Answer in one line: Severance pay in China is one month’s wage for every full year you worked, and half a month if you worked less than six months — but if your monthly wage is more than three times the local published average, the base is capped at three times that average and the years counted are capped at 12; where the dismissal is unlawful, the figure doubles.

What the law provides

Article 46 of the Labour Contract Law lists when severance is owed: termination agreed with the employer’s proposal, incapacity or incompetence after training or reassignment, a major change in circumstances that makes the contract impossible to perform, and the other situations named in that article. Article 47 gives the formula — one month’s wage per year of service; six months or more but less than one year counts as one year; less than six months, half a month’s wage. Monthly wage means your average over the 12 months before termination. Two ceilings apply: above three times the previous year’s average monthly wage published for the locality, the base becomes three times that average and the years counted are capped at 12.

Article 87 is the provision employers forget: where a termination is unlawful, the payment is double the Article 47 figure. That is compensation, not severance. Article 48 lets you ask for the contract to continue instead, or take the money where performance is no longer possible. Article 40 covers no-fault dismissal — incapacity, incompetence, changed circumstances — and requires 30 days’ written notice or one extra month’s wage instead, plus severance.

When you get nothing

Article 39 dismissals carry no severance: failure during probation, serious breach of the employer’s rules, serious dereliction of duty or self-dealing causing major loss, or being held criminally liable. A voluntary resignation on 30 days’ written notice under Article 37 also pays nothing, as does ending part-time work under Article 71.

The exception cuts the other way too. If it is the employer’s own conduct that forces you out — no labour protection, wages not paid in full or on time, social insurance not paid, rules that breach the law and harm your rights — that is a resignation under Article 38, and Article 46(1) still requires severance.

What this means in practice

Hypothetical numbers: five full years at RMB 20,000 a month comes to five months’ wages, RMB 100,000. If the company had no lawful ground and dismissed you anyway, the claim is RMB 200,000. Miss the 30-day notice and add one month’s wage on top. Payment falls due together with the handover under Article 50, and if the employer simply refuses to pay, the labour authority can order payment plus an additional 50% to 100% of the amount under Article 85.

Disputes start with labour arbitration, which is free of charge and can be filed within one year of the infringement under Article 27 of the Labour Dispute Mediation and Arbitration Law. For severance or compensation claims not exceeding 12 months of the local monthly minimum wage, the award is final under Article 47, although you can still sue within 15 days under Article 48. Keep the contract, payslips and the termination notice: the employer carries the burden of proving the ground for dismissal.

A typical scenario (hypothetical)

A foreign sales manager in Shanghai, five years with the company at RMB 45,000 a month, is told her role is no longer needed and her access is cut off the same day, with no notice and no stated ground. Because the employer cannot show a lawful ground, the claim is double the Article 47 severance plus one month’s wage in lieu of notice — and because her wage is above three times the local average, the exact figure is calculated from the local published average rather than her full salary.

FAQ

Q: How much severance pay am I entitled to in China?

A: One month’s wage for each full year of service under Article 47, with half a month for a period under six months, and the wage measured as your average over the last 12 months.

Q: Is there a maximum?

A: Yes. If your monthly wage is above three times the local published average, the base is capped at three times that average and the years counted cannot exceed 12.

Q: What is the difference between severance and compensation?

A: Severance is the Article 47 amount; compensation is double that amount, payable under Article 87 where the employer terminated the contract unlawfully.

Q: Can my employer avoid paying by calling it a resignation?

A: Not where the employer’s own failures forced the exit — that is a termination under Article 38 and Article 46(1) still requires severance.

Q: Where do I file a claim?

A: Labour arbitration, free of charge, within one year of the infringement under Article 27. Smaller severance claims are decided by a final award, and either side can go to court within 15 days.

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Wang Guan | Co-founder, Beijing Haolue Law Firm | +86 17813108512