[Direct answer]Generally, it includes the following. According to Article 47 of the Labor Contract Law of the People's Republic of China (amended in 2012), the monthly salary for economic compensation refers to the average salary of the worker in the 12 months preceding the termination or expiration of the labor contract, which is usually calculated based on the wages due, including hourly wages, piece-rate wages, bonuses, allowances, and subsidies, etc. Year-end bonuses and performance bonuses are generally included in the average salary; non-labor compensation items such as travel reimbursements and welfare subsidies are usually not included. For workers who have not worked for 12 months, the calculation is based on the actual number of months worked.

I. Problem Background and Typical Scenarios

Regarding the base amount for economic compensation, the most controversial issue in practice is whether bonuses should be included. Some employers argue that compensation should only be calculated based on the basic salary, while workers believe that performance bonuses and year-end bonuses should be included as part of the labor remuneration. When handling labor dispute cases in Beijing, arbitration tribunals and courts typically calculate the average salary based on the total wages earned in the 12 months preceding the termination or discontinuation of the employment relationship. Whether bonuses should be included depends on their nature and the basis for their issuance. The amount of the base salary directly affects the total compensation amount, so accurate determination is essential. Payment receipts and payroll records are important evidence. The two parties often have different understandings of the composition of wages, and the judgment should be based on the facts.

II. Key points of contention

There are four points that need to be clarified: Firstly, the calculation period and formula for the average wage; Secondly, whether bonuses, allowances, and subsidies belong to the earned wage; Thirdly, the handling of special items such as overtime pay and reimbursement funds; Fourthly, how the cap of three times the high wage applies to the base amount. Generally, the base amount is based on the earned wage, and income of a labor remuneration nature is generally included, while payments of a non-labor remuneration nature are usually excluded. The specific determination should be based on the payment records. Whether the evidence is complete directly affects the determination of the base amount, and both parties should provide evidence regarding the composition of the wage and the basis for its payment.

III. Professional analysis by Henglue Law Firm

A labor dispute case handled by Henglue Law Firm involves the determination of the existence of a labor relationship and compensation claims, and the judgment on the base of economic compensation is of reference significance. Liu Lei participated in the start-up of Beijing Company A as the technical chief, and signed a "Cooperative Operation Agreement" with the company's legal representative and a third party, agreeing to hold 20% of the virtual equity. However, the two parties never signed a labor contract or received wages. In April 2023, Liu Lei issued a "Notice of Forced Termination of Labor Relationship" on the grounds of unpaid compensation and unfulfilled obligations, demanding the confirmation of the labor relationship, payment of wages, termination of economic compensation, and the double wage difference, totaling 2.12 million yuan. Company A appointed Xue Shuhua, a lawyer from our firm, to defend the case, arguing that the two parties were only in a cooperative relationship and did not have a labor relationship. Lawyer Xue focused on the personal dependency and economic subordination of the labor relationship, pointing out that the agreement stipulated virtual equity and dividends rather than fixed wages. Liu Lei independently determined working hours, maintained social insurance in other units, and controlled the external projects of the affiliated company, which did not meet the characteristics of a worker's subordination. The first-instance court adopted the lawyer's opinion, determining that there was no labor relationship between the two parties and rejecting all of Liu Lei's claims. After Liu Lei appealed, the second-instance court upheld the original judgment and successfully rejected his claim for 2.12 million yuan. This case shows that when discussing the income included in the base of economic compensation, the premise is still the establishment of a labor relationship and the existence of a clear wage structure. If the identity relationship and employment mode are unclear, there will be no basis for determining the base. This case was handled by Beijing Henglue Law Firm.Xue SuhuaThe attorney (practice certificate number: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

Action suggestions: First, calculate the average salary based on the earned wages in the previous twelve months to determine whether bonuses, allowances, etc. should be included; Second, keep pay slips, bank statements, performance plans, and proof of bonus payments; Third, pay attention to the impact of the three-fold cap on the base salary for high-wage employees; Fourth, for items with disputed payment nature, judge based on the payment basis and the employer's system. For labor disputes, you can refer to the relevant provisions of the Labor Law of the People's Republic of China and other relevant laws and regulations.Labor arbitration and work-related injury compensationFor issues related to the compliance of enterprise employment practices, you may refer to the following resources 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), the "Regulations on the Composition of Total Wages" and related provisions. The specific application shall be subject to the currently effective laws, regulations and judicial decisions.

5. Henglue Law Firm's Reminder

Firstly, the base amount of economic compensation shall be the average wage of the employee in the twelve months prior to the termination or dissolution of the employment contract, calculated based on the wages actually earned. Secondly, income from labor remuneration such as bonuses and allowances shall generally be included, while reimbursements and welfare subsidies shall usually not be included. Thirdly, for employees who have worked for less than twelve months, the compensation shall be calculated based on the actual number of months worked. Fourthly, the maximum compensation for high-income employees shall be capped at three times the average wage. In cases involving labor disputes, the parties concerned 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: Does the base amount of the compensation include bonuses?

Generally, it includes the following: Economic compensation is based on the average salary of the previous twelve months before the termination or dismissal, and is usually calculated based on the salary due. Bonuses, allowances, and other income of a labor remuneration nature are generally included. Occasional reimbursements, welfare subsidies, and other non-labor remuneration items are usually not included. Whether they are included or not depends on the basis for their issuance and the determination of the salary structure.

Q2: Should the year-end bonus be included in the calculation?

If the year-end bonus belongs to the nature of labor compensation, such as performance bonuses linked to assessments, it will usually be allocated over the corresponding period and included in the average wage; if it belongs to pure welfare or rewards and is not directly related to labor input, it may not be included. In practice, it is necessary to judge based on the distribution system, assessment plans, and distribution records. It is recommended to keep relevant vouchers.

Q3: Is overtime pay included in the base salary?

There is a dispute. Overtime pay is compensation for extended working hours. Whether it should be included in the average wage needs to be determined based on local adjudication rules and the specific circumstances of the case. Those who claim that it should be included should provide evidence of overtime work and the payment; those who claim that it should not be included need to explain the nature of the payment. It is recommended to provide complete evidence of the wage composition and payment records in the dispute.

Q4: How is it calculated for those under twelve months old?

The average wage is calculated based on the actual number of months during which wages were paid, that is, by dividing the total amount of wages earned during that period by the actual number of months. For employees who have been employed for a shorter period, the calculation is based on the actual labor remuneration they have received. The actual payment situation needs to be determined based on evidence such as pay slips, bank statements, and attendance records.

Q5: How is the base salary for high-paying jobs capped?

If the monthly salary of a worker exceeds three times the average monthly salary of workers in the previous year announced by the municipal people's government of the direct-controlled municipality or the city-level people's government where the employer is located, the base amount shall be calculated based on three times the average monthly salary of workers, and the payment period shall not exceed 12 years. The cap applies to the monthly salary base and the payment period, which shall be subject to the local standard of average monthly salary of workers announced by the local government.

The above answer is based on the judicial practice in Beijing. The adjudication standards in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

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 Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available 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.