Help, what is my severance pay?

If you are entitled to severance pay, how exactly is it calculated in the PRC?

In the PRC, severance pay is calculated in a bifurcated manner. The old labor law (“Old Law”) applies to the term of employment before January 1, 2008 and the new PRC Labor Contract Law (“New Law”) applies to the period from January 1, 2008.

1. For term of service after January 1, 2008.
According to the New Law, severance pay is generally 1 month’s salary for each year of employment (or ½ month salary for employment of less than 6 months).

“Monthly Salary” = the employee's average monthly salary in the preceding 12 months prior to termination, which includes base salary and also any bonuses, allowances, subsidies, etc.

**If however, the Monthly Salary is more than three times the average monthly salary of all employees in the jurisdiction (“Average Local Salary”), then the Monthly Salary will be capped at 3x the Average Local Salary. For example in Shanghai the Average Local Salary in 2008 was RMB 3,292, and three times that equals RMB 9,876. Therefore, suppose your monthly salary is RMB 35,967 a month from January 1, 2008 – January 1, 2009, your severance will be capped at RMB 9,876.

2. For term of service before January 1, 2008.
According to the Old Law, the term of employment before this time period is not subject to the Average Local Salary cap. Therefore, employees fair much better with regards to severance pay for the term worked prior to January 1, 2008. So following the example above, you will be able to use your Monthly Salary (i.e., RMB 35,967) to calculate severance pay.

(***this is not legal advice! talk to a friendly lawyer friend -- you may also be able to get more or nothing at all, depending on your individual circumstances)