Draft Social Security (Civil Penalties) Regulations 2012:

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Publisher: TSO (June 20, 2012)

ISBN: 021504472X

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Under PRC Labor Contract Law, the last salary payment must coincide with the employee’s completion of work.  Practically however, employers often need a buffer to calculate, for example, quarterly bonuses and sales staff commissions.  In Shanghai, this reality is now legally accommodated.

The Updated Regulation also resolves the controversial issue of what should comprise base pay for purposes of calculating overtime and leave pay.  The following are now specifically excluded from base pay: year-end bonus, commuting allowance, meal allowance, housing subsidy, night-shift allowance, high temperature allowance and overtime pay.
Finally, the Updated Regulation articulates a policy that opens the door for employers to decrease an employee’s salary as a consequence of employee misconduct.  While rules for implementation have yet to be formulated, this represents a significant development and departure from the laws in the rest of China. 
Shanghai is blazing the trail for employers in this regard: it is the only province where the Updated Regulation or any similar rule applies.  A national salary payment regulation is currently being drafted, and this may reflect the principles of the Updated Regulation.  We will continue to keep you apprised.
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