Since the outbreak of the epidemic in the spring of this year, Shanghai has taken containment measures against areas such as Pudong since March 28, and has taken containment measures against areas such as Puxi since April 1. Most areas are still under containment. Many enterprises are unable to operate normally during the period of closure. Under such circumstances, can enterprises reduce salaries for employees?

1、 Negotiable salary reduction

According to the Ministry of Human Resources and Social Security and local regulations of Shanghai Municipality, enterprises affected by the epidemic can not only negotiate salary reductions, but also adjust the salary treatment of employees in various ways.

Specifically, during the period when employees are delayed or not returned to work due to the impact of the epidemic, employees who cannot provide normal labor will be paid according to the standards specified in the labor contract within a salary payment cycle; If the wage payment period exceeds one wage payment period, and if the employee provides normal labor, the wage paid by the enterprise to the employee shall not be lower than the local minimum wage standard. "If an employee fails to provide normal labor, the enterprise shall pay living expenses, which shall be subject to the measures stipulated by each province, autonomous region, or municipality directly under the Central Government.". Currently, there is no clear regulation on the specific standard of living expenses in Shanghai. Referring to Article 12 of the "Shanghai Enterprise Wage Payment Measures", it should not be lower than the minimum wage standard set by Shanghai, that is, 2590 yuan per month. However, in practice, there are also cases where 80% of the minimum wage standard in Shanghai is paid and supported by the court.

On the other hand, if an enterprise is experiencing difficulties in production and operation due to the impact of the epidemic, it can negotiate with employees through a consultative democratic process to stabilize their jobs by adjusting salaries, rotating positions and taking shorter working hours, and try not to reduce or reduce layoffs; For those who are temporarily unable to pay wages, the enterprise can negotiate with the labor union or employee representatives to postpone payment, to help alleviate the pressure on the enterprise's capital turnover.

2、 How to understand "a salary payment cycle"?

There are currently no uniform provisions on this issue, and there are two different understandings.

（1） The first understanding

"One Payroll Period" is "Previous Payday - Shutdown Date - Next Payday". In other words, within the monthly salary cycle, the date of payment of the original salary standard is from the date of shutdown to the remaining date of the monthly salary cycle, usually less than one month.

For example, the Law Enforcement Brigade of the Jing'an District Human Resources and Social Security Bureau in Shanghai holds this view, [from the "Jing'an" official account, "How to pay wages during isolation? A large wave of dry goods has come to answer the questions of the human society" of the Law Enforcement Brigade of the Jing'an District Human Resources and Social Security Bureau on April 5, 2022.] Take the suspension of production on February 20 of the employer, and the salary of the last month on the 15th of each month as an example:

Example 1: If the corresponding salary calculation period is from the 1st to 31st of the previous month, the original salary has been paid on February 15th (January), the original salary should be paid on March 15th (February), and the living expenses will be paid from April 15th.

Example 2: If the corresponding salary calculation cycle is from the 1st to 31st of the current month, the original salary (February) has been paid on February 15th, and the living expenses will be paid from March 15th.

（2） Second understanding

"One salary payment cycle" is a natural month. In other words, regardless of which day is the pay day, the date of payment of the original salary standard is one month (30 days) from the date of shutdown.

For example, take the employer's suspension of production on February 20th and the salary of the previous month paid on the 15th of each month as an example:

Example 1: If the corresponding salary calculation period is from the 1st to the 31st of the previous month, the original salary has been paid on February 15th (January), the original salary should be paid on March 15th (February), and the original salary should be paid by stages on April 15th (February 20th to March 21st, and the living expenses should be paid from March 22nd to 31st).
Example 2: If the corresponding salary calculation period is from the 1st to the 31st of the current month, the original salary has been paid on February 15th (February), and the original salary will be paid by stages on March 15th (March 1st to March 21st), and the living expenses will be paid from March 22nd to 31st.

