[Direct answer]In the Beijing area, there is a statutory cap on the economic compensation paid to high-salaried employees upon the termination of their labor contracts. According to Article 47 of the Labor Contract Law of the People's Republic of China, if the monthly salary of the employee exceeds three times the average monthly salary of workers in the region announced by the municipal people's governments of the directly-administered cities and prefecture-level cities where the employer is located in the previous year, the standard of economic compensation paid to them shall be calculated based on three times the average monthly salary of workers in the region. The maximum period of payment of economic compensation shall not exceed 12 years. Whether an employee is considered "high-salaried" is determined by whether the average monthly salary in the 12 months prior to the termination of the contract exceeds three times the local average monthly salary. The portion exceeding this amount is not included in the compensation base, but whether the salary structure, bonuses, and overtime pay should be included in the calculation often leads to disputes. It is recommended to first calculate the relationship between the employee's average monthly salary and three times the local average monthly salary, and then determine the compensation range that can be claimed. For more details, please refer to the relevant provisions.Labor and work-related injury legal services.

1. Problem background and typical scenarios

The issue of severance pay for high-salaried workers is very common in practice. Typical groups include corporate executives, technical directors, and sales directors, whose monthly or annual salaries are significantly higher than those of ordinary employees. Common scenarios include: when the company is downsizing or negotiating termination, employees find that the compensation base is "capped", and the amount they receive is far lower than the amount calculated based on their actual salary; there are large year-end bonuses, equity incentives, or project commissions within the 12 months before leaving, leading to disputes over the determination of average wages; and both parties have different understandings of the scope of "wages", with the company only calculating compensation based on the basic salary. Many high-salaried employees mistakenly believe that compensation is calculated based on their actual income, only realizing the difference after signing the agreement. Such disputes often involve the determination of wage components and the social average wage standard, and the pace of handling and the burden of proof directly affect the amount of compensation that can be obtained. Related wage and social insurance disputes can be combined with other cases.\nLabor and Work-Related Injury SectionCoordinated assessment.

II. Key points of contention

The focus of the controversy over the cap on high-salary compensation lies in three aspects. Firstly, whether the three-fold cap is triggered: whether the average monthly salary of the worker in the 12 months prior to their departure exceeds three times the average monthly salary of workers in the employing unit's local area in the previous year. The differences in regional standards and statistical criteria will directly affect the conclusion. Secondly, the calculation method of the average salary: whether bonuses, commissions, overtime pay, and subsidies are included. This is a frequently disputed area, with employers often insisting on only counting the fixed basic salary, while workers demand that all components be included. Thirdly, the starting point of the cap on years: when does the 12-year limit begin, and how is a cross-regional transfer defined? These issues are also prone to disagreements. For cases involving cross-regional employment, reference can be made to the relevant provisions.Business and contract dispute resolution services for enterprisesClarify the employment entity.

III. Professional analysis by Hengluo Law Firm

Based on practical observations in handling labor dispute cases, the premise of compensation disputes is often whether the labor relationship itself exists. Taking a case handled by Beijing Henglu Law Firm as an example: In January 2021, Liu Lei participated in the start-up of Beijing A Company as the technical chief and signed a "Cooperative Operation Agreement" holding 20% virtual equity. However, no labor contract was signed and no actual salary was paid. In April 2023, Liu Lei sent a "Notice of Forced Termination of Labor Relationship" on the grounds of unpaid compensation, claiming to confirm the labor relationship and demanding wages, economic compensation, and other totaling 2.12 million yuan. A Company entrusted Xue Shuhua, a lawyer from our firm, to defend against the lawsuit, claiming that the two parties were only in a cooperative relationship. The first-instance court ruled that there was no labor relationship and rejected all claims. Liu Lei appealed, and the lawyer defended against the case based on the core elements of "personal dependence" and "economic subordination". The second-instance court upheld the original judgment and successfully rejected the other party's claim of 2.12 million yuan. This case was handled by Beijing Henglu Law Firm.Xue SuhuaThe attorney (practice license number: 11101201211769926, subject to the document issued by the judicial administrative organ) acts as the agent in this case. Note: The compensation request is based on a genuine labor relationship, and for high-salaried employees, it is necessary to first accurately calculate the average wage and the capping rules to avoid deviations in the nature of the relationship or the calculation base. In similar cases, Henglue Law Firm will also focus on reviewing the salary records, social insurance payments, and evidence of employment management, distinguishing the boundaries between cooperation and labor relationships.

IV. Practical suggestions and legal basis

The core basis is Article 47 of the Labor Contract Law of the People's Republic of China (amended on December 28, 2012, and implemented on July 1, 2013), which stipulates the calculation of economic compensation with a cap of three times the local average wage and a maximum of 12 years; Article 27, which specifies the calculation of monthly economic compensation, including hourly or piece-rate wages, bonuses, allowances, and subsidies, and other monetary income; as well as the detailed provisions on wage composition in Article 27 of the Implementing Regulations of the Labor Contract Law of the People's Republic of China. Practical suggestions: Before leaving the company, first retrieve the bank statements of your salary for the past 12 months to verify whether it exceeds three times the local average wage; pay attention to keeping the payment receipts for disputed income such as year-end bonuses and commissions; when negotiating the termination of the contract, require the company to specify in writing the calculation method and base for compensation; and raise objections to the calculation in time within the arbitration statute of limitations. For signed compensation agreements, you can refer to the relevant provisions.Labor and work-related injury servicesEvaluate the terms and conditions of the contract to identify potential risks.

