China: A Guide to Prevent Collapse During Corona Crisis

Emily Kuhnert March 26, 2020

We have gathered information on what measures you can take as an employer in China to help preserve your employees while keeping your business intact. As more information comes in, we will update this post.

If you have any questions on the impact of Coronavirus on labor laws, visit our LinkedIn AMA post and leave us your questions in the comment section and we will reply.

[AMA] Impact of Coronavirus on Labor Laws

Updated: March 26, 2020 

Beijing- The Beijing government has introduced a plan to phase in the reduction of social insurance payments and deferred payments.

From February 2020 to April 2020- Pension, unemployment and work injury insurance has been reduced:

  • Pension insurance: Was reduced from 16%  to 8%
  • Unemployment insurance: Was reduced from 0.80% to 0.40%
  • Work injury insurance: Was reduced by 50% of the current rate

An application does not need to be submitted in order for the employer to benefit from these reductions.

From February 2020 to June 2020: Small, medium and micro sized businesses will be exempt from payment.

Differed payments- If an organizations’ operations has been affected by the coronavirus, they may be eligible to apply to defer social contribution payments.  Some of the conditions for eligibility include:

  • The company has experienced a decrease of 50% in monthly revenue compared to Q4 2019
  • The company is not included on a list of companies that have been caught to be dishonest with social security payments
  • The company must commit to ensuring that the social insurances are paid before the expiration of the deferred payment date
  • The company must continue to withhold employee contributions as per the law.  If the employee agrees, the payments of withheld contributions can be deferred as well without penalty.
  • The duration of the deferment should not exceed more than 6 months and this plan will end on December 20, 2020.  No late fees or penalties will be applied during this time.

Shanghai- The Shanghai municipality has also introduced measures to reduce the employer social insurance contributions in phases.

From February 2020 to June 2020, small and medium sized businesses will be exempt from the payment of social insurances.

From February 2020 to April 2020, enterprise (including private)- employer social insurance contributions will be reduced by half.

Starting from February of this year, the three social insurance units of enterprises will be exempted from phased payments.

Government agencies,flexible employees who are self-insured are not eligible for the reduction, deferment, or exemption of social insurance payments.

Employer and Employee Rights & Obligations Q&A

Source: Baker McKenzie

1. Are employees obliged to disclose themselves as a “risk-factor” to the employer? Yes. 

  • Employers are required to collect employees’ health and travel information and employees also have an obligation to proactively provide such information.
  • Furthermore, in many cities (such as Beijing, Shanghai, Guangzhou, and Shenzhen), the local governments implement an individual health code system which can identify the individual’s COVID-19 related health risk level based on the government’s data platform. Employees are generally required to show their individual health code (at the low risk level) before they can enter into the office building/workplace. Employees with a health code of medium or high risk level may not be allowed to enter the office building/workplace or any other public places.

2. Can the employer demand employees to disclose themselves as being a “risk-factor”? Yes. 

  • Employers are required to collect employees’ health and travel information and employees have an obligation to provide such information. An employer may use the government operated individual health code system to identify the employee’s COVID19 related health risk.

3. Can the employer issue an instruction (or a policy) requiring employees to report co-workers with flu symptoms (i.e., fever, cough, difficulty breathing, pain in the muscles, tiredness) to the employer? Yes. 

  • Entities and individuals have a general obligation under the PRC Law on the Prevention and Treatment of Communicable Diseases (Communicable Diseases Law) to promptly report any infectious cases or suspected infectious cases to the disease prevention and control authority and medical institutions. Therefore, it should be permissible for the employer to issue an instruction or a policy requiring employees to report co-workers with flu symptoms to the employer, to fulfill such obligation.
  • Furthermore, employers arguably are required by the government to appoint a designated person(s) to observe the relevant co-workers’ health status. In fact, an official from the National Health Commission stated in a press conference that this measure is required to contain COVID-19 in the workplace. However, this statement has not been documented in any formal government notice.

4. Can employees refuse to come to work? Generally no, unless the employee has justifiable reasons.

  • Pursuant to the relevant government notice, if an employee refuses to return to work without justifiable reasons (as defined below), an employer should first advise the employee that the employer has taken sufficient epidemic control and prevention measures and it is generally safe to resume work, and encourage the employee to return to work. If the employee still refuses to report to work without justifiable reasons, such absence can be deemed to be an unauthorized absence. Technically, the employer may take disciplinary action (up to summary dismissal) for the employee’s unauthorized absence based on the company’s policy. The justifiable reasons referred to above include employees being confirmed with or suspected of contracting COVID-19, employees having been in contact with confirmed or suspected cases, and employees being unable to return to work in the office due to government quarantine orders or other emergency measures, such as a city lock-down, travel ban, or employees being isolated/quarantined after they return to the city where the employer is located pursuant to local policy.
  • Practically, the All China Federation of Trade Unions has suggested that employers arrange for female employees who are pregnant or are nursing to work from home and to provide better protection for them during the COVID-19 outbreak.
  • An employer may, at its discretion, allow employees who are reluctant to come to work, to work from home to the extent practicable. Alternatively, the parties may agree on a period of paid or unpaid leave, or otherwise adjust the employees’ future rest days/weekends for them to take leave now.

