How is severance pay calculated?

Severance pay is calculated depending on how many years you have worked.

1. For each full year, one month of normal salary is given.

2. Any period of above six months but less than one year shall be deemed as one year.

3. For any period of less than six months, it is one-half of the monthly salary.

4. If your monthly salary is three times higher than the average monthly salary of workers as announced last year by the people’s government at the municipal level directly under the central government or at the level of the districted city where the entity is situated, the rate shall be three times the average monthly salary of workers and may not exceed 12 years of work.

5. Monthly salary means the average monthly salary of the worker for the 12 months before the discharge or termination of the labor contract thereof.

Example:

You have worked for 3 years and 3 months with a monthly salary of 10,000.
Severance pay is 3.5 X 10,000 = 35000

What is N, N+1 and 2N?

N stands for the amount of years that you have worked in the company.

“N”

You get N under the following circumstances:

  1. You terminate the contract due to your employer failing to provide labour protection or work conditions as stipulated in the labour contract.
  2. You terminate the contract because your employer has failed to pay the full amount of remunerations in a timely manner.
  3. You terminate the contract because your employer has failed to pay social security premiums.
  4. You terminate the contract because the bylaws in your labour contract thereof are inconsistent with any law or regulation and impair your rights and interests.
  5. Your labour contract is invalid due to your employer concluding or modifying it by way of deception or coercion, or taking advantage of your difficulties, to force you to conclude an employment contract or to make an amendment thereto, that is contrary your true will.
  6. Your employer proposes to terminate the labour contract through unanimity. Note that if you are the one who proposes to terminate the labour contract, you will not get severance pay.
  7. The company is undergoing economic downsize layoff and you are the unlucky one.
  8. The company is under revitalization in accordance with the Enterprise Bankruptcy Law
  9. Your employer has gone bankrupt, is revoked of business license thereof, is ordered to close down, is discharged, or goes into liquidation
  10. The term of your labour contract has come to an end. You are willing, but your employer is unwilling to sign a new one.
  11. The term of your labour contract has come to an end and BOTH you and your employer is unwilling to sign a new one.
  12. You have fallen ill or is injured for a non-work-related reason, and not able to bear the original post after the expiration of the medical treatment period as prescribed, nor can assume any other position as arranged by the employer;
  13. You are incapable of doing your job even upon training or adjustment to your post
  14. The objective circumstance has altered significantly, on which the conclusion of the labour contract is based, resulting in the labour contract unable to be performed. And no agreement concerning the modification of contents of the labour contract is reached after consultations between you and your employer.

“N+1”

N+1 is given when there is no 30-day notice given before termination of the contract, and under these three conditions

(1) You have fallen ill or is injured for a non-work-related reason, and not able to bear the original post after the expiration of the medical treatment period as prescribed, nor can assume any other position as arranged by the employer;

(2) You are incapable of doing your job even upon training or adjustment to your post

(3) The objective circumstance has altered significantly, on which the conclusion of the labour contract is based, resulting in the labour contract unable to be performed. And no agreement concerning the modification of contents of the labor contract is reached after consultations between you and your employer.

“2N”

2N stands for double the amount of normal severance pay. Basically, it kicks in when there is illegal discharge or termination of the labour contract.
If you belong to any of the situations below and your employer fires you anyways, you get 2N payment.

(1) You conduct operations exposing you to occupational disease hazards and have not gone through an occupational health check before leaving your post, or is suspected of having an occupational disease and is under diagnoses or medical observation.

(2) You have an occupational disease and have lost or partially lost your capacity to work as confirmed due to an injury relating to your job during employment

(3) You are suffering from illness or is being injured irrelevant to his job, and the period of medical treatment as prescribed therefore has not expired

(4) You are in pregnancy, confinement or nursing period.

(5) You have been working for the employer for exceeding 15 years continuously and are less than 5 years away from your legal retirement age

Edgar Choi is author of “Commercial Law in a Minute” and host of a legal-advice account “Law in a minute” on WeChat

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