[Direct answer]In the Beijing area, the "N+1" compensation for terminating a labor contract consists of two parts: "N" is the statutory economic compensation, which is calculated as one month's salary for each year of service in the company, with more than six months but less than one year counted as one year, and less than six months counted as half a month's salary, in accordance with Article 47 of the Labor Contract Law of the People's Republic of China; "+1" is the compensation in lieu of notice, which refers to the situation that the employer terminates the labor contract with the employee for non-fault reasons according to Article 40 of the Labor Contract Law of the People's Republic of China, but fails to notify the employee in writing 30 days in advance. In this case, the employer shall pay the employee an additional one month's salary. The standard of the compensation in lieu of notice is generally determined based on the employee's salary in the month preceding the termination of the contract. For more details, please refer to the relevant provisions of the Labor Contract Law of the People's Republic of China.Labor arbitration and legal services for work-related injury compensation.

I. Problem Background and Typical Scenarios

"N+1" is the most commonly heard compensation term when workers are unilaterally dismissed by their employers, but its application has clear prerequisites. Typical scenarios include: the worker suffers from an illness or non-work-related injury, and after the expiration of the medical period, they are unable to perform their original job or any other arranged work, and the company proposes to terminate the contract; the worker is unable to perform their duties, and after training or job reassignment, they are still unable to perform their duties, and the company terminates the contract on this basis; the objective circumstances on which the labor contract is based undergo major changes, resulting in the inability to perform the contract, and after consultation, no agreement is reached on amending the contract, and the company terminates the contract. The above three types are non-fault dismissals. If the company fails to give written notice 30 days in advance, the severance pay will be triggered. In contrast, fault-based dismissals (Article 39) such as serious disciplinary violations or serious dereliction of duty, as well as dismissals by mutual consent, do not necessarily apply to "N+1".

II. Key points of contention

The disputes often focus on three aspects: First, the nature of the termination. The company claims that it is a non-fault termination and should pay N+1, while the employee claims that it is an illegal termination and should pay 2N in compensation. The two can only choose one, and the determination of the nature directly determines the amount; Second, the boundary of the "significant changes in objective circumstances". Whether the company's business adjustment and the suspension of business constitute statutory circumstances often become the focus of attention; Third, whether the consultation procedure has been carried out and whether the company has conducted substantive consultations on the amendment of the contract. In addition, whether the severance pay and economic compensation are claimed at the same time and whether they are included in the tax-free allowance also need to be clarified in individual cases. The relevant claims and evidence organization can be combined togetherCreditor-debtor relations and enforcement case servicesEvaluate the subsequent path of protecting rights and interests.

III. Professional analysis by Henglue Law Firm

Based on the observations of similar cases handled by Henglue Lawyers, the key to winning or losing a termination case involving major changes in objective circumstances lies in the evidence chain. Taking a case of terminating sensitive review as an example: A Tianjin branch of an insurance company decided to stop related business and close down its branch due to continuous losses in life insurance business, resulting in the disappearance of the original position. The company terminated the labor contract with the branch manager according to Article 40(3) of the Labor Contract Law and paid economic compensation and notice pay. The manager claimed that the termination was illegal and demanded compensation. The arbitration and first-instance court ruled that the termination was legal. In the second-instance stage, the attorney submitted evidence such as the branch's lease withdrawal application and business registration withdrawal, proving that the original position had objectively disappeared. Through the testimony of department heads and transfer notifications, the attorney formed an evidence chain to prove that the company had conducted substantive consultations on the transfer but failed to reach an agreement. The second-instance court ruled that the termination was legal, as the cessation of business operations constituted a major objective change in circumstances, the consultation process had been fulfilled, and the appeal was dismissed. This case highlights that when a company terminates a contract due to objective changes, it must simultaneously prove that the changes are objective and non-attributable, that the contract is indeed unenforceable, and that the consultation process has been fulfilled - all three conditions are indispensable.

IV. Practical suggestions and legal basis

In terms of legal basis, Article 40 of the Labor Contract Law of the People's Republic of China (amended on December 28, 2012) lists three types of non-fault circumstances under which the employer may terminate the contract by giving 30-day written notice or paying an additional month's salary; Article 47 stipulates the calculation standard and maximum compensation period for economic compensation; Articles 48 and 87 clarify that the legal consequences of unlawful termination include continued performance of the contract or double compensation. When calculating compensation, "N" is the average monthly salary during the 12 months preceding the termination multiplied by the length of service; "+1" refers to the calculation of the notice period based on the previous month's salary standard. Practical advice: When receiving a termination notice, first verify the legal basis corresponding to the termination reason; require the company to provide a written explanation of the calculation basis; preserve the labor contract, payroll records, termination notices, and consultation records on job transfer; if you have doubts about the legality of the termination, promptly assert your rights within the arbitration statute of limitations. For issues related to enterprise employment compliance and contract review, you may wish to learn more about them.Business and contract dispute services for enterprises.

