How China severance is calculated

Step 1: find the service multiplier

Article 47 counts each full year with the employer as one month of wages. A remaining period of six months or more but less than a year is treated as one year. A remaining period under six months produces half a month's wages.

• 1 year exactly = 1.0 month.
• 3 years and 4 months = 3.5 months.
• 3 years and 8 months = 4.0 months.

Step 2: find the monthly wage base

Article 47 uses the employee's average monthly wage during the 12 months before revocation or termination. Implementation Regulation Article 27 says this is wages payable before deductions and includes time or piece-rate wages plus monetary income such as bonuses, allowances, and subsidies.

If the employee worked for fewer than 12 months, the average is calculated over the months actually worked. If the average is below the local minimum-wage standard, Article 27 applies that minimum standard instead.

Step 3: check the high-earner cap

If the employee's monthly wage exceeds three times the previous year's local average monthly wage published by the relevant municipal or city-level government, Article 47 caps the wage base at three times that local figure and caps the compensable service period at 12 years.

The calculator therefore gives an uncapped basic estimate without asking users to find a local wage figure. A potentially capped case needs the correct official local figure for the relevant year and a separate calculation.

Example with the calculator default

At an uncapped average monthly wage of RMB 20,000 and exactly one year of service, basic N is RMB 20,000. At the same wage and three years plus four months, the multiplier is 3.5 and the estimate is RMB 70,000.

Service before 1 January 2008

Article 97 contains transition rules. For a labor contract already in force when the Labor Contract Law took effect, post-2008 compensation years are calculated under the new law, while any pre-2008 entitlement is handled under the rules that applied at that time. The calculator deliberately does not attempt that historical split.