SHHRSS Issued the Circular Increasing the Minimum Wage Standard in Shanghai

April 7, 2011

The Shanghai Human Resources and Social Security Bureau ("SHHRSS") issued the Circular on Adjusting the Minimum Wage Standard in Shanghai ("Circular I") on March 22, 2011, which announces that, commencing from April 1, 2011, the minimum wage standard in shanghai has been increased. The monthly minimum wage standard which applies to the full-time employment has been increased from RMB 1120 to RMB 1280, and the hourly minimum wage standard which applies to part-time employment has been increased from RMB 9 to RMB 11.

According to relevant laws and regulations, the wage paid by the employer to the employee shall not be less than the local minimum wage standard. So, upon the new standard’s implementation date provided in the Circular I, all wages beneath the new standard shall be increased accordingly in Shanghai.

Meanwhile, all the amount which should be calculated on the base of the minimum wage standard has been increased consequently, for instance, the severance pay paid to the employee by the employer (if the employee's average monthly wage during the 12 months preceding the rescission or termination of the employment contract is beneath the local minimum wage standard). The maximum subject matter amount of the type of employment dispute case, in which a worker seeks recovery of employment remuneration, medical expenses for a work-related injury, severance pay or compensation pursuant to the relevant law, and which should be handled as a final reward, has also been increased correspondingly, too.

The Circular I also points out that: (i) items which should be excluded from monthly minimum wage and paid by the employer according to laws and regulations additionally include: (a) wages for extended working hours; (b) subsidies for working under special working environment and conditions which involve middle shift, night shift, high temperature, low temperature, underground work and toxic and hazardous substance; (c) social insurance premium and housing fund paid by the employee according to law; (d) meal allowances, commutation subsidies and housing subsidies; (ii) hourly minimum wage shall exclude the social insurance premiums which should be paid by both the employee and the employer, and the employer shall pay the relevant social insurance premiums as per laws and regulations beside paying the hourly minimum wage.

Additionally, according to the Circular on Announcing the Employees' Average Wage and Its Growth Rate in 2010 in Shanghai ("Circular II"), the employees' average annual wage and average monthly wage in Shanghai in 2010 reached RMB 46,757 and RMB 3,896 respectively, both of which revealed a 9.3% growth over the previous year. The Circular II also provides that the aforementioned new standard shall be applied when making calculation based on the employees' average wage in 2010 in Shanghai. Accordingly, the maximum contribution base of social insurance and housing fund paid by the employer and the employee respectively in Shanghai has been increased.