Sick leave pay standards reduced in Shanghai

Effective 15 August 2026, the local regulations governing sick leave pay calculations in Shanghai have expired. As a result, Shanghai will transition from its historically more generous local standards to the national standard for sick leave pay, which provides for payment no less than 80% of the applicable local minimum wage. This represents a significant reduction in employer obligations and aligns Shanghai with the rest of mainland China.

 

A. Transition to the National Standard for Sick Leave Pay

Shanghai’s sick leave pay standards have historically been more generous than those in other provinces and cities. For example, under the previous framework, an employee with 8 years or more of service at the same employer would receive 100% of their salary during sick leave of six months or less. Although sick leave pay was subject to a cap at the average social wage level, the effective sick leave pay remained substantially higher than in other provinces and cities, creating a significant financial burden on employers and, to some extent, incentivising the abuse of sick leave.

With the expiration of the local regulations, Shanghai will now follow the national standard for calculating sick leave pay, under which sick leave pay should be no less than 80% of the applicable minimum wage.

Based on the 2026 Shanghai minimum wage of RMB2,740 per month, the statutory sick leave pay under the new standard would be approximately RMB2,192 per month.

 

B. Medical Treatment Period: No Change

The medical treatment period calculation standard remains unchanged, and continues to differ from the rules in other provinces and cities, specifically, under the Shanghai rules, the medical treatment period is determined solely based on the employee’s years of service at the current employer. It starts at 3 months for the first year of service and increases by 1 month for each additional year of service, up to a maximum of 24 months. By contrast, in most other cities, the medical treatment period is determined by both the employee’s years of service at the current employer and their total years of service in the workforce.

 

C. Recommended Actions

The impact of the new sick leave pay calculation method will depend on how each employer’s existing policies, internal rules, and employment contracts are structured. Key considerations include whether the company’s policy or employment contract determines sick leave pay by reference to “applicable local regulations” (or similar language), whether specific calculation details are stipulated, the extent to which the company wishes to continue offering entitlements that exceed the statutory requirements, and the company’s appetite for reducing labor costs and minimising the risk of employees abusing sick leave. Employers should consider taking the following actions:

1. Review existing policies and rules. Determine whether the company’s current sick leave pay provisions reference local regulations generally or incorporate specific calculation tables. This will dictate whether the policy automatically adopts the new standard or requires an affirmative amendment. Under PRC labour law, the company is required to go through a consultation process for any such policy amendments.
2. Review employment contracts. Identify whether certain amendments to individual employment contracts or collective contracts would be required to reflect the new legal update and the standard the company would like to implement. Amendment to these documents will require consent from the employees.
3. Monitor further guidance and assess transitional issues. Employers should continue to monitor any further guidance from local authorities and judicial practice regarding the interpretation and application of the new standard, particularly with respect to transitional arrangements. For example, for a company whose policies automatically adopt applicable rules and regulations on sick leave pay, it remains unclear how sick leave pay should be calculated in the following situations: (a) an employee who applied for sick leave before 15 August but will not commence the leave until on or after 15 August; and (b) an employee who is already on sick leave that straddles the 15 August cutoff date—specifically, whether the updated sick leave pay policy can immediately be implemented as of 15 August.