5. Can employees refuse to attend meetings or to travel?

  • Employees generally cannot refuse an employer’s reasonable requests. An employer’s request would probably be viewed as reasonable if it follows the rules regarding meeting and travel arrangements in a pandemic situation. So far the national government and many cities have issued notices in this respect.
  • For meeting arrangements, the national government encourages employers to arrange meetings through video conference and reduce face-to-face meetings. If a face-to-face meeting must be held, employers should reduce the number of participants, shorten the meeting time, increase seat spacing, and ensure ventilation of the meeting venue and take efforts to control and prevent the spread of the COVID-19.
  • For travel arrangements, employers are required by the national government to reduce travel arrangements to the extent possible. Employers should take into account the relevant government travel restrictions (with some examples listed below) from both the departing and arrival cities before arranging for employees to travel. Employees may have a justified reason for refusing to travel based on these travel restrictions. 1) For domestic travel, the employee may be subject to isolation /quarantine for 14 days upon arrival at the destination place and/or return to the city where the employee is based pursuant to local policy. 2) For international travel, in light of the global spread of COVID-19, certain local governments (such as the Beijing government) suggest that individuals adhere to the principle of “no travel if not necessary”, and cancel international trips to countries or regions with epidemic situation if possible. 3) All individuals who travel from aboard must undergo an isolated medical observation for 14 days upon arrival in Beijing; all individuals who are from or have travelled through countries listed to have a serious COVID-19 outbreak must isolate themselves at home or a designated place for 14 days upon their arrival in Shanghai.
  • In practice, an employer, when arranging employees to travel during a pandemic period, should assess whether there are government restrictions and isolation requirements in the departing and arrival cities, whether the travel is essential and whether there are any alternatives, whether there are any other risk factors, and what protection measures the employer may provide for the health and safety of the employees. After these assessments are undertaken and the decision is reasonably made in favour of travelling, the employee should follow the employer’s instructions on the travel arrangements. The employer may be able to take certain disciplinary action against the employee if the employee then refuses to follow the employer’s reasonable request.
  • In the absence of detailed guidance in this area, in general, an employer needs to act reasonably when arranging meetings/travel. If an employer takes any disciplinary action against an employee for his/her failure to follow the employer’s instructions, the employer would need to show to the labor tribunal or court that its decision and instructions were reasonable in the context of a pandemic situation.

6. Can the employer send employees on suspension from work?

  • The employer can suspend the employees’ work in a few situations.
  • If the employer identifies an employee with suspected symptoms, such employee should be immediately isolated and sent to the hospital for COVID-19 diagnosis. The employee who is confirmed with or suspected as having COVID-19 must be quarantined for medical treatment or isolated for medical observation as per the government requirement.
  • If the employer identifies an employee who has had close contact with a COVID-19 case or suspected COVID-19 case, such employee must be isolated for medical observation as per the government requirement.
  • If the employee is released from required quarantine/isolation but the employer decides to nevertheless send the employee home, the employer may instruct the employee to work from home if the employee can perform the work remotely, or the employer may otherwise arrange the employee to use annual leave (ideally upon agreement with the employee).
  • If the employer suffers from difficulties in its production and operations due to the epidemic situation and decides to suspend all employees from work for a certain period of time, the employer may (i) arrange the employees to use their annual leave (ii) put the employees on leave by adjusting the rest days within the calendar year of 2020 (this means that employees can be deemed to take their rest days during the period of suspension. When the employee returns to work after the period of suspension, the employee can make up for the rest days taken (e.g., the employee may on weekends etc.); or (iii) suspend its business operations and suspend the employees from work. There are national and local rules regarding pay during the suspension period, e.g., when the employee is subject to mandatory medical treatment or observation, when the employee is released but still not able to work, or when the company chooses to arrange the employee to stay at home without arranging working. For information on salary payment requirements during the suspension period, please see Q10 below.

7. When is the employer forced to shut down its operations?

  • If an employee has symptoms of COVID-19, the employer’s workplace may be required to be quarantined immediately. The office unit he/she works at may need to be closed depending on the medical observation on such employee. If an employee is confirmed as having COVID-19, depending on the seriousness of the epidemic situation, the employer may be ordered by the local government to close down the entire office. The employer may only re-open the office after the epidemic situation is under control.

