China Severance Pay (Economic Compensation) Calculator
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.
Your numbers
Gross monthly wage including regular bonuses and allowances, averaged over the 12 months before termination.
The municipal or provincial average monthly wage announced by the local government. Used for the 3x cap.
Under 6 months counts as half a month of pay, 6 months or more counts as a full month.
Your results
Planning estimate only. Local rules, collective agreements, unpaid leave, bonuses and court practice differ by city. Confirm with a China employment lawyer before acting.
Total payout vs years of service
Sweeps Completed years of service from 1 to 30, holding your other inputs fixed.
Restructuring cost report from your ERP data
Optional: we can outline a read-only report that pulls tenure and pay by employee from your HR and ERP tables.
Optional. The tool and every export work without this. No spam.
How to use the calculator
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
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.
- 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
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.
Frequently Asked Questions
What is the difference between N and N+1?
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?
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?
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?
No. Unpaid wages, accrued annual leave, overtime arrears and social insurance catch-up are separate items. Add them to your budget outside this calculator.
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.
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