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Shanghai's New Sick Leave Pay Position: Greater Flexibility for Employers

9 September 2026

By Maarten Roos, Stacey Wu

For many years, employers in Shanghai operated under a local sick leave pay regime that was often much more generous to employees than the national standard. This changed on 16 August 2026 upon expiry of local notice Circular 83.

The Shanghai labour authority has confirmed that of Circular 83 is no longer effective, and that in the absence of replacement rules, the national standard applies. No new Shanghai-specific rules are currently planned.

For employers, this is generally a welcomed development. The expiry of Circular 83 removes the former mandatory, service-based calculation system and gives employers greater flexibility to determine their own sick leave pay arrangements. It may also allow them to reduce the financial burden associated with long-term employee sickness. However, whether an employer can benefit immediately will depend on what it has already promised employees in its contracts and internal policies.

From service-based formula to statutory floor

Circular 83 prescribed different rates of sick leave pay according to an employee’s length of service with the employer and, in certain cases, the duration of the employee’s absence. Longer-serving employees could therefore be entitled to receive a relatively high percentage of their normal salary while on sick leave.

Following the expiry of Circular 83, the principal statutory reference is Article 59 of the Opinions on Several Issues concerning the Implementation of the PRC Labour Law (Lao Bu Fa [1995] No. 309). Under this national rule, an employer must pay an employee during the statutory medical treatment period, but the payment may be lower than the local minimum wage. It must not, however, fall below 80% of that minimum wage.

Shanghai’s current monthly minimum wage is CNY 2,740. The corresponding minimum sick leave payment is therefore CNY 2,192 for a complete month of sick leave, subject to the applicable calculation rules where the absence covers only part of a month.

It is important to emphasize that CNY 2,192 is a statutory minimum, not a mandatory standard rate. Employers remain free to offer more favourable sick leave benefits, and many employers do, especially foreign-invested companies. However, they are no longer required by Circular 83 to calculate sick leave pay according to an employee’s length of service. This means Shanghai employers now have the opportunity to design a sick leave policy that optimally reflects their own remuneration structure, workforce and cost considerations.

Existing company rules do not automatically disappear

The expiry of Circular 83 does not automatically cancel more generous benefits already granted by an employer.

Many Shanghai employers reproduce the former local rates in their employment contracts, employee handbooks, remuneration policies or other internal rules. Where those documents grant employees a specific level of sick leave pay, the employer may remain bound by that commitment even though the legislation on which it was originally based has expired.

The wording of the relevant document will matter. There is an important difference between:

a policy that expressly promises payment at stated percentages of salary; and
a policy that merely refers to the sick leave pay required under the laws and regulations in force from time to time.

In the first case, the more generous rates are likely to continue as an independent company commitment until they are validly amended e.g., by a change of the employee handbook. In the second, the expiry of Circular 83 may have a more direct effect on the amount payable. Employers should therefore review the actual wording of their documents before changing payroll practices.

Can an employer reduce sick leave payments?

An employer may consider adopting a new sick leave pay structure based on, or closer to, the national minimum. This could materially reduce employment costs, particularly where the employer currently pays long-serving employees a high percentage—or even 100%—of their normal salary during sick leave.

Any change should apply prospectively and must be implemented through the correct procedure. Where the existing entitlement appears in an employee handbook or another internal policy directly concerning employees’ interests, the employer should follow the consultation procedure required under PRC employment law. This generally includes presenting the proposed amendment to employees or their representatives, seeking and considering their opinions, consulting the labour union or employee representatives, and properly communicating the final policy to the workforce. A change introduced without the required procedure may not be enforceable in an employment dispute.

Where a particular rate of sick leave pay has been agreed directly in an employment contract, the position is more restrictive. The employer generally cannot reduce that contractual entitlement unilaterally. Written agreement with the employee will normally be required.

Employers should also consider the employee-relations consequences. A reduction from salary-based sick leave pay to CNY 2,192 per month could be substantial, particularly for senior or long-serving employees. Some employers may prefer to retain part of the former benefit, introduce a cap, or adopt a more moderate formula rather than moving immediately to the statutory minimum.

Useful opportunity for Shanghai employers

The change creates a genuine opportunity for employers in Shanghai. We recommend the following steps to employers with personnel in Shanghai:

Review employment contracts, employee handbooks, remuneration policies and payroll practices.
Identify whether the existing sick leave formula is stated as a contractual or company benefit, or merely refers to the applicable law.
Decide whether the current benefit should be retained, reduced or replaced.
Consider whether a capped or tiered company policy would be preferable to immediately adopting the national minimum.
Assess the financial and employee-relations impact of any proposed change.
Follow the statutory consultation and communication procedures as part of an change of internal policies.

The expiry of Circular 83 should be viewed as positive for employers. It gives them greater control over the design and cost of their sick leave benefits and potentially reduces the financial burden created by Shanghai’s previous rules.

That flexibility is not unlimited. Before reducing payments, each employer must establish what it has already committed to and follow the appropriate procedure to change those commitments.

R&P's China employment team has been repeatedly recognized by the Legal500 as a leader in the field. Key focus areas include termination of senior management, mass redundancy projects, compliance investigations, and general employment law support. For more information, please reach out to the authors Maarten Roos ([email protected]) or Stacey Wu ([email protected]), or your trusted contact at R&P China Lawyers.