8. Does the employer have the obligation to report infections occurring in the business to the health authorities? Yes.

  • An employer is under a legal obligation to prevent and control communicable diseases pursuant to the Communicable Diseases Law and its implementing measures. This obligation includes:
  • Cooperating with the prevention and control measures taken by the disease prevention and control authority and medical institutions;
  • Providing truthful information to the local disease prevention and control authority and medical institutions;
  • Promptly reporting any infectious cases or suspected infectious cases to the disease prevention and control authority and medical institutions.

9. Can the employer require an employee to see a doctor?

  • If an employee has suspected symptoms, the employer should immediately isolate such individual and send him/her for COVID19 diagnosis in a designated hospital. The employee will be quarantined for medical treatment if he/she is confirmed as having COVID-19. The employee will be isolated for medical observation if he/she is suspected of having COVID-19.

10. If employees are sent on suspension from work, or refuse to come to work or if an operation is being shut down, do the employees still need to be paid?

  • Whether the employee is entitled to be paid depends on the reason why they are not working:
  • If an employee contracts COVID-19, is suspected of contracting COVID-19, or is ordered to be isolated due to close contact with an actual or suspected COVID-19 case, the employer should continue paying normal salary and benefits during the treatment period or isolation period.
  • If the employee is unable to return to work in the office due to government quarantine orders or other emergency measures, or the employee is required by government rules to self-isolate at home for 14 days upon arrival in the city of the employer’s office, the default position is that the employer should continue to pay normal salary and benefits (note the employer may first arrange for the employees to use their paid annual leave during the relevant period). However, for employees who are unable to return to work in the office due to government quarantine orders or other emergency measures, and remain unable to return to work in the office after using up all available paid annual leave, subject to consultation with the employees (it is not clear what the exact consultation process is, but presumably no employee consent is required in such consultation), an employer may follow the work stoppage payment rules by paying full salary for the first payment cycle (i.e., the first month of work stoppage), and starting from the second month, the employer may start paying the minimum living allowance required under the local rules. Further to the above national requirements, based on the local policy in Beijing, for employees who stay in Hubei province but cannot perform work, starting from March 2020, employers in Beijing need to pay them no lower than twice the Beijing basic living costs.
  • If the employer arranges the employees to work from home or to use their annual leave or the employer otherwise puts the employees on leave by adjusting the rest days within the calendar year of 2020, the employer should pay the employees their normal salary during the relevant period.
  • If the employee refuses to come to work without justifiable reasons, this will be deemed to be an unauthorized absence. The employer is not obliged to pay the employee and may take disciplinary action against such employee in accordance with company policy. (Note, however, unless the employer otherwise dismisses the employee for the unauthorized absence based on company policy, the employer will still need to make social insurance contributions for the employee even during the period of unauthorized absence.)
  • If an employer suspends business operations due to an epidemic situation, during the first pay cycle (i.e., the first month), the employer must pay salary as specified in the employment contract (i.e., employees must continue to receive regular pay). For the period beyond the first pay cycle (after one month), the employer must: (i) pay salary no less than the local minimum wage to employees who have performed work and (ii) pay a “living fee” to employees who have not performed work (the living fee amount shall be determined in accordance with applicable local regulations).

11. If kindergartens and schools are being closed and employees need to stay home and cannot work, does the employer need to pay them and – if so – for how long?

  • Currently there is no national rule on this topic. Some local governments have issued a notice to provide some guidance in this area.
  • In Beijing, each household may have one breadwinner to stay at home to take care of minors (defined as minor children who have to stay at home due to the postponed opening of kindergartens, primary schools, middle schools and high schools). Such arrangement will be treated as being subject to quarantine or other emergency measures taken by the government, and the employer should pay normal salary to the employee during such period. There is no clear time limitation for such period. Furthermore, during the relevant period, the employee’s employment cannot be terminated unless for serious misconduct. If the employee’s employment contract expires during the relevant period, the employment contract shall be automatically extended until the relevant period ends. Note, however, the employer may arrange such employee to work from home, or arrange a different or flexible work schedule for him/her to provide normal work, or arrange the employee to take leave by adjusting the rest days / weekends within the calendar year. In addition, the employees should ask their elder family members to take care of the minor children to the extent possible.
  • Except for Beijing, currently there is no similar government notice that requires employers to pay salary for employees who need to stay home to take care of their minor children and cannot work in other major cities. Generally employers are encouraged to arrange with employees to work from home or arrange a different or flexible work schedule for them to provide normal work while taking care of their minor children.