Meaning
Statutory compensation formulas under Chinese labor legislation calculate severance payouts based on employee tenure and monthly wage averages upon employment contract termination. Under the Labour Contract Law of the People’s Republic of China, severance arithmetic labour code rules govern how employers compute financial compensation when terminating employees during corporate restructurings or non-fault dismissals. Payout calculations multiply years of service by the employee average monthly wage over the twelve months preceding termination.
Specific caps and service period thresholds protect worker rights and employer solvency limits.
Tenure Multiplier
Length of service determines the base multiplier applied to the monthly wage calculation. Under severance arithmetic labour code standards, working periods between six months and one year count as one full month of wage compensation, while service under six months incurs a half-month payment. Employment history predating January 1, 2008 follows legacy calculation rules under local municipal labor regulations.
Wage Cap
High earners are subject to statutory payment caps equal to three times the local average monthly wage published annually by municipal statistics bureaus. Service years for employees exceeding the wage threshold are capped at a maximum multiplier of twelve years.
Double Payment
Unlawful employment terminations trigger punitive compensation mandates equal to double the standard severance calculation. Employers failing to establish statutory grounds for unilateral termination face mandatory reinstatement orders or double severance payouts.
