Provisions of Shanghai Municipality on Raising Enterprises' Back-pay Security Funds and Advancing Payment
(Promulgated by Decree No. 72 of Shanghai Municipal People's Government on June 21, 2007; amended in accordance with the Decision of Shanghai Municipal People's Government on Amending Provisions of Shanghai Municipality on Raising Enterprises' Back-pay Security Funds and Advancing Payment promulgated by Decree No. 19 of Shanghai Municipal People's Government on September 25, 2009)
Chapter I General Provisions
Article 1 (Purpose and Basis)
With a view to helping workers overcome the temporary difficulties in their life caused by their employers' back pay, and maintaining social stability, these Provisions are formulated in the spirit of relevant documents issued by the State Council and pursuant to the Provisions of Shanghai Municipality on the Promotion of Employment.
Article 2 (Definition)
"Back pay" in these Provisions refers to enterprises' defaults on payment of the wages that shall be but are not yet paid to the workers as well as the compensations that shall be but are not yet paid to workers upon rescission or termination of the labor contract.
Article 3 (Application Scope)
These Provisions shall govern the enterprises' payment of the back-pay security fees, and the workers' application for advancing payment from the security funds.
These Provisions shall not apply to the construction contractors which implement a wage guaranty plan.
Article 4 (Principles for Providing Back-pay Security)
In providing back-pay security, the following principles shall be complied with pooling funds from the general public, providing aid in cases of emergency, and placing a cap on payments to be advanced from the security funds. Workers are encouraged to seek back pay by legal means and to protect their own lawful rights.
Article 5 (Sources of Funds)
This Municipality shall set up back-pay security funds. The funds shall come from the following sources:
1. the enterprises' payment of the back-pay security fees, and the interests thereof;
2. the reimbursements from enterprises of back-pay advanced to affected workers from the funds;
3. subsidies from the financial department; and
4. other incomes.
Chapter II Administrative Departments
Article 6 (Administrative Department)
Shanghai Municipal Human Resources and Social Security Bureau (hereinafter referred to as the "Municipal HRASS Bureau") shall be the competent administrative department of this Municipality responsible for back-pay security, and shall perform the following duties:
1. formulate a management system for the back-pay security funds;
2. examine and decide on advancing back pay from the funds that exceeds the cap;
3. seek from the defaulting enterprises reimbursements of the back pay it has decided to advance to affected workers from the funds;
4. direct and supervise the district/county human resources and social security bureaus (hereinafter referred to as "D/C HRASS Bureaus") in their work regarding back-pay security; and
5. perform other duties which it ought to perform under these Provisions.
The D/C HRASS Bureaus shall be responsible for work regarding back-pay security within their respective jurisdictions, and shall perform the following duties:
1. accept and file applications from their respective jurisdictions for advancingback pay from the security funds, as well as those applications the Municipal HRASS Bureau has earmarked for them to handle and advance back pay;
2. examine and decide on the back pay to be advanced from the funds that does not exceed the cap;
3. seek from the defaulting enterprises reimbursements of back pay they have advanced to affected workers from the security funds; and
4. perform other duties which they ought to perform under these Provisions.
The "cap" in Clauses 1 and 2 hereunder shall be decided by the Municipal HRASS Bureau.
Article 7 (Financial Management)
The revenues and expenses of the back-pay security funds shall be managed separately. Special accounts shall be opened for such purpose, and the money in such accounts shall be used only for the purpose of providing back-pay security.
The back-pay security funds allocated by the Municipal HRASS Bureau to the D/C HRASS Bureaus shall be deposited to the special accounts of the D/C HRASS Bureaus, each of which shall be subject to independent accounting. The specific rules for managing such accounts shall be formulated by the Municipal HRASS Bureau together with the municipal finance bureau.
The expenditures necessary for work relating to back-pay security shall be included in the budget of the government at the same level.
Article 8 (Supervision)
Shanghai Municipal Social Security Supervisory Committee shall supervise over the collection of the back-pay security fees and the use of back-pay security funds.
Chapter III Collection
Article 9 (Collecting Agency)
The social security agencies under the Municipal HRASS Bureau shall be responsible for the collection of the back-pay security fees.
