her area of specialization is China Employment Law.