[Direct answer]The severance pay and compensation are two different types of payments. The economic compensation (N) is calculated based on the length of time the employee has worked at the company. For each full year of service, one month's salary is paid; for a period of more than six months but less than one year, it is calculated as one year; and for a period of less than six months, half a month's salary is paid. If the employer unlawfully terminates the labor contract, the compensation (2N) is paid at twice the standard of economic compensation. This is in accordance with Articles 46, 47, and 87 of the Labor Contract Law. The monthly salary is calculated based on the average salary earned in the 12 months prior to the termination. To assert rights, the employee should apply for labor arbitration within one year from the date of termination. First, distinguish between voluntary termination, involuntary termination without fault, and unlawful termination, and then calculate the compensation accordingly. For more details on the relevant process, please refer to the guidelines.Labor arbitration and legal services for work-related injury compensation，详见Beijing Henglue Law Firm.

I. Legal basis and interpretation of provisions

1. Articles 46 and 47 of the Labor Contract Law of the People's Republic of China (effective January 1, 2008)

Article 46 enumerates the circumstances under which economic compensation should be paid, including the employer's proposal for consensual termination, dismissal without fault, economic layoffs, and the employee's forced termination pursuant to Article 38; Article 47 establishes the calculation standard: one month's salary for each completed year, one year's salary for a period of more than six months but less than one year, and half a month's salary for a period of less than six months. If the monthly salary is more than three times the average monthly salary of workers in the employer's area in the previous year, the compensation shall be paid at three times the average monthly salary, and the maximum period of service shall not exceed twelve years. The key points of evidence include the labor contract, salary records, and the basis for termination.

2. Articles 48 and 87 of the Labor Contract Law of the People's Republic of China (effective January 1, 2008)

If the employer unlawfully terminates or terminates the labor contract, and the employee requests to continue to perform the contract, the employer shall continue to perform it; if the employee does not request to continue to perform the contract or the labor contract can no longer be performed, the employer shall pay the employee compensation in accordance with Article 87 at twice the standard of economic compensation. The compensation is based on the unlawful termination, and the economic compensation cannot be claimed at the same time. After paying the compensation, the employer shall not pay the economic compensation separately. In practice, whether it constitutes an unlawful act depends on whether the rules and regulations on which the termination is based have been publicized and whether the termination procedure is legal.

3. The interpretation of the case by the court

The common practice adopted by the court is as follows: the monthly salary is calculated based on the worker's earned salary, including hourly wages, piece-rate wages, bonuses, allowances, subsidies, and other monetary income, taking the average value of the previous twelve months as the basis; the severance pay in the "N+1" model only applies to the three types of no-fault dismissals specified in Article 40; it does not apply to consensual dismissals or forced dismissals; if the employment subject changes for reasons not attributable to the worker, the working years in the original unit shall be counted together; and floating compensation such as year-end bonuses is generally converted according to the agreement or proportion. When determining whether the dismissal is illegal, the court will also review whether the reason for the dismissal was notified to the trade union in advance, and whether there was a written notice of dismissal. If the dismissal was oral and the employer cannot provide evidence, it will generally be deemed an illegal dismissal.

II. Henglue Law Firm's Real Cases (Detailed Review)

Review of the case:Zhang * is an employee of a telecommunications company. The two parties signed a non-fixed-term labor contract effective from October 1, 2019, with a monthly basic salary of 7,917 yuan and variable performance bonuses. Since September 1, 2009, Zhang * has been working for related employing entities, with no changes in his work location or duties. On January 14, 2022, Zhang * submitted a "Notice of Forced Resignation" on the grounds that the company failed to pay his labor remuneration in full and on time. The company received the notice on January 17. However, it did not pay Zhang * his wages for November and December 2021 until January 29 and February 28, 2022 respectively. Zhang * has entrusted Beijing Henglu Law Firm to handle the case for him.Wang XinruiThe lawyer argued that the economic compensation and the unpaid annual leave wages should be discharged.

The focus of the controversy:First, the company failed to pay wages in full and on time, so Zhang * was forced to terminate the contract and wonder whether he could receive economic compensation. Second, Zhang * worked for different employers successively, so whether his working years should be calculated consecutively. Third, after the job transfer, the company cancelled his performance-based pay and unpaid annual leave pay, so whether the company should compensate him for these losses.

Our position and that of the other party are as follows:Zhang claimed that he was forced to terminate the contract due to the company's failure to pay his salary, and according to Articles 38 and 46 of the Labor Contract Law, he should be entitled to economic compensation, and his work experience should be counted continuously. The company should also pay him for the unpaid annual leave. The company argued that the difficulty in operation was not due to malicious non-payment of salaries, and that Zhang did not receive performance-based pay after his job transfer in July 2021. Moreover, the Beijing branch was not an affiliated company of the company. The first-instance court made mistakes in calculating the amount of salary and work experience.

Attorney's Strategy and Legal Opinion:Attorney Wang Xinrui put forward three points: Firstly, the company indeed failed to pay the labor remuneration in full and on time. According to Article 38 Paragraph 1 Item 2 and Article 46 Paragraph 1 of the Labor Contract Law, it was not improper for Zhang * to terminate the contract and claim economic compensation on this basis. Secondly, according to Article 10 of the Implementing Regulations of the Labor Contract Law, Zhang * did not change the employing entity due to his own reasons. From September 1, 2009 to January 17, 2022, the work location and content remained unchanged, and the social insurance was cross-paid. Before March 2015, the company paid the wages, and the legal representative overlapped. The working years should be calculated continuously. Thirdly, the company claimed that the transfer of posts cancelled the performance, but failed to submit evidence of consultation, and also failed to provide evidence of arranging leave or paying the unpaid annual leave wages. According to the Regulations on Paid Annual Leave for Employees, the company should pay the corresponding wages.