Article 10 (Payers of the Back-pay Security Fees)
Enterprises in this Municipality shall pay the back-pay security fees within the period specified by the Municipal HRASS Bureau in accordance with the Provisions hereunder.
Enterprise branches that have obtained their own business licenses shall pay the back-pay security fees on their own.
The back-pay security fees paid by the enterprises shall be listed as an item of cost.
Article 11 (Rates and Amounts)
Enterprises and branches thereof shall pay the back-pay security fees on an annual basis. The exact amount of such payment shall be the monthly minimum wages as made public by this Municipality.
Article 12 (Adjustment and Its Promulgation)
The Municipal HRASS Bureau may propose from time to time to adjust the rates of fee payments or suspend fee payments into the back-pay security funds in the light of the revenues and expenses of such funds. Such proposals shall be implemented upon approval by the Municipal People's Government and shall be made known to the general public.
Chapter IV Applications and Payment from the Funds
Article 13 (Requirements Regarding Application)
Under any of the following circumstances, when the enterprise in question is unable to pay or is unable to pay for the time being the back pay, the affected worker may apply for advancing the back pay from the funds:
1. the enterprise has declared bankruptcy, is dissolved, or is winding up for liquidation, and the facts of back pay have been confirmed by the enterprise or its liquidators or verified by the relevant human resources and social security administrative department or labor dispute resolution agency; or
2. the enterprise has stopped its business operation because its operator has gone into hiding or has fled, and the facts of back pay have been verified by the relevant human resources and social security administrative department or labor dispute resolution agency.
Apart from the above, in cases where enterprises' back pay may give rise to grave conflicts, and the administrative department responsible for dispute resolution has verified the facts of the dispute and the back pay, the affected worker may also apply for advancing the back pay.
Article 14 (Restrictions on Applicant's Qualification)
Under circumstances set forth in Article 13 hereof, the following persons who otherwise qualify shall not receive advanced back pay from the funds:
1. the legal representative or operator of the enterprises in question;
2. close relatives of the above who live with them;
3. those who own 10% or more of the shares of the enterprises in question;
4. those whose monthly wages are more than three times the average wages of this Municipality; or
5. those whose total claim of back pay is under 200 yuan.
Article 15 (Materials to be Submitted by Applicants)
The applicant shall provide evidence of his or her identity and labor relations, and shall properly fill out the application form for advancing back pay from the funds, and provide as well relevant materials substantiating the fact of back pay.
If the applicant falls under Clause 2 of Article 13, he/she shall also submit evidentiary materials provided by the relevant dispute resolution agency proving the necessity of advancing back pay from the funds.
Article 16 (Deadline for Application)
Workers who seek advancing back pay from the funds shall submit their applications to the relevant D/C HRASS Bureau within 30 days upon obtaining evidentiary materials in support of the fact of back pay.
If a worker can not submit his/her application in time due to reasons unattributable to himself or herself, the D/C HRASS Bureau may appropriately extend the period of application.
Article 17 (Examination and Advancing Back Pay from the Funds)
Upon receiving an application, the D/C HRASS Bureau shall promptly examine it, and shall decide within 10 working days whether or not to advance payments from the funds. Applications for payments to be advanced in excess of the cap shall be submitted to the Municipal HRASS Bureau for examination and approval.
The decision of the human resources and social security administrative department against advancing back pay from the funds shall not affect the applicant's right to seek payment of the defaulted wage from the enterprise in question pursuant to provisions of labor supervision and labor dispute resolution and other relevant laws and regulations.
Article 18 (Duty to Assist)
When, in examining the application materials, the human resources and social security administrative department need additional information regarding the back pay, the applicant, the enterprise in question, and other relevant institutions and organizations shall have the duty to cooperate.
Article 19 (Amount of Back Pay to be Advanced)
In cases where the claimed back-pay doest not exceed six months' wages, computation of the amount to be advanced from the funds shall be based on the actual months of back pay. In cases where the claim exceeds six months' wages, the amount to be advanced from the funds shall be the total of six months.
