# China Severance Pay (Economic Compensation) Calculator

> Source: https://netray.co/tools/china-severance-pay-economic-compensation-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Estimate statutory economic compensation under China's Employment Contract Law, including N, N+1 and 2N cases and the high-earner cap.

## Category

regional

## Region

China

## Industry

Manufacturing

## Audience

- HR manager
- Plant manager
- Finance controller

## Tool

**Kind:** calculator

**Currency:** CNY 

**Inputs:**

#### Average monthly wage (last 12 months)

**Key:** monthly_wage

**Type:** number

**Default:** 9000

**Min:** 0

**Step:** 100

**Unit:** CNY

**Help:** Gross monthly wage including regular bonuses and allowances, averaged over the 12 months before termination.

#### Local average monthly wage (published, prior year)

**Key:** local_avg

**Type:** number

**Default:** 11000

**Min:** 0

**Step:** 100

**Unit:** CNY

**Help:** The municipal or provincial average monthly wage announced by the local government. Used for the 3x cap.

#### Completed years of service

**Key:** years

**Type:** number

**Default:** 6

**Min:** 0

**Max:** 40

**Step:** 1

**Unit:** years

#### Months beyond the last full year

**Key:** extra_months

**Type:** number

**Default:** 4

**Min:** 0

**Max:** 11

**Step:** 1

**Unit:** months

**Help:** Under 6 months counts as half a month of pay, 6 months or more counts as a full month.

#### Compensation basis

**Key:** multiplier

**Type:** select

**Default:** 1

**Options:**

##### Statutory (N)

**Value:** 1

##### Unlawful termination (2N)

**Value:** 2

#### Pay in lieu of 30 days notice

**Key:** notice

**Type:** select

**Default:** 0

**Options:**

##### No (notice given)

**Value:** 0

##### Yes (add one month, the +1)

**Value:** 1

**Outputs:**

#### Wage cap (3x local average)

**Key:** cap_wage

**Expr:** 3 * local_avg

**Format:** currency

#### Cap applies (1 = yes)

**Key:** capped

**Expr:** if(gt(monthly_wage, cap_wage), 1, 0)

**Format:** integer

**Description:** When 1, the wage base is limited to the cap and service years are limited to 12.

#### Wage base used

**Key:** base_wage

**Expr:** if(capped, cap_wage, monthly_wage)

**Format:** currency

#### Months from partial year

**Key:** part_year

**Expr:** if(eq(extra_months, 0), 0, if(lt(extra_months, 6), 0.5, 1))

**Format:** decimal

#### Compensation months (N)

**Key:** n_eff

**Expr:** if(capped, min(years + part_year, 12), years + part_year)

**Format:** decimal

#### Economic compensation

**Key:** comp

**Expr:** n_eff * base_wage * multiplier

**Format:** currency

#### Pay in lieu of notice

**Key:** notice_pay

**Expr:** notice * monthly_wage

**Format:** currency

**Description:** Uses the actual average monthly wage, not the capped base.

#### Total termination payout

**Key:** total

**Expr:** comp + notice_pay

**Format:** currency

**Primary:** true

**Chart:**

#### Total payout vs years of service

**Type:** line

**X:** years

**From:** 1

**To:** 30

**Steps:** 30

**Series:**

- total

**Disclaimer:** Planning estimate only. Local rules, collective agreements, unpaid leave, bonuses and court practice differ by city. Confirm with a China employment lawyer before acting.

## Content

**Intro:** Closing a line, relocating a plant or ending a contract in China triggers economic compensation under the Employment Contract Law. This calculator turns years of service, wage and the local average wage into the N, N+1 or 2N figure finance needs for a restructuring budget.

**Sections:**

#### How to use the calculator

**Body:** Enter the employee's average monthly wage over the last 12 months, the published local average monthly wage, and the service period split into completed years and extra months. Pick the basis: N for lawful no-fault terminations, mutual agreement initiated by the employer and economic layoffs, or 2N when termination is found unlawful. Add the +1 option when you pay one month in lieu of 30 days written notice. The primary output is the total payout, and the chart shows how it grows with tenure so you can compare long-service and short-service groups.

#### The method behind the numbers

**Body:** Compensation is one month of wage for each full year of service. A partial year of six months or more counts as one year, and under six months counts as half a month. If the monthly wage is above three times the local average wage, the wage base is limited to that cap and the number of years is limited to 12. Unlawful termination doubles the figure. The notice payment uses the employee's actual average wage.

**Bullets:**

- Under 6 months extra service: 0.5 month
- 6 months or more extra: 1 month
- Cap: 3x local average wage, maximum 12 years
- 2N applies to unlawful termination
- +1 is one month of wage in lieu of notice

#### Worked example and common mistakes

**Body:** An employee earning CNY 9,000 per month with 6 years and 4 months of service under a lawful layoff gets 6.5 months, so 58,500. Adding the +1 payment brings the total to 67,500. Common mistakes are using the base salary instead of the full average wage, forgetting the half-month rule, applying the cap to people below it, and mixing up the local average wage with the minimum wage. Years served before a 2008 law change may follow different transition rules, so older employees need a manual check.

**Cta:** If HR data sits in your ERP, Netray can build a read-only report that pulls tenure and wage history per employee so a restructuring budget is traceable. We can run it on your own servers.

**Faq:**

#### What is the difference between N and N+1?

**Answer:** N is the statutory compensation for years of service. The +1 is an extra month of wage paid when the employer ends the contract without giving 30 days written notice in cases where notice is required.

#### When does the 3x cap apply?

**Answer:** When the employee's average monthly wage exceeds three times the local average monthly wage published by the government. The wage base is limited to the cap and compensation years are limited to 12.

#### Is 2N the same as double severance?

**Answer:** Yes. If a termination is found unlawful, the employer typically owes twice the statutory economic compensation, or the employee may seek reinstatement. This tool simply doubles the N figure.

#### Does this cover unused leave and social insurance?

**Answer:** No. Unpaid wages, accrued annual leave, overtime arrears and social insurance catch-up are separate items. Add them to your budget outside this calculator.

## Search terms

china severance pay calculator, economic compensation china calculator, N+1 compensation china, 2N compensation china unlawful termination, china employee termination cost, china factory layoff cost calculator, employment contract law article 47, china redundancy pay calculator

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