The court's reasoning and the outcome of the case:The first-instance judgment ordered the company to pay the arrears in wages of 3,640 yuan (already fulfilled), the economic compensation for the termination of the labor contract of 295,207.08 yuan, and the unpaid annual leave wages of 40,347.66 yuan; the second-instance court found that the facts determined in the first-instance judgment were clear and the applicable laws were correct, and dismissed the appeal and maintained the original judgment. This judgment is the final judgment. The company has paid a total of more than 330,000 yuan, which intuitively shows the calculation result of "one month's compensation for each full year of service" in cases involving long service periods.

This case is handled by Beijing Henglu Law Firm.Wang XinruiAttorney (practice certificate number: 11101202111290829, subject to the certificate issued by the judicial administrative organ) acting as the agent.

III. Frequently Asked Questions

Q1: When you're dismissed, do you get one month's salary or two months' salary as compensation?

It depends on the nature of the termination. For legal terminations such as those proposed by the employer, including consensual termination, termination without fault, and non-renewal of the contract upon expiration, the employer shall pay economic compensation according to N; where the termination fails to provide 30-day written notice in accordance with Article 40 of the Labor Contract Law, an additional one-month's salary, i.e., N+1, shall be paid. Terminations based on serious disciplinary violations but involving illegal facts, systems, or procedures constitute illegal terminations, and the employee may demand continued performance or claim 2N in compensation. The two claims are mutually exclusive based on the nature of the termination. It is recommended to first secure the termination notice and then proceed accordingly.Labor arbitration professional servicesCalculate the specific plan.

Q2: How is the monthly salary base calculated, and are bonuses and subsidies included in the calculation?

According to Article 27 of the Implementing Regulations of the Labor Contract Law, the monthly salary for economic compensation shall be calculated based on the salary that should be received, including hourly or piece-rate wages, bonuses, allowances, subsidies, and other monetary income, and the average value of the previous twelve months shall be taken. If the employee's monthly salary is more than three times the average monthly salary of local workers in the previous year, the compensation shall be capped at three times the average salary and the compensation period shall not exceed twelve years. There are differences in the calculation of overtime pay in different regions. It is recommended to refer to the salary records and the local arbitration standards. When making a claim, first calculate the compensation based on the salary that should be paid, and then negotiate or arbitrate according to this calculation.

Q3: If the employment subject is changed during the employment period or the employee is assigned to an affiliated company, how is the length of service calculated?

For employees who are transferred from their original employer to a new employer for reasons not attributable to themselves, their original working years shall be combined to count as their working years with the new employer (Article 10 of the Implementing Regulations of the Labor Contract Law), unless the original employer has already paid them economic compensation. For employees who voluntarily change jobs and sign contracts with different employers, their working years shall be calculated separately. The key to determining this is whether the change occurred at the employee's own initiative, whether the work location and content are continuous, and whether the social insurance payment records and the entity that pays their salaries are the core evidence. It is necessary to keep these records in advance.

Q4: Can I claim both compensation and economic compensation at the same time? How long will it take to receive them?

You can't have both. Economic compensation is based on legal termination, while compensation is based on illegal termination. You can only claim one of them according to the nature of the termination. After paying 2N for illegal termination, you will no longer be entitled to economic compensation. Procedurally, you should first apply for labor arbitration. For simple disputes, the case will be concluded within 45 days from the date of acceptance, which can be extended by 15 days. If you are dissatisfied with the arbitration award, you can file a lawsuit within 15 days from the date of receipt of the award. The entire process typically takes several months, and the period involving first-instance and second-instance litigation will be even longer.

Q5: What evidence do I need to prepare?

The core evidence includes labor contracts, bank transaction records of wages, notices of termination or audio recordings of oral dismissals, attendance records, social insurance payment records, and signed copies of rules and regulations; those claiming unlawful termination should also secure procedural evidence such as union notifications and conversation records. The evidence should be organized around three key elements: the nature of the termination, the wage base, and the length of service. It should be compiled in chronological order, and the arbitration tribunal will use this to calculate the specific amount of N or 2N compensation. If there are missing pieces of evidence, the claimant may request the arbitration tribunal to obtain the attendance and wage records held by the employer.

IV. Suggestions for Protecting Your Rights

  • Upon receiving the notice of termination, first check the signature and the reason. The written request should clearly state the basis for the termination. Do not sign on a blank document.
  • Keep the salary slips, labor contracts, attendance records, and social insurance records. Calculate the amount of compensation due according to the three steps of "nature of the termination, monthly salary, and length of service".
  • For an unlawful termination, you can choose to claim continued performance of the contract or compensation of 2N. First, assess whether the labor contract can actually be continued, and then determine the appropriate solution.
  • You should apply for labor arbitration within one year from the date of termination; if you are not satisfied with the arbitration award, you should file a lawsuit within 15 days to avoid losing your right to litigation due to exceeding the time limit.

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 Wang Xinrui·Beijing Henglue Law Firm