---
title: "China Termination & Severance 2026"
description: "China termination 2026: severance owed from day one, 1 month per year of service, double pay for unlawful dismissal, 4.286 weeks notice for non-fault exits."
canonical: https://www.teamed.global/country-hiring-guides/china/termination-and-severance
---

China · Termination child

Served by Teamed vetted partner-entity network in China

# How do you *terminate an employee in China* in 2026?

China owes severance from the very first day of employment: 1 month salary per year of service with no qualifying threshold. Dismiss an employee outside the statute's closed list of permitted grounds and [Article 87 of the Labour Contract Law](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) doubles that bill automatically.

Last reviewed 12 June 2026 · China guide

![A wide view of a modern Chinese city skyline at dusk, warm office lights visible in glass towers against a deep blue sky.](/images/country-guides/china-termination-severance.webp)

Illustration · Shanghai, China

Answer.cite this

China dismissal is grounds-driven. The [Labour Contract Law 2008](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) lists the only permitted reasons in Articles 39, 40, and 41. Severance is owed on every non-fault exit from the first day. The rate is **1 month of average salary per complete year worked**. Partial service under six months earns half a month's pay.

There is no minimum service period before severance applies. An employee made redundant in their first week receives severance. An employee dismissed for serious misconduct under Article 39 receives nothing.

Dismissal outside the permitted grounds triggers an automatic double-severance penalty under Article 87. Some employees cannot be dismissed at all during protected periods. These include pregnant workers and those on medical leave.

For non-fault dismissals, you must give **4.286 weeks written notice** or pay out one additional month's salary instead. Laying off **20 or more employees** triggers a separate collective procedure. You must give the trade union or all employees **30 days advance notice** before any dismissal.

![A signed employment contract on a wooden desk with a red company seal beside it.](/images/country-guides/china-termination-polaroid-1.webp)

Sealed and filed

## What grounds permit termination in China?

China uses a **closed-list system**. Only the grounds in the [Labour Contract Law](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) (Articles 39, 40, and 41) permit dismissal. Anything outside that list is not valid. A dismissal on unlisted grounds triggers the double-severance penalty under Article 87.

**Article 39 (summary dismissal, no severance):** serious misconduct, fraud in hiring, dual employment causing material damage, criminal liability, or serious breach of employer rules. **Article 40 (non-fault, 4.286 weeks notice, severance owed):** post-illness failure to return to the original or a reassigned post. Inability to perform after training and reassignment. Objective circumstances that make the contract unworkable. **Article 41 (collective redundancy, advance consultation, severance owed):** economic restructuring, severe operational difficulties, or significant change in production or business.

### Absolutely protected employees

Article 42 bars termination entirely during protected periods. These include: employees on medical leave for a work-related illness or injury; pregnant, nursing, or within the first year post-birth; employees who have worked at the enterprise for **fifteen or more years and are within five years of statutory retirement age**. An employer who dismisses any protected employee faces automatic double-severance plus potential reinstatement orders from the labour arbitration committee.

### Step-by-step procedure for non-fault dismissal (Article 40)

For the most common employer-initiated exit, follow these steps before issuing notice. Skipping any step converts an otherwise lawful termination into an unlawful one, and the double-severance consequence is automatic.

1. Document the non-performance or changed circumstance Build a contemporaneous written record showing the specific Article 40 ground: post-illness failure to return, inability to perform after training and reassignment, or objective circumstance change. A verbal record is insufficient; Chinese labour arbitration requires documentary proof.
2. Attempt training or reassignment first For capability-based exits, Article 40 requires the employer to provide training or offer a reassigned post before giving notice. Proceeding straight to dismissal without this step makes the termination unlawful.
3. Notify the trade union in writing Before issuing the termination notice, inform the trade union (or employee representatives where no union exists) of the reason. The union has the right to raise objections; the employer must consider them in writing, though the dismissal may proceed.
4. Issue written notice or agree payment in lieu Give the employee written notice of the statutory period, or pay one additional month's salary in lieu and terminate immediately. Both the notice letter and any payment-in-lieu agreement must be signed and dated.
5. Pay severance and complete administrative formalities Calculate and pay the Article 47 severance by or on the final working day. Complete the personal file transfer and social insurance account transfer to the employee's chosen institution within the statutory window, and issue a written proof of termination.

