Even when an employer lawfully terminates an employee, severance will be paid unless there is some employee misconduct leading to the dismissal.
China does mandate severance pay following lawful termination for restructuring, contract expiration or mutual agreement between the employer and employee. An unlawful termination (without cause) would result in double the severance amount being imposed or punitive compensation.
As a company with employees in China, you may want to know how severance pay in China is calculated so that you can plan for any anticipated terminations, and this article will give you those details.
Calculating Severance Pay in China
The basic rule for severance calculation in China is one month of salary for each year of employment. It is based on the employee’s average salary amount for the 12 months preceding dismissal. Work periods of six months or more in a year will result in a full month salary, while less than six months equals one-half month’s salary...read more
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