On 15 August 2026, two long-standing Shanghai local regulations on sick leave pay expired and were not renewed by the Shanghai Human Resources and Social Security Bureau, i.e. the Circular of the Labor Administration of Shanghai Municipality on Strengthening the Administration of Enterprise Employees’ Sick Leave and Ensuring Their Living during Sick Leave (Circular Hu Lao Bao Fa [1995] No. 83, “Circular 83”) and the Circular of the Labor and Social Insurance Bureau of Shanghai Municipality on the Minimum Payment for Sick Pay or Illness Relief Pay of Enterprise Employees in This Municipality (Circular Hu Lao Bao Fa [2000] No. 14, “Circular 14”) Circular 83 and Circular 14 are hereinafter collectively referred to as the “Two Circulars”). This means that from 16 August 2026, Shanghai will adopt the national statutory standards in calculating sick leave salary. They are much lower than the local standards originally applicable in Shanghai. Below we summarize the key changes and explain their practical implications for employers in Shanghai.
1. Previous Sick Leave Pay Standards Applicable in Shanghai
Under the expired Circular 83, Shanghai employers were required to pay sick leave pay at a certain percentage of the employee’s salary subject to the employee’s sick leave period and consecutive working period at the employer. Specifically:
- for sick leave of no more than 6 months, the sick leave pay ranged from 60% to 100% of the employee’s salary depending on his/her working period at the employer;
- for sick leave beyond 6 months, an illness relief pay of 40% to 60% of the employee’s salary had to be paid instead.
Further, Circular 83 also provided a mandatory floor and an optional cap for the sick leave pay/ illness relief pay. The floor was 40% of the average monthly salary of all employees at the employer. For example, if the average monthly salary at the employer is RMB 10,000, the floor would be RMB 4,000. The cap was the average monthly salary of all employees in Shanghai for the previous year, for example RMB 12,577 in 2025. Circular 14 further provided that sick leave pay/ illness relief pay should not be lower than 80% of the local minimum wage in Shanghai after deduction of the employee’s personal contributions to social insurance and housing funds.
The above local sick leave pay/ illness relief pay in Shanghai were much higher than the national standards and had been implemented in Shanghai for more than 30 years. With the expiry of the Two Circulars, employers in Shanghai are no longer mandatorily required to follow these more generous local standards.
2. New Sick Leave Pay Standards Applicable in Shanghai
- Following the expiry of the Two Circulars, sick leave pay in Shanghai is now subject to the national standards under Article 59 of the Circular of the Ministry of Labor on Issuing and Distributing the Opinions on Several Issues concerning the Implementation of the PRC Labor Law (Lao Bu Fa [1995] No. 309). According to this Article, employees who are ill or suffer from non-work-related injuries shall receive, if taking sick leave during the medical treatment period, sick leave pay or illness relief pay in the amount at the minimum of 80% of the local minimum wage. Based on the current monthly minimum wage in Shanghai of RMB 2,740, the current minimum sick leave pay/ illness relief pay in Shanghai can be as low as RMB 2,192 per month. Notably, under Shanghai’s minimum wage rules, the employee’s personal contributions to social insurance and housing funds shall not be included in the minimum wage and must be paid separately by the employer. Following the same logic, the prevailing view is that employers, if only paying employees sick leave pay at the minimum level, should still bear the employees’ personal contributions to social insurance and housing funds on top of RMB 2,192.
- It shall be noted that the standards of sick leave pay set by the national laws or local regulations are only minimum requirements for employers that have not set their own sick leave pay standards. If an employer has already set higher standards in its employment contracts with employees, collective contracts, or internal rules and regulations such as the employee handbook, such higher standard shall be valid and legally binding, and the employer must apply such standards until they are validly adjusted.Nevertheless, if employers did not set their own standards of sick leave pay but applied the statutory standards only, legally speaking, after 15 August 2026, employers in Shanghai can pay the employees the sick leave salary/illness relief pay according to the national standards rather than the former Shanghai local standards.
3. Practical implications for employers in Shanghai
The expiry of the Two Circulars gives employers in Shanghai greater autonomy in setting their sick leave pay standards. It also opens a window for employers to review their current standards and decide whether to adjust them. We recommend that employers assess their own situation in a timely manner and decide on appropriate adjustments, if any, by taking into account factors such as company culture, costs and employee benefits, etc. Specifically, employers may wish to pay attention to the following:
(1) Review of the company’s existing sick leave pay standards
Employers should first check what they included in their own sick leave pay standards in the past. Normally, such standards can be found in employment contracts, collective contracts, and internal rules and regulations such as the employee handbook. For multinational employers, stipulations on sick leave may also have been included in offer letters, assignment or secondment letters for expatriate employees, group-wide or regional benefit policies.
- In general:
- If the relevant provisions only refer to “applicable laws and regulations”, the national minimum standard will automatically apply if an employee takes sick leave after 15 August 2026. Such employers do not necessarily need to amend their documents at this stage, but should closely monitor further policy developments in Shanghai.
- If the relevant provisions set out specific sick leave pay rates, or even just copied or referred to the tiered rates under Circular 83, these rates shall be deemed as the employer’s own standards and shall remain valid. In particular, if the provision does not expressly include the cap under Circular 83, the rates will apply to the employee’s full salary without any upper limit. In such case, the newly applicable national sick leave pay standards will not help the employers to reduce the costs in this regard. These employers may carefully consider whether their current standards should be maintained or revised.
(2) Change of the company’s existing sick leave pay standards, if necessary
Where an employer decides to change its existing sick leave pay standards, it must do so in the appropriate way in compliance with law. The specific measures to be taken by the employer depend on where the standard is set out:
- If the sick leave pay standards are provided in the company’s internal rules and regulations such as employee handbook and/or separate company policies on sick leave pay, to adjust such standards, the employer must follow the statutory collective consultation procedures under Article 4 of the PRC Employment Contract Law, i.e. announce the amended draft to all employees, consult the employees’ opinion, and announce the final amended version to employees.
- If the sick leave pay standards are provided in employment contracts or individual letters/agreements with the employees, to adjust such standards, the employer must reach a written agreement with each employee concerned.
- If the sick leave pay standards are provided in more than one document, all relevant documents should be amended consistently. The amended standards should only apply to the sick leave taken after their effective dates. Where an employee takes sick leave before the adjusted company standard takes effect, the sick leave pay for such leave should still be calculated in accordance with the previous standard.
(3) Please note that although the Shanghai local government has changed its policies on sick leave pay standards, it has not changed its special policies on medical treatment period yet, which are still different from the national standards. Therefore, employers in Shanghai shall still decide the medical treatment period of the employees according to the local policies in Shanghai when adopting the new sick leave pay standards for their employees.
