[Direct answer]It shall be calculated according to the length of service. According to Article 47 of the Labor Contract Law of the People's Republic of China (amended in 2012), the economic compensation shall be calculated based on the length of service of the worker in the unit. For each completed year of service, one month's salary shall be paid; for a period of more than six months but less than one year, it shall be calculated as one year; for a period of less than six months, half a month's salary shall be paid. Where the monthly salary of the worker is more than three times the average monthly salary of workers in the same region as announced by the municipal people's governments of the direct-controlled municipalities and cities divided into districts, the compensation shall be paid at the amount of three times the average monthly salary of workers, and the maximum payment period shall not exceed 12 years. Here, the monthly salary refers to the average monthly salary of the worker during the 12 months preceding the termination or expiration of the labor contract.

1. Problem background and typical scenarios

Economic compensation is one of the most concerned amounts by workers when their labor contracts are terminated or rescinded, and the calculation of the number of months directly affects the total amount. In practice, disputes often focus on how to determine the length of service, whether transfers between different units can be counted continuously, whether high salaries are capped, and how to determine the monthly salary base. When handling labor disputes in Beijing, arbitration tribunals and courts will verify the length of service and average salary based on the labor contract and social insurance and salary payment records, and then calculate the number of months in accordance with Article 47. Accurate determination of the length of service and base salary is a prerequisite for the calculation, and special attention should be paid to situations where transfers are not due to the worker's own reasons.

II. Key points of contention

There are four points that need to be clarified: Firstly, how to determine the start and end dates of the working years; Secondly, the different conversions of more than six months but less than a year and less than six months; Thirdly, the applicable conditions of the high salary cap and the 12-year limit; Fourthly, the scope of the monthly salary base, whether it includes bonuses, allowances, etc. Generally, the number of months is determined by the working years, but the base and cap rules will significantly affect the final amount, which needs to be checked item by item. The completeness of the evidence directly affects the determination of the working years and the base, and both parties should provide materials based on the actual employment situation.

III. Professional analysis by Henglue Law Firm

A labor dispute case handled by Henglue Law Firm directly relates to the prerequisites for calculating economic compensation. Liu Lei participated in the start-up of Beijing Company A in the capacity of technical chief and signed a "Cooperation and Operation Agreement" with the legal representative and a third party, agreeing to hold 20% of the virtual equity. However, the two parties never signed a labor contract or paid wages. In April 2023, Liu Lei issued a "Notice of Forced Termination of Labor Relationship" on the grounds of unpaid compensation and unfulfilled contractual obligations, demanding confirmation of the labor relationship, payment of wages, termination of economic compensation, and compensation for double wage differences totaling 2.12 million yuan. Company A appointed Xue Shuhua, a lawyer from our firm, to defend against the lawsuit, arguing that the two parties only had a cooperative relationship and no labor relationship existed. Lawyer Xue pointed out that the agreement stipulated virtual equity and dividends rather than fixed wages, and Liu Lei independently determined working hours, maintained social insurance with other units, and controlled external projects undertaken by affiliated companies, which did not meet the characteristics of employee subordination. The first-instance court adopted the lawyer's argument and ruled that no labor relationship existed, rejecting all of Liu Lei's claims. After Liu Lei appealed, the second-instance court upheld the original judgment and successfully dismissed his claim for 2.12 million yuan. This case shows that claiming economic compensation requires the establishment of a labor relationship. If no labor relationship exists, there is no basis for calculating the number of months of compensation and the compensation base. The identification of the employment relationship and employment model is the first hurdle in such claims. This case was handled by Beijing Henglue Law Firm.Xue SuhuaThe attorney (practice license number: 11101201211769926, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Action suggestions: First, verify the length of service based on the labor contract, employment materials, and social security records; Second, check the average wage of the past twelve months before the termination or termination, and clarify the base salary range; Third, pay attention to the application of the three-fold cap and the twelve-year limit for high salaries; Fourth, keep the transfer certificates for transfers between units and claim continuous calculation. For labor disputes, you can refer to the relevant provisions.Labor arbitration and work-related injury compensationFor issues related to labor compliance in enterprises, you can refer to the following materials for reference.Intellectual property protection and corporate complianceLegal basis: Articles 46 and 47 of the Labor Contract Law of the People's Republic of China (amended in 2012) and related provisions. The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, the number of months of economic compensation is calculated based on the length of service. For one year of service, one month is calculated; for more than six months but less than one year, one year is calculated; and for less than six months, half a month is calculated. Secondly, the monthly salary base is determined based on the average salary of the last twelve months before the termination or cessation of employment. Thirdly, the maximum compensation for high-income employees is capped at three times the average salary and the maximum length of service is twelve years. Fourthly, the length of service resulting from a transfer not initiated by the employee should be calculated continuously. In cases involving labor disputes, the parties may resolve the disputes through legal channels.Labor arbitration and work-related injury compensationThe service is supported, and you can refer to it when handling difficult and complex casesSpecial servicesColumn.

VI. Frequently Asked Questions

Q1: How is the number of months of economic compensation calculated?

Calculated based on the length of service of the worker in the current unit: for each completed year of service, one month's salary shall be paid; for a period of more than six months but less than one year, it shall be calculated as one year; for a period of less than six months, half a month's salary shall be paid. The length of service shall be calculated from the date of employment to the date of termination or conclusion of the labor contract. If the worker is assigned to a new unit for reasons not attributable to him or her, the original length of service shall be counted together.

Q2: How is it calculated if it's less than a year?

For those who have worked for more than six months but less than a year, their compensation shall be calculated based on a full year, i.e., they will be paid one month's salary; for those who have worked for less than six months, they will be paid half a month's salary. For example, if an employee has worked for ten months, their compensation will be calculated based on a full year; if they have worked for three months, their compensation will be calculated based on half a month's salary. The conversion shall be based on the actual working time, and the start and end dates shall be determined in accordance with the labor contract, social insurance records, and salary records.

Q3: Is there a cap on high salaries?

Yes. If the monthly salary of the worker is higher than three times the average monthly salary of workers in the previous year announced by the municipal people's government of the city where the employer is located, the employer shall pay the worker three times the average monthly salary, and the maximum payment period shall not exceed 12 years. Here, the monthly salary refers to the average salary of the past 12 months before the termination or conclusion of the employment contract.

Q4: What income is included in the monthly salary?

It refers to the average wage of the worker in the twelve months prior to the termination or expiration of the labor contract, which generally includes hourly wages, piece-rate wages, bonuses, allowances, and subsidies, etc. that should be received. Usually, incidental payments and non-labor compensation are excluded. When there are disputes about the specific scope, the determination should be based on the payment records and the composition of the wages.

Q5: Can the length of service be calculated continuously?

For those who are transferred from their original employer to a new employer for reasons beyond their own control, the length of service with the original employer shall be combined with the length of service with the new employer. If they claim that the service periods should be counted consecutively, they shall keep evidence such as transfer documents, social insurance payment records, and changes in the entity responsible for paying salaries, in order to prove the continuity of the transfer and that it was not due to their own reasons.

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

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Labor arbitration legal services·Attorney Xue Suhua·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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. In case of disputes, please consult a practicing lawyer in time.