5. Hengluo Law Firm's Advice

For high-salaried employees facing compensation caps, the key points are as follows: First, confirm that the labor relationship truly exists, and then calculate whether the average wage triggers the three-fold cap; for disputed wage components, priority should be given to using objective evidence such as bank statements to claim full inclusion; when negotiating termination agreements, it is essential to specify the compensation base and calculation process to avoid regretting verbal agreements later. When handling similar cases in the Beijing area, it is recommended to organize social insurance, wage, and attendance evidence as early as possible, and pay attention to the one-year arbitration statute of limitations. If the company is vague about the compensation amount, it can be resolved through legal means.Special servicesMake an appointment for an evaluation and, if necessary, initiate labor arbitration to protect your rights.

VI. Frequently Asked Questions

Q1: Do high-salaried employees have a good chance of winning if they claim full compensation based on their actual salaries?

The ability to obtain support does not depend on a promise of the outcome, but on the application of the wage bracket and capping rules. According to Article 47 of the Labor Contract Law, if the monthly wage is more than three times the local social average wage, the compensation shall be capped at three times and the service period shall not exceed 12 years. It is difficult to exceed the statutory limit for this part of the request. However, regarding whether "wages" should include bonuses, commissions, and overtime pay, the law explicitly includes monetary income. If the company only calculates compensation based on the basic wage, it will be easier to obtain support if you claim to include the full amount of actual income. The key to victory lies in whether the evidence can prove the actual average wage and wage composition. It is recommended to first calculate the gap between your average wage and the capping line, and then decide on a negotiation or arbitration strategy. Do not easily believe in unrealistic promises of victory.

Q2: To claim high wage compensation, what evidence do I need to prepare?

The core evidence includes: the bank statements and pay slips of the past twelve months (to prove the actual average wage and wage composition), labor contracts or proof of labor relations, social insurance and personal income tax payment records (to corroborate the wage level and employment nature), year-end bonus and commission payment receipts (to prove the disputed income), notices of termination or termination of labor relations and compensation agreements (to prove the parties' agreement and the difference in compensation amounts), as well as attendance and overtime records (relating to the inclusion of overtime pay). The organization of evidence should focus on four points: "establishment of labor relations - calculation of average wage - whether the cap is triggered - amount of compensation". If there are missing materials, you can apply to the arbitration committee to retrieve them. Never give up on the compensation you deserve just because your evidence is weak.

Q3: How much does it cost to hire a lawyer and go to court to resolve a dispute over high-salary compensation?

Arbitration and litigation do not charge fees themselves, or only charge relatively low acceptance fees; after entering litigation, the case acceptance fees are calculated according to the amount of the litigation request as the base and accumulated in stages, to be borne by the losing party. Lawyer's fees are related to the complexity of the case, the amount of the subject matter, and the lawyer's qualifications. They can be charged on a piecework, hourly, or percentage basis, subject to the terms of the engagement contract, and there is no unified government pricing. Risk-sharing agreements in civil and commercial cases involving property relations are subject to a percentage cap. High-salary cases often involve large amounts, so it is recommended to clarify the charging method and cap before entrusting, and to evaluate the compensation that can be claimed and the costs after starting the case to avoid making small-amount claims that are not economical due to high costs.

Q4: How long does it usually take to resolve a dispute over high salary compensation?

Labor disputes must first be arbitrated. The arbitration tribunal generally concludes the case within 45 days from the date of acceptance, and the case may be extended by 15 days if it is complex. If the party is not satisfied with the arbitration award, it may file a lawsuit with the people's court within 15 days from the date of receipt of the award. Civil litigation in the first instance is generally concluded within six months, and in the summary procedure, it is within three months; if there is an appeal, the second instance generally takes three months. Overall, it often takes several months to a year from arbitration to enforcement in the first instance. It is recommended to start the process as early as possible during the transition period of being employed or leaving the job, and to pay attention to the fact that the arbitration statute of limitations is one year from the date when the party knows or should know that his rights have been infringed, so as to avoid losing the right to claim due to exceeding the time limit.

Q5: The company only calculates compensation for high-salaried employees based on their basic salaries. What should I do specifically?

It is recommended to proceed in four steps: First, retrieve the complete salary records and payment vouchers for the past twelve months, calculate the actual average salary, and determine whether it exceeds three times the local social average wage. Second, communicate with the company in writing, demanding that the compensation base be set at the actual salary (including bonuses, commissions, and overtime pay), and keep a record of the communication. Third, if no agreement is reached, file a labor arbitration claim within the one-year arbitration statute of limitations and submit salary evidence to claim full compensation. Fourth, if dissatisfied with the arbitration award, file a lawsuit within 15 days. Throughout the process, retain the termination notice, agreements, and communication materials. If necessary, hire a lawyer to assist with calculations and negotiations to prevent the company from using the capped compensation rules to reduce the compensation amount.

The above content is based on the judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglu Law Firm for specific situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant 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. If you encounter disputes, please consult a practicing lawyer in time.