Important and/or distinctive aspects of rights on termination in China.
In China, the law currently provides for an exclusive list of statutory reasons for employers to unilaterally terminate the employment contract. The employer assumes the burden of proof regarding the occurrence of (one of) the reasons. This can be very difficult, in particular for employers who have not adopted sound internal rules and HR management practice.
In practice, to avoid risks related to an unlawful unilateral termination, employers often adopt the amicable termination approach by proposing a written termination agreement to the employee. To secure the employee’s consent, a higher than statutorily required severance payment may be offered to the employee.
The statutory severance is calculated generally based on the principle of “one month salary for each year of service”. The calculation is capped at three times the local average monthly salary. The cap amount in Shanghai is currently RMB 17,817 gross, and in Beijing it is 21,258 gross. Employment relationships which commenced before 1 January 2008 are subject to additional regulations under the old law, requiring a careful legal assessment.