Is an employer in the PRC obliged to make a severance payment when terminating an employee's employment?
This depends on the reason for which the employer is terminating the employee's employment.
If the employee's employment is terminated by the employer due to one of the following reasons, the employer is not required to make a severance payment (which was formally known as "economic compensation" under the PRC Labour Contract Law) to the employee:
However, under the following circumstances, severance pay is payable by the employer to the employee on termination of employment:
If the employer terminates the employee's employment for other reasons than those listed above, or without any reason, the employer will be regarded to have illegally terminated the employee, and will be ordered by the court to reinstate the employee, or to pay damages to the employee (which generally amount to twice the rate of the severance pay).
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