The financial compensation is paid by the employer and the worker upon the termination or termination of their labour relations. The amount of the financial compensation is linked to the wage standard of the worker and the length of service. In practice, a number of employers and workers have been unable to agree on the amount of their financial compensation, which has led to litigation。
The following are three typical cases in which we are able to clean up the areas of error that can easily arise in the calculation of financial compensation, with a view to reducing disputes from the source and creating a harmonious employment environment。
Knowledge point i: financial compensation for old employees who have entered the workforce before 2008
The monthly salary rate for a catering company, qi, which took office on 1 october 2003, was $20,000. The contract was terminated on 20 july 2021 by mutual agreement, but the amount of the financial compensation was disputed. After hearing, the court found that the labour contracts act had entered into force on 1 january 2008 and that the length of service covered the period around 2008, so that the period of service before and after 1 january 2008 should be counted as the nodal period. In accordance with the relevant provisions, in the case of a negotiated release, the calculation of financial compensation for the period after 2008 is “the rate of one month's salary for each full year”. In the case of six months or less and less than one year, financial compensation shall be paid to the worker for half a month.” the calculation of financial compensation for the period up to 2008 would be “a financial compensation equivalent to one month's salary for every year completed, up to a maximum of twelve months. Financial compensation shall be paid for work of less than one year at the rate of one year”. The number of years of service prior to 1 january 2008 should be calculated at 5 years and after 1 january 2008 at 14 years, for a total of 19 years. Accordingly, the court ordered a catering company to pay a financial indemnity of $380,000 for the dissolution of the labour relationship, based on 19 years of service (rather than a simple reduction of less than 18 years on 20 july 2021 and 1 october 2003)。
The labour contracts act, which came into force on 1 january 2008, contains provisions on financial compensation that differ from the previous labour code, the financial compensation for violation and dismissal of labour contracts, so that after 1 january 2008, different provisions apply as to whether a worker can claim financial compensation from his employer and the length of work must be calculated according to the two methods mentioned above. However, the basis of calculation is the average wage of the worker for the twelve months preceding the termination or termination of the employment contract, which is no longer counted in series。
Knowledge point two: the base figure is the salary payable and includes monetary income such as bonuses, allowances, etc
Wang zi joined a beverage company on 11 september 2003 as sales manager. On 7 may 2022, wang ordered the company to pay the difference in wages and financial compensation, on the grounds that the company was unilaterally demoted. The court found that wang had initiated the dismissal of the labour contract on the grounds of a unilateral reduction in the company's salary and, at the time of its termination, had asserted the difference in salary, taking into account the fact that the drink company did not pay the full amount of the post allowance, it could be held that wang had met the requirements for payment of financial compensation. Since both parties accepted that the company had paid wang's year-end award for 2021 to wang in 2022, the amount should be converted and included in wang's average salary for a period of 12 months prior to separation and the amount of the financial compensation should be accounted for accordingly。
In accordance with the labour contracts act, the regulations for the application of the labour contracts act, the average wage of a worker for the twelve months preceding the termination of his or her employment contract is calculated on the basis of the worker's salary, which shall consist of the social insurance, tax, etc., to which he or she is subject, and which consists of hourly or piece-rate wages and monetary income such as bonuses, allowances and subsidies. The end-of-year prize to which the worker is entitled shall be divided on the basis of an average of twelve months per year. The average wage of the worker for the twelve months preceding the termination or termination of the employment contract is lower than the local minimum wage, which is calculated at the local minimum wage. The average wage is calculated on the basis of the number of months actually worked, if the worker has worked less than twelve months。
Knowledge point three: financial compensation for high-income employees, calculated at three times the social wage seal fuck
On 1 march 2009, wang joined a medical company to work as a salesman. On 2 september 2021, a medical company terminated his employment contract with wang for reasons such as the existence of an error at work, violation of work discipline, etc. By failing to acknowledge the existence of a work error and a breach of discipline, the king has petitioned the court for damages for the wrongful dismissal of the labour contract. One wage consists of the basic salary plus sales, with an average salary of over 40,000 yuan for the first 12 months of service. After hearing, the court found that the average salary of wang for the first twelve months before leaving office was three times the average salary of the employee of a legal entity in beijing in the previous year, so that wang's calculation of compensation for an unlawful termination of a labour contract should be based on three times the social wage, with a maximum of 12 years. A medical company is liable to pay more than $900,000 in compensation for an unlawful termination of employment contract。
The average monthly wage of high-income workers tends to be significantly higher than that of society, and in order to balance the rights and obligations of employers and workers, the law imposes special restrictions on the financial compensation available to high-income workers. Article 47 of the labour contracts act provides that: “if the monthly wage of the worker is more than three times the average monthly wage of the employee in the area of the previous year, as announced by the municipal people's government of the municipality under whose authority the employer is located, the rate of payment of financial compensation shall be three times the average monthly wage of the employee and the maximum period of payment of financial compensation shall be twelve years.” in 2020, the average wage of employees of legal entities in beijing city was $151,360, i. E. The average monthly wage ceiling was 1513,602*3 = 37840. Since the average salary of the king for a period of twelve months prior to separation has exceeded $37840 and the length of service has exceeded 12 years, financial compensation should be calculated on the basis of a maximum of 12 years. As this case is exonerated, the amount of compensation must be multiplied twice。
