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Human Resources and Payroll in China 2016-2017 (5th Edition) -
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3. For the counting of the years of service:
How to deal with working periods of less than one year? For a working period that is less than 6
months, it shall be counted as half a year, and half month’s salary must be paid as severance.
If a working period is over 6 months but less than one year, it shall be counted as one year, and one
month’s salary shall be paid as severance.
For example, in the case that an employee worked for 13 months for the same company, it can be
regarded as (1+12) months when calculating the severance payment. For the 12 months, he will
receive severance pay that amounts to 1 month’s salary. For the 1 month, it can be regarded as
half a year and the employee can receive 0.5 month salary as severance payment. So in total, the
severance payment is 1.5 months’ salary.
4. Total amount restriction:
The severance is limited to a maximum of 12 month’s average salary. In other words, a lawfully
terminated employee can only receive a maximum of 12 month’s average salary even if he or she
worked for a company for over 12 years.
The calculation method provided above is only the minimum amount an employer is required to pay by law. In
practice, however, employers often pay a higher amount than the statutoryminimumamount. The reason behind
this is simple: employers are willing to pay more money to get employee’s consent, and thus avoid potential labor
disputes. Even if there are grounds for unilateral termination, they are challenged in court and lead to costly and
onerous litigation more often than not. This is because the grounds for termination are not always easy to prove.
Besides, in circumstances beyond the lawful termination we presented in the above sections, such as wrongfully
terminating a specially protected personnel, the employee shall be entitled to double severance payment if the
employee does not demand continued employment or it’s impossible to continue the employment relationship.
It is a commonmisconception that an employer can unilaterally terminate an employee with no solid reasons by
simply paying double severance payment. The potential cost to employers for unlawful termination can be quite
high. Apart from litigation costs, the employer might still need to pay the employee’s salary for the remainder of
the contract, as well as the double severance payment.
In addition, employers often give higher severance payment to employees in sensitive positions, such as employees
who keeps important documents of the company, upon the expiration of their labor contracts.