[Direct answer]In the Beijing area, it generally includes the wages owed to the worker. According to Article 47 of the Labor Contract Law of the People's Republic of China (amended in 2012), the economic compensation is calculated based on the length of time the worker has worked in the unit. The monthly wage refers to the average wage of the worker in the 12 months prior to the termination or expiration of the labor contract. The Implementing Regulations of the Labor Contract Law of the People's Republic of China further clarify that the monthly wage is calculated based on the wages owed to the worker, including hourly wages or piece rates, as well as bonuses, allowances, and subsidies, etc. Monetary income in the form of year-end bonuses is generally included in the calculation base of economic compensation. If the payment cycle of the year-end bonuses spans more than 12 months before the termination, it can be converted or calculated based on the corresponding period to calculate the average wage. If the monthly wage is lower than the local minimum wage standard, it shall be calculated based on the minimum wage standard.

1. Problem background and typical scenarios

When terminating or rescinding a labor contract, employees often ask whether the year-end bonus should be included in the calculation of the economic compensation base. In practice, some employers exclude the year-end bonus on the grounds that it does not constitute wages, while others split the bonus into various categories to avoid including it in the base, resulting in a lower compensation amount. How the economic compensation base is determined directly affects the total compensation amount and is a frequent point of dispute.

II. Key points of contention

First, the scope of monthly salary, the difference between earned salary and actual salary. Second, whether monetary income such as bonuses, allowances, and subsidies should be included. Third, how to convert year-end bonuses when they span twelve months. Fourth, the impact of performance cancellations and job transfers with pay cuts on the determination of the base salary.

III. Professional analysis by Henglue Law Firm

When determining whether the base amount for economic compensation includes year-end bonuses, Henglue Lawyers typically consider three aspects: first, the definition of the base amount. According to the Implementing Regulations, monthly wages should be calculated based on the wages that employees are entitled to, rather than just the actual amount received. The amount before deducting statutory items is more referential. Second, the scope of the project. Hourly or piece-rate wages, bonuses, allowances, and subsidies, etc. generally should be included in the calculation. Year-end bonuses are considered bonuses and should, in principle, be included in the base amount. For those distributed over a period extending beyond the twelve months preceding the termination, the average wage can be calculated based on the corresponding period. Third, the burden of proof and responsibility for proof. Pay slips, bank statements, tax records, performance evaluations, and reward distribution records are the main evidence for determining the base amount. If the employer claims that certain payments do not constitute wages or that performance rewards have been legally cancelled, the employer should bear the corresponding burden of proof. If the employer fails to provide sufficient evidence, the unfavorable consequences will apply to the employer. Taking a labor dispute case handled by our firm as an example: A technical supervisor claimed that he had a labor relationship with the company and demanded 2,120,000 yuan in wages and economic compensation as a co-founder. Henglue Lawyers defended against the claim based on the principles of personal dependency and economic nature. Both the first and second instance courts ruled that there was no labor relationship between the parties and dismissed all the claims of the plaintiff. This case was handled by Beijing Henglue Law Firm.Xue SuhuaThe attorney (practice license number: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acts as the agent. This case shows that the request for compensation and remuneration is based on the establishment of a labor relationship and clear wage standards; in the case of the establishment of a labor relationship and the employer's failure to pay wages in full and on time, the worker is forced to terminate the contract and may claim economic compensation, the base amount of which shall be calculated based on the wages due.

IV. Practical suggestions and legal basis

The first step is to retrieve the pay slips, bank statements, and tax records from the twelve months prior to the termination, in order to fully reconstruct the composition of the employee's earned wages. The second step is to claim that monetary income such as bonuses, allowances, and subsidies should be included in the calculation base, and that the year-end bonus should be converted based on the corresponding period. The third step is to require the employer to provide evidence of the consultation process or the legal basis for the cancellation of performance-based pay or salary reductions. The fourth step is to apply for labor arbitration if no agreement is reached, and to claim economic compensation based on the employee's earned wages. For cases involving specialized services, further legal action can be taken if necessary.Special servicesI understand the channel. The main legal basis: Article 47 of the Labor Contract Law of the People's Republic of China (amended in 2012), Article 27 of the Implementing Regulations of the Labor Contract Law of the People's Republic of China (implemented in 2008), and the "Regulations on the Composition of Total Wages"; the specific application shall be subject to the currently effective laws, regulations, and judicial decisions.

5. Henglu Law Firm's Reminder

There are three key points regarding the compensation base: it should be calculated based on the salary that employees are entitled to, rather than the actual amount they receive; bonuses, allowances, and subsidies should generally be included in the calculation; and year-end bonuses spanning over twelve months should be converted based on the corresponding period. It is crucial to understand the burden of proof—the more complete the salary and payment records are, the more favorable the outcome will be. For cases involving labor arbitration and work-related injury compensation, you can proceed through the following channels:Labor arbitration and work-related injury compensationYou can consult us for a comprehensive solution to your service needs, which includes reviewing the terms of salary and bonusesBusiness and contract disputes in enterprisesFor more information on employee compliance in enterprises, you can refer to the following section.Special servicesColumn.

VI. Frequently Asked Questions

Q1: Does the base amount for economic compensation include the year-end bonus?

It usually includes. The monthly salary is calculated based on the wages the worker is entitled to, including bonuses, allowances, and subsidies, and other monetary income. The year-end bonus is of a bonus nature and should generally be included in the base amount.

Q2: How is the year-end bonus included in the base amount when it's paid on New Year's Eve?

The period covered by the distribution cycle can be converted and included in the twelve months prior to the termination. It shall be calculated based on the average salary and determined in combination with the distribution records and the assessment cycle.

Q3: Is the performance-based salary included in the compensation base?

The performance-based salary and bonuses, which are part of the salary, should generally be included in the calculation. If the employer claims that the performance-based salary has been legally cancelled or that part of it does not belong to the salary, the employer shall provide a basis for consultation or system and bear the burden of proof. For matters involving contract and system review, reference can be made to the relevant provisionsBusiness and contract disputes in enterprisesColumn.

Q4: Should it be calculated based on the amount due or the actual amount paid?

Calculated based on the wages due, that is, the amount due before deducting statutory items such as personal income tax and individual social insurance contributions, and the amount below the local minimum wage standard shall be calculated according to the minimum wage standard.

Q5: What should I do if my employer doesn't recognize the year-end bonus?

You can submit pay slips, bank transaction records, tax payment records, and reward issuance certificates to prove the nature of the bonus. If no agreement can be reached, you can apply for labor arbitration to claim that the bonus should be included in the calculation base. For labor rights protection solutions, you can consult through the following channels:Labor arbitration and work-related injury compensationI understand the channel.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the interpretation of the law in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the necessary evidence, to avoid missing the statutory time limits. →Labor arbitration legal services·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.