Table of content:
- Is it lawful for me to receive severance pay?
- How do calculate a severance payment should be?
- What if my employer fails to pay me my severance pay?
- What are N, N+1 and 2N and what do they stand for?
- What does “2N” refer to?
- Relevant Labor Contract Law of the People’s Republic of China Laws and Regulations
- Conclusion
Is it lawful for me to receive severance pay?
In China, severance pay is a legal requirement for employees who are fired by their employers or whose employers fail to renew their labor contracts on the same terms as before. This means that under these two circumstances, employees are entitled to a severance package. However, there are several examples and gaps that result in employer-employee talks.
How do calculate a severance payment should be?
Severance pays shall be paid to the worker at the rate of one month’s salary for each year of employment with the employer, according to Article 47 of the People’s Republic of China’s Labor Contract Law. It is determined based on one year if it is more than six months; if it is less than six months, the worker is paid half a month’s wage if he or she is not on probation.
If the worker’s monthly salary is more than three times the average monthly salary of employees in the region in the previous year, as announced by the people’s government of the municipality directly under the Central Government or the municipality with districts, severance pay shall be paid at the rate of three times the average monthly salary of employees, with a maximum number of years of severance pay not exceeding twelve.
If the worker’s monthly salary is more than three times the average monthly salary of the employees in the previous year’s region, as announced by the people’s government of the municipality directly under the Central Government or the municipality with districts, severance pay shall be paid to the worker at the rate of three times the average monthly salary of the employees, and the maximum number of years of severance pay shall not exceed twelve years.
What if my employer fails to pay me my severance pay?
According to Article 87 of the People’s Republic of China Labor Contract Law, if the employer terminates or terminated the labor contract in violation of the provisions of Article 47, it must pay the worker an indemnity equal to twice the standard of economic compensation stipulated in Article 47 of this law.
Different types of compensation can be sought depending on the circumstances of the divorce. For example, double wages for failing to sign a labor contract, as well as back payment of social security. If employee-employer negotiations fail, you can file an arbitration claim under the law, requesting that the company pay economic compensation, withheld wages, overtime wages, and unemployment insurance, among other things.
Assume an employee is fired. One month in advance, the company notifies both parties in writing, and both parties agree. He earned 30,000 yuan per month and had been with the company for 5 years and 7 months. The company must then pay him 180,000 yuan in severance pay for 6 months.
What are N, N+1 and 2N and what do they stand for?
N is the number of years of work that is commonly cited and is used to refer to the economic compensation in the Labor Contract Law.
N denotes standard severance pay.
N+1 = Standard severance pay + 1 month (to cover the lack of a notice period)
2N = Double severance pay in the event of employer wrongdoing.
There are 6 scenarios for “N” (standard) severance pay for the termination of a labor contract:
(1) Consensual termination proposed by the employer
(2) Resignation of the employee if the employer is at fault
(3) Dismissal by the employer if the worker is not at fault
(4) Economic redundancy
(5) Except for the case where the employer maintains or improves the terms and conditions of the employment contract and the worker does not agree to the renewal, the employment contract expires and is terminated;
(6) When the main body of the employer is extinguished (such as when the employer is declared bankrupt; when the employer decides to dissolve the contract in advance, etc.).
Which scenarios does “N+1” apply to? Basically any scenario where the employer does not give out the 30 day notice period:
(1) the expiration of the contract period.
(2) job incompetence & the employer does not give a notice period
(3) Significant change in objective circumstances where no notice period is given.
What does “2N” refer to?
2N is the compensation paid by the employer after the employment contract is terminated in violation of the law. If the employer terminates the employment contract in violation of the law, the worker has the following options.
(1) to request the reinstatement of the labor relationship
(2) to continue to perform the contract;
(3) or request the employer to pay compensation for the illegal termination of the employment contract, which is commonly known as 2N.
In the event that the worker requests the payment of compensation, or the worker requests the reinstatement of the employment but it is difficult to do so in practice, the employer shall pay the compensation to the worker, i.e. 2N.
Relevant Labor Contract Law of the People’s Republic of China Laws and Regulations
Article 47:
Economic compensation shall be paid to the worker according to the standard of one month’s salary for each year of employment with the employer. If it is more than six months or less than one year, it shall be calculated on the basis of one year; if it is less than six months, the worker shall be paid half a month’s salary as economic compensation.
Article 48:
The employer violates the provisions of this Law to cancel or terminate the labor contract, the worker requests to continue to perform the labor contract, the employer shall continue to perform; the worker does not request to continue to perform the labor contract or the labor contract has been unable to continue to perform, the employer shall pay compensation in accordance with the provisions of Article 87 of this Law.
Article 87:
If the employer terminates or terminates the labor contract in violation of the provisions of this Law, it shall pay compensation to the worker in accordance with two times the standard of economic compensation stipulated in Article 47 of this Law.
Employees’ Conclusion
When facing possible termination, know your rights. Make wise decisions or do not rush into (or out of) agreements without carefully considering your options.
Employers should consider
Concentrate on compliance while attempting to reduce risk. Using a qualified HR service provider, such as China Payroll so you can save time and money. Contact us now!