If the defaulted monthly wage or monthly compensation exceeds the minimum wage of this Municipality for the relevant year, the amount to be advanced from the funds shall be calculated by the minimum monthly wage. If the defaulted monthly wage or monthly compensation falls below the minimum wage, the amount to be advanced from the funds shall be the actual amount of back pay.
Chapter V Seeking Reimbursement from Enterprises
Article 20 (Subrogation of Right to Seek Back Pay from Enterprises)
After a worker has received advanced back pay, the human resources and social security administrative department that has made such advanced payment shall have the right in subrogation to seek back pay from the enterprise in question with respect to the part that has been advanced from the funds.
Obtaining the advanced back pay from the funds shall not affect the rights of the worker to seek payment of the remaining parts of the back pay from the enterprise in question pursuant to relevant laws.
Article 21 (Enterprises' Obligation to Repay)
The enterprise in question shall promptly pay into the back-pay security funds the amounts which have been advanced to the worker from such funds.
Article 22 (Remedies for Failure to Perform Obligation of Repayment)
If the enterprise in question defaults on or refuses to perform its obligation to repay into the funds the amounts that have been advanced to workers from the funds, the human resources and social security administrative department may apply to a people's court for enforcement or institute a legal action in a people's court.
Article 23 (Right to Repayment in Liquidation)
In cases where back pay has been advanced from the funds pursuant to Item 1, Clause 1of Article 13 hereof, the human resources and social security administrative department may partake in the distribution of property by attending the meetings of creditors, and shall have priority in getting repaid.
Chapter VI Legal Liability
Article 24 (Investigation and Punishment of Enterprises That Default on Wage Payments)
The human resources and social security administrative department shall investigate and punish, pursuant to the Rules of Supervision over Labor Security and relevant provisions of this Municipality, enterprises that default on payment of wages or other remunerations without justification, or fail to pay compensations in accordance with relevant laws.
Article 25 (Legal Liabilities for Failure to Pay the Back-pay Security Fees)
The Municipal HRASS Bureau shall order the enterprises which fail to pay the back-pay security fees to pay such fees within a prescribed time limit. If an enterprise defaults on the payment, it shall pay an additional 2% as penalty for each day of such default, as well as a fine of between not less than 1,000 yuan but not more than 3,000 yuan. The penalties shall go to the back-pay security funds.
Article 26 (Legal Liabilities for Providing Falsified Materials)
The human resources and social security administrative department shall order those who obtain advance payment of defaulted wages from the funds by providing falsified materials or fabrications to return the amount obtained. If the wrongful act constitutes a crime, the wrongdoer shall be prosecuted for criminal liability as provided by law.
Article 27 (Liabilities of Responsible Officers for Violating the Law)
Those who are involved in the work relating to back-pay security shall be disciplined by relevant administrative departments if they abuse their powers, commit fraud for personal gains, or neglect their duties. If the wrongful act constitutes a crime, the wrongdoer shall be prosecuted for criminal liability as provided by law.
Chapter VII Supplementary Provisions
Article 28 (Annual Report and Audit)
The Municipal HRASS Bureau shall report to the Municipal People's Government on an annual basis about the previous year's collection of the back-pay security fees and the use of the money in such funds.
The auditing department shall duly audit and monitor the revenues and expenses of the back-pay security funds.
Article 29 (Coordinating Mechanism)
Shanghai Municipal Joint Committee for Labor Relation Coordination may, on a regular basis, research on and coordinate in matters regarding back-pay security.
Article 30 (Commendation)
The human resources and social security administrative department may commend those enterprises that have made outstanding achievements in protecting workers' rights and interests and promoting harmony in labor relations.
Article 31 (Effective Date)
These Provisions shall be effective as of October 1, 2007, and the Trial-Implementation Procedures of Shanghai Municipality on Back-Pay Funds of Small Enterprises (SMPG G  No. 043) printed and distributed by Shanghai Municipal People's Government on November 25, 1999, and the Implementation Suggestions on Collection of Back-Pay Security Funds of This Municipality's Small Enterprises (SMPG G  No.038) approved and transmitted by Shanghai Municipal People's Government on August 8, 2000 shall be repealed at the same time.