When is severance owed in China?

Common situations where severance may be owed

Under Article 46 of the Labor Contract Law, statutory economic compensation is tied to specified ways of ending the labor contract. The label used by a manager is not enough; the initiating party, written reason, procedure, and supporting facts all matter.

• The employee ends the contract under Article 38 because of specified employer breaches, such as failure to pay wages or social insurance as required.
• The employer proposes a mutual termination under Article 36 and the parties agree.
• The employer terminates under one of the three Article 40 routes: post-medical-period incapacity, continued incompetence after training or reassignment, or a major change in objective circumstances after consultation fails.
• The employer carries out a qualifying workforce reduction under Article 41.
• A fixed-term contract expires, subject to the renewal exception explained in the contract-expiry guide.
• The employer is declared bankrupt, has its business licence revoked, is ordered to close, or dissolves in a situation covered by Article 44.

Common situations where severance is not automatic

The following situations should not be put into the calculator as though payment were already established. A separate eligibility analysis comes first.

• The employee resigns voluntarily under Article 37 without relying on a qualifying employer breach under Article 38.
• The employer lawfully proves an Article 39 ground, such as serious breach of valid workplace rules. Whether the ground and process are actually lawful can be disputed.
• The employee refuses a fixed-term renewal even though the employer offered to maintain or improve the existing contractual conditions.
• Either side ends qualifying part-time employment under Article 71.
• The parties negotiate a payment that is contractual rather than statutory. The agreement may be more generous, but it should not be confused with a confirmed Article 46 entitlement.

Check the route before the amount

Ask for the employer's proposed legal route, reason, effective date, and document in writing. Preserve the contract, handbook, payroll records, performance material, notices, and negotiation messages. Do not sign a resignation merely to acknowledge receipt of an employer document.

The calculator estimates an amount after a route is selected; it cannot decide whether the employer's facts or procedure satisfy that route.