On July 10, 2020, the Ministry of Human Resources and Social Security and the Supreme People's Court jointly issued the "Typical Cases of Labor and Personnel Disputes (First Batch)" (Human Resources and Social Security Ministry Letter [2020] No. 62) in Case 4, which holds this view, and the People's Court of Pudong New Area in Shanghai shares the same view. [See the official account of "Shanghai Pudong Court" on February 12, 2020, "Here Comes the Answer! Ten Questions and Ten Answers to the Legal Problems of Labor Employment under the Epidemic".] This understanding is relatively beneficial to employees, and it is suggested that enterprises outside Jing'an District in Shanghai should adopt the second way, which is more stable.

3、 Attention should be paid to democratic procedures

As mentioned earlier, during the special period of epidemic prevention and control, enterprises can alleviate operational pressure by reducing salaries, paying living expenses, delaying payment of wages, and other methods. However, they should also pay attention to democratic procedures and conduct democratic negotiations with trade unions, employee representatives, or all employees to ensure legal compliance.

Some enterprises may be concerned that they cannot reach an agreement after democratic negotiation, so they may simply force a notice to unilaterally adjust employee salaries. However, lawyers hereby suggest that democratic procedures focus on "procedures", which is also known as "forms". The core of democratic procedures is to ensure the employees' right to know and supervise, rather than limiting the independent management rights of enterprises. In most cases, if there are different opinions on a system or resolution formulated through democratic procedures that cannot be reached through consultation, the enterprise can make a final decision based on the need for independent operation, provided that it does not violate legal provisions and is reasonable. Therefore, it is recommended that enterprises do not skip legal procedures due to fear of formality, resulting in the final system or resolution being unable to receive legal support due to procedural flaws.
In this special period, enterprises can choose appropriate democratic procedures based on their actual situation, such as through online instant meetings such as Tencent meetings, WeChat group chats, and pin group chats, or through non instant meetings such as company internal OA websites, forums, and emails. If the meeting is held by way of a conference, it is recommended that the entire process of audio and video recordings be retained for evidence. If conditions permit, enterprises can also request a notary office to record the entire process, or conduct a notarization in a timely manner after the meeting to retain relevant evidence.

Generally speaking, the democratic consultation process should include the following four steps:

(1) The enterprise introduces a system or draft resolution, stating the background, purpose, content, etc. of the relevant formulation;

(2) Employees discuss and propose plans and opinions. The employee congress or all employees discuss the system or draft resolution, propose supportive or non supportive opinions, and explain the reasons;

(3) The enterprise shall negotiate with the trade union or employee representatives on an equal footing. After discussing and collecting employee opinions, the enterprise shall negotiate with the trade union or employee representatives to discuss whether to adopt relevant opinions. The trade union or employee representatives shall vote according to the voting procedure in accordance with the law. For enterprises without trade unions or employee representatives, the enterprise can directly negotiate with all employees. After listening to different opinions, the enterprise can decide whether to adopt them based on the actual situation;

(4) Publicize the final system or resolution, or inform all employees. An enterprise should notify all employees of the final system or resolution before it becomes effective.
To sum up, during the period of closure and control of the epidemic, enterprises can adjust the wages and salaries of employees through legal and compliant methods to stabilize employment. In this difficult time, they can work together to usher in the resumption of work and production as soon as possible.

References and Notes:

(1) Notice of the General Office of the Ministry of Human Resources and Social Security on Properly Handling Labor Relations Issues during the Prevention and Control of Pneumonia Infected by novel coronavirus (RSTDM [2020] No. 5)

(2) Opinions of the Ministry of Human Resources and Social Security, the All China Federation of Trade Unions, the China Enterprise Confederation - China Entrepreneur Association, and the All China Federation of Industry and Commerce on Stabilizing Labor Relations to Support the Resumption of Work and Production of Enterprises during the Prevention and Control of novel coronavirus Pneumonia (RSBF [2020] No. 8)

(3) Provisional Regulations on Wage Payment (LBF [1994] No. 489)

(4) "Opinions of the Shanghai Higher People's Court and the Shanghai Human Resources and Social Security Bureau on Relevant Guidance for Handling Labor Dispute Cases Affected by the Epidemic Situation" (HGF [2020] No. 203)

(5) "Measures of Shanghai Municipality on the Payment of Enterprise Wages" (H.R.S.Z.F. [2016] No. 29)