5. Henglue Law Firm's Reminder

"N+1" is not a standard termination arrangement for all cases. It only applies to the non-fault termination situations as stipulated in Article 40 of the Labor Contract Law where no advance notice is given; employees should not automatically claim it in the case of negotiated termination or fault-based termination, nor should they settle for N+1 when the company's termination is indeed illegal and give up on 2N. When claiming rights, the written reasons for the termination notice, evidence of the wage base, and the negotiation process are the three pillars. Due to the complexity of individual cases and differences in judicial interpretations across regions, it is recommended to evaluate the nature and amount of the termination in consultation with professional opinions.

This case is handled by Beijing Henglu Law Firm.Chen PingRepresented by a lawyer (practice license number: 11101201411619680, subject to the document issued by the judicial administrative organ). For more guidance on labor rights protection, please visitBeijing Henglu Law FirmAndSpecial services and other case services.

VI. Frequently Asked Questions

Q1: What salary is used to calculate the "1" in the notice payment?

The notice pay refers to an additional month's salary. In judicial practice, it is usually determined according to the worker's monthly salary before terminating the labor contract. If the previous month's salary cannot reflect the normal level (such as leave or abnormal performance), some regions' arbitrators will refer to the average salary of the previous 12 months. The calculation base of the notice pay may be different from that of the economic compensation ("N"), which is the average salary of the previous 12 months, including bonuses and allowances. When claiming, the worker should check them separately. The worker can ask the company to clarify the calculation details and raise objections to the obviously low calculations in a timely manner.

Q2: The company said they would compensate me with N+1 for the business adjustment, but I want to be compensated with 2N. Is that possible?

It depends on whether the termination is legal. If the company terminates the contract in accordance with Article 40 of the Labor Contract Law and fulfills the obligations of giving advance notice or paying the compensation in lieu of notice, and pays the economic compensation, it is a legal termination. In this case, the employee usually only receives N or N+1, and cannot claim 2N. Only when the termination lacks statutory grounds or fails to comply with statutory procedures and is deemed an illegal termination, can the employee, in accordance with Article 48, choose to demand the continuation of the contract or claim compensation of twice the standard of economic compensation (2N). The two are of different nature and cannot be obtained simultaneously. Before making a claim, it is necessary to determine the legal basis for the company's termination.

Q3: Under what circumstances can a company legally terminate the employment contract without giving 30-day notice?

Under the three non-fault termination circumstances (Article 40 of the Labor Contract Law), the employer should give written notice 30 days in advance. If no notice is given, the employer must pay compensation in lieu of notice, and the termination is still legal. In addition, if the employee has committed a fault as stipulated in Article 39 (such as serious disciplinary violations, serious dereliction of duty, or being held criminally liable), the employer can terminate the contract immediately without a notice period or paying economic compensation. If the parties terminate the contract by mutual agreement according to Article 36, the notice period can be agreed upon by both parties. Therefore, "no need to wait 30 days" does not mean "no need to pay compensation". The key lies in the legal nature of the termination and the corresponding provisions.

Q4: What is the maximum number of years that N in N+1 can represent?

The duration of economic compensation is not unlimited. According to Article 47 of the Labor Contract Law, if the worker's monthly salary is more than three times the average monthly salary of workers in the local area, the standard of economic compensation shall be paid at three times the average monthly salary of workers, and the maximum duration of payment shall not exceed 12 years; if the monthly salary is lower than this standard, it shall be calculated according to the actual length of service, with one month's payment for each completed year, one month for six months or more but less than one year, and half a month for less than six months. The additional month of severance pay is a fixed extra month, and it is not subject to the 12-year cap. When calculating, it is necessary to first determine whether the salary triggers the three-times cap, and then add the additional severance pay.

Q5: Do I need to pay personal income tax on the notice payment and economic compensation?

There is a tax-free allowance according to the law. According to the relevant provisions of the Ministry of Finance and the State Taxation Administration, the one-time compensation income obtained by individuals upon terminating their employment relationship with their employers, within three times the average local annual wage, is exempt from personal income tax; the excess portion shall be taxed in accordance with the regulations. The severance pay, as a component of the termination compensation, is included in the calculation of the one-time compensation income together with the economic compensation, rather than being taxed separately in full. Whether the specific amount is tax-free and how much is exempt from taxation needs to be determined based on the local average social wage and the total compensation amount. It is recommended to verify with the company's finance department or tax professionals when calculating to avoid double taxation or tax omissions.

The above content is based on the compilation of 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, so as to avoid missing the statutory time limit.Labor arbitration legal services·Attorney Chen Ping·Beijing Henglu Law Firm