## How much notice do you give for non-fault termination?

The notice rule under [Article 40](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) is flat, not scaled by tenure. Every non-fault dismissal requires **4.286 weeks written notice**. Length of service does not change this.

You can also pay out one additional month's salary instead of working notice and dismiss immediately. This right comes from the law, not from the contract.

| Termination type | Notice required | Severance owed |
| --- | --- | --- |
| Article 39 (serious misconduct) | None | None |
| Article 40 (non-fault: post-illness, incapacity, objective change) | 4.286 weeks written notice, or one additional month salary in lieu | Yes |
| Article 41 (collective redundancy) | 30 days advance explanation to trade union or all employees | Yes |
| During probation (employer, for cause) | None | None |

There is no statutory tenure-based notice scale. A five-year employee and a two-month employee receive the same 4.286 weeks notice on a non-fault exit. Contractual notice can exceed the statutory floor but cannot go below it.

Employee resignation after probation: 30 days written notice under Article 37. During probation, the employee gives 3 days notice.

### Probation and notice

Probation periods under [Article 19](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) scale with contract duration. For fixed-term contracts of three years or more, and for open-ended contracts, the maximum probation is 6 months. The employer may dismiss during probation without notice if the employee fails to meet documented employment conditions; no severance applies in this case. The employee may resign on 3 days notice during probation.

## How is severance calculated in China?

Severance under [Article 47](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) is **1 month of average salary per complete year of service**. It runs from the first day of employment. The minimum qualifying period is 0 years, so entitlement begins immediately.

Partial years count. Under six months of service earns half a month's pay. Six months or more, but under one year, counts as a full year.

### The salary cap

Where an employee's average monthly salary exceeds three times the local government-published average monthly salary, two caps apply: (1) the average salary used in the formula is capped at three times the local average, and (2) the maximum years of service counted is capped at **12 years** for service on or after 1 January 2008. The effective maximum statutory severance for a high earner is therefore three times the local average monthly salary, multiplied by twelve years, giving a ceiling of thirty-six months of the local average. For service before 2008, the three-times salary cap does not apply in Beijing and Shanghai; practitioners advise verifying the pre-2008 treatment locally.

### What counts as average monthly salary

Average monthly salary is the arithmetic mean of all cash compensation in the twelve months before termination: base salary, bonuses, allowances, and subsidies. Commission earnings and overtime that formed part of normal compensation count. Stock vesting and expense reimbursements generally do not.

### Double severance for unlawful termination (Article 87)

Any dismissal outside the permitted grounds under Articles 39, 40, or 41, and any procedural defect severe enough to render a termination unlawful, triggers **double the statutory severance** as a penalty under Article 87. This is not a compensatory award on top of standard severance. It replaces the standard severance entirely with twice the amount. The same salary cap and service-year cap apply to the double-severance calculation.

## When does a mass layoff trigger collective rules?

The collective rules under [Article 41](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) apply when you dismiss **20 or more employees**. They also apply when you dismiss fewer than 20 but the number is ten percent or more of your total workforce.

You must explain the situation to the trade union or all employees **30 days in advance**. You must hear their views. Then you must report the plan to the local labour authority.

L&E Global · Termination of employment contracts in China

Propose **20 or more redundancies** (or redundancies equalling ten percent of the workforce) and the collective rules apply: **30 days advance explanation** to the trade union or all employees before the first notice issues, followed by a mandatory report to the local human resources and social security bureau. Statutory redundancy grounds under Article 41 are limited to: court-ordered restructuring, serious operational difficulty, production or business change after a contract amendment is refused, or significant change in objective circumstances. Standard severance applies to each affected employee.

