Shanghai’s Sick Leave Pay Rules Have Lapsed: What Employers Need to Know

WHAT HAPPENED ON AUGUST 15

Chinese government notices of entitlements often carry an expiry date and must be actively renewed. On August 15, 2026, Shanghai allowed two such notices to lapse.

The first was the Notice on Strengthening the Administration of Employee Sick Leave and Safeguarding Employees’ Livelihood During Sick Leave (Hu Lao Bao Fa [1995] No. 83), which set the rate of sick pay.

The second was the Notice on the Minimum Standard for Sick Leave Pay or Sickness Relief Payments for Enterprise Employees in this Municipality (Hu Lao Bao Bao Fa [2000] No. 14), which established the floor below which sick pay could not fall. We refer to these notices below as the 1995 Notice and 2000 Notice, respectively.

Both notices had already been extended once, to August 15, 2026, by a 2021 notice (Hu Ren She Gui [2021] No. 6), but no further extension has followed. The Shanghai Human Resources and Social Security Bureau has since confirmed the expiry on its official website.

WHAT THE OLD SHANGHAI RULES REQUIRED

Under the 1995 Notice, sick leave pay was calculated as a percentage of wages. The applicable percentage increased with the employee’s years in the workforce:

Two features of this table had been commonly misunderstood.

First, the percentages did not apply to the employee’s full salary but rather the employee’s “own wage,” which the rules defined as 70% of normal actual pay. An employee on the top tier therefore received 70% of salary, not the full amount.

Second, length of service was calculated across the employee’s entire career, including time with all previous employers, not just the period spent with the current employer.

The 2000 Notice added a floor to this scale: sick pay could never fall below 80% of the Shanghai minimum wage, measured before deductions of the employee’s social insurance and housing fund contributions.

WHAT THE LAW NOW REQUIRES

With the expiration of the local Shanghai regulations, the national rule now governs. Article 59 of a 1995 Ministry of Labour document (Lao Bu Fa [1995] No. 309) imposes a single requirement: during the medical treatment period, sick pay must not fall below 80% of the local minimum wage.

The “medical treatment period” is a statutory window running from three to 24 months depending on the employee’s length of service with the employer, among other factors. During that window, the employer generally cannot dismiss an employee who is out sick.

Beyond this, Article 59 is silent: it prescribes no formula for calculating sick pay, sets no maximum, and imposes no obligation to continue payment once the medical treatment period ends.

The table below sets out the position before and after the change in Shanghai’s sick leave regime:

AN EMPLOYER’S OWN DOCUMENTS MAY STILL APPLY

The expiry removes the government’s requirement but it does not release employers from commitments already made to their employees. Sick pay is governed by a hierarchy of sources—the legal minimum, the individual employment contract, any collective contract, and the company’s internal rules—and the legal minimum operates as a floor, not a ceiling. Anything the employer has promised above that floor continues to be binding on the employer.

In practice, employers are likely to face one of the three following scenarios:

• The old scale was incorporated into the documents. Many Shanghai employers likely copied the percentage scale into their contracts or handbooks. Where they did, those terms remain binding. Reducing pay to the statutory floor of 80% of the Shanghai minimum wage would breach such terms, and employees could file claims and recover the shortfall.
• The documents are silent on sick pay. The national minimum applies by default, and the employer has room to set its own rate going forward.
• The documents use general wording. A clause such as “sick pay will be provided in accordance with Shanghai regulations” leaves the position unclear. The employer can argue that the referenced regulations no longer exist; employees can argue that they are entitled to whatever the clause meant at the time of signing. As this point is likely to be litigated, it is a particular area to watch to see if it is a safe ground for reducing pay.

Lastly, the change does not operate retroactively. Sick leave taken on or before August 15, 2026 continues to be governed by the old rules.

CHANGING YOUR RULES REQUIRES A PROCESS

Even where a change is legally available, an employer cannot simply issue a new policy and begin applying it. Two distinct sets of requirements apply depending on where the sick pay term is recorded:

• Staff handbook and internal rules. Chinese law requires employers to consult with employees before modifying or abolishing policies or benefits that impact the employees’ “vital interests.” If the employer does not engage in the consultation process, or if the employer cannot demonstrate that the employees were properly notified, an arbitrator may decline to enforce the new rule—leaving the original terms in place.
• Individual employment contracts. Because each employee has separately agreed to this term, it can be amended only with the employee’s individual and express consent. There is no unilateral route. Where the contract and handbook conflict, the employee is generally entitled to whichever provides more favorable treatment.

OPEN QUESTIONS

The expiry has left several practical questions without clear answers. Some of these questions concern how the new rule itself is to be applied, for example, whether the 80% minimum wage floor is measured before or after deduction of the employee’s own social insurance and housing fund contributions.

Others concern the risks of paying only the statutory minimum, for example, where contracts or handbooks already promise a higher rate (as discussed above).

RECOMMENDATIONS

With these considerations in mind, we recommend that employers take the following steps:

• Audit the relevant documents before making any changes and maintain the current sick pay rate until that review is complete. Employment contracts, any collective contract, the employee handbook, and local HR policies should all be examined to determine whether the former Shanghai standard has been incorporated therein.
• Identify employees currently on sick leave, along with the remaining medical treatment period for each, particularly if the employee’s sick leave commenced before August 15, 2026.
• Draft a new sick pay policy. With the law now providing only a floor and no formula, employers may set the rate themselves.
• Consult the workforce to implement new sick leave pay rates and retain proof of the process.
• Brief HR and line managers on the current position. The legal minimum may have fallen, but the company’s obligations have not—at least not until its own documents are updated.