20 May 2010
Is an employer in the PRC obliged to make a severance payment to its employee if the employee terminates his/her employment?
The requirement to make such a payment depends on the reason why the employee is terminating his or her employment with the employer.
If the employment is terminated by the employee with written notice and without any reason, the employer is not required to make a severance payment to the employee.
The employer is obliged to make a severance payment to the employee if the employee terminates the employment for one of the following reasons:
- the employer fails to provide the labour protection or working conditions specified in the employment contract;
- the employer fails to pay remuneration in full and/or on time;
- the employer fails to pay the social insurance premiums for the employee in accordance with the law;
- the employer forces the employee to work by means of violence, threat, force, or illegal detention; or the employer issues illegal directions or compels risky practices which endanger the safety of the employee;
- the rules and regulations of the employer violate the provisions of the laws or regulations, and such violation harms the employee’s rights and interests; or
- the employment contract is invalid due to one of the following circumstances:
- the employer has used deception or coercion, or taken advantage of an employee’s difficulties to enter into or change a labour contract, not with the employee’s true intention;
- the employer disclaims its legal liability or denies the employee’s right; or
- mandatory provisions of laws or regulations are violated.
Is an employer in the PRC obliged to make a severance payment to its employee when the employment contract comes to an end (rather than being terminated)?
Yes, but only when:
- a fixed-term employment contract expires (unless the employee refuses to renew the employment on the no less favourable terms and conditions); or
- the employer is declared bankrupt, has its business license revoked, is ordered to close down, is withdrawn or the employer decides to dissolve in advance.
The manner of calculation of severance payment will be considered in the next Bitesize.
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