Source: [L&E Global, Termination of employment contracts in China](https://leglobal.law/countries/china/employment-law/employment-law-overview-china/07-termination-of-employment-contracts/)

### Permitted grounds for collective redundancy

Unlike individual terminations under Article 40, collective redundancy requires one of four specific triggers: restructuring under the Enterprise Bankruptcy Law; serious difficulty in production or business operations; a change in production, technology, or significant business direction after failed negotiation to amend contracts; or other objective circumstances causing a major change in the basis on which contracts were concluded. Pure cost-reduction without one of these triggers does not qualify under Article 41.

### Priority re-hire obligation

Employees made redundant under Article 41 have a statutory priority right to re-hire if the employer recruits for the same or similar roles within six months of the collective redundancy. Ignoring the re-hire obligation is a common source of labour disputes in China.

### Administrative formalities

On any termination, the employer must complete the personal file transfer and social insurance account transfer within 15 days of contract termination under Article 50 of the Labour Contract Law. Outstanding wages should be settled at or before this window. Late file or insurance transfers can independently expose the employer to damages claims separate from the termination itself.

## Can you agree a mutual termination in China?

Yes. [Article 36](https://english.court.gov.cn/2015-08/17/c_761484_10.htm) allows employer and employee to end the contract by written mutual agreement at any time. This is the cleanest exit when the grounds for unilateral dismissal are uncertain.

The employee must give genuine written consent. Coercion or pressure makes the agreement not valid. That leaves the employer exposed to an unlawful-dismissal claim.

Employers typically pay severance at or above the Article 47 formula as part of a mutual termination agreement, even though the statute does not require it for employer-initiated mutual agreements. In practice, the employee will expect compensation; below-formula settlements attract labour arbitration challenges and the arbitration committee has discretion to award a higher amount.

Mutual termination agreements in China should be written in Mandarin Chinese and should specify: the termination date, the full and final severance payment, the social insurance and file transfer obligations, a statement that the employee acknowledges receipt and waives further claims, and (where relevant) non-compete obligations with agreed compensation. Non-compete clauses are enforceable only if paired with monthly compensation for the restricted period; an unpaid non-compete is void.

### Why mutual agreement matters for foreign employers

Labour arbitration in China is fast, cheap, and employee-friendly. The arbitration fee is nominally borne by the employer on claims the employee wins. A well-structured mutual termination agreement, executed before the relationship deteriorates, is frequently the most cost-effective path for foreign-invested enterprises. Any unilateral action that the arbitration committee later finds procedurally defective reverts to the Article 87 double-severance penalty.

## How Teamed runs China terminations

Teamed acts as your legal [employer of record](/lp/employer-of-record) in China for [**from $599 per employee per month**](/pricing). There is **zero FX mark-up** in any currency. Our vetted partner-entity network holds the Chinese labour contracts. The dismissal procedure runs through Teamed's China operations.

We handle the grounds assessment, notice calculation, severance maths, Article 50 file-transfer formalities, and final-pay reconciliation on **one platform**. The decision to dismiss, on what grounds, and on what commercial terms remains yours.

**Real HR and legal experts** handle your China hires, from the first labour contract to every social insurance contribution and year-end formality. **An actual person**, not a ticket queue. There is **no setup fee** and **no exit fee**, and employer cost **passes through at cost, itemised** on every invoice.

The split of responsibilities under EOR for China terminations:

| What Teamed handles | What the client decides |
| --- | --- |
| Assessment of the applicable statutory grounds (Article 39, 40, or 41) | Whether to dismiss and why |
| Notice calculation and PILON assessment | Whether to work the notice or pay in lieu |
| Severance calculation against the Article 47 formula and local salary cap | Whether to enhance the severance above statutory |
| Mutual termination agreement drafting in Mandarin Chinese with qualified local partners we engage | The commercial terms and severance amount |
| Collective redundancy notice to trade union or employees and local authority report | Selection of employees for redundancy |
| Article 50 file transfer and social insurance account transfer within deadline | Communication timing with the wider team |
| Labour arbitration support if a claim is raised | Settlement vs. defence strategy |

China's labour arbitration system is fast and employee-friendly. Having every procedural step documented before the labour contract ends is the difference between a clean exit and a costly dispute.

EOR payroll, contractor onboarding, and entity setup all live on **one platform**. A China contractor who converts to EOR keeps their record, and that same employee can **graduate** from EOR to your own China entity without switching systems. Run the [Crossover Calculator](https://www.teamed.global/tools/crossover-calculator) to see the month the model flips. EOR is the right structure for a first China hire, **until it isn't**. Start from the China hiring overview; each guide here covers one layer of Chinese employment law.

Key sources: [Labour Contract Law, Supreme People's Court English version](https://english.court.gov.cn/2015-08/17/c_761484_10.htm), [L&E Global termination overview](https://leglobal.law/countries/china/employment-law/employment-law-overview-china/07-termination-of-employment-contracts/), and [China Briefing, terminating employees in China](https://www.china-briefing.com/doing-business-guide/china/human-resources-and-payroll/terminating-employees-in-china).

## Frequently asked questions

Does an employee in China have to work for a minimum period before they qualify for severance?

No. Under Article 47 of the Labour Contract Law, severance is owed from the very first day of employment. The qualifying service threshold is 0 years, meaning there is no minimum. Even an employee with under six months of service who is non-fault terminated receives half a month's severance.

How much notice must you give to terminate an employee in China?

For non-fault terminations under Article 40, you must give 4.286 weeks written notice, or pay one additional month's salary in lieu of notice. There is no tenure-based scale: the same notice applies whether the employee has two months or ten years of service. For summary dismissal under Article 39 (serious misconduct), no notice is required and no severance is owed.

What happens if you dismiss an employee outside the permitted statutory grounds?

Article 87 of the Labour Contract Law imposes automatic double-severance as a penalty for any unlawful termination. The double-severance replaces (rather than supplements) the standard statutory severance. The same salary cap (three times local average monthly salary) and service-year cap apply.

Which employees can never be dismissed in China?

Article 42 bars termination of employees who are on medical leave for a work-related illness or injury; pregnant, nursing, or within the first year after birth; or who have worked at the enterprise for fifteen or more years and are within five years of the statutory retirement age. Dismissing an absolutely protected employee is unlawful regardless of the grounds cited.

When does a mass layoff in China trigger collective redundancy rules?

Article 41 applies when 20 or more employees are dismissed, or when fewer are dismissed but they represent ten percent or more of the total workforce. The employer must explain the situation to the trade union or all employees 30 days in advance and file a report with the local labour authority before any notice is issued.

What administrative steps must be completed when an employee leaves in China?

Under Article 50 of the Labour Contract Law, the employer must complete the personal file transfer and social insurance account transfer within 15 days of the termination date. The employer must also issue a written proof of termination. Outstanding wages should be settled at or before this window; practitioners treat the 15 days formality window as the practical upper bound for final wage settlement.

Teamed Legal Operations

The Article 87 double-severance rule catches foreign employers off guard more than any other feature of Chinese employment law. Getting the grounds wrong does not leave you paying regular severance plus a top-up. It replaces standard severance with double, and the calculation runs at the full Article 47 formula.

A note from Tom Price-Daniel

In China, severance starts on day one. There's no qualifying period, no threshold, no minimum tenure before the meter runs.  
Dismiss outside the statutory grounds list and the bill doubles automatically under Article 87.  
The question isn't whether you owe severance in China. It's whether you owe single or double.

Tom Price-Daniel · Co-founder, Teamed

## Related China guides

- Hiring in China, overviewparent
- [Termination and severance in the United Kingdom](/country-hiring-guides/united-kingdom/termination-and-severance)neighbour
- [Employer of Record overview](/lp/employer-of-record)core
- [Pricing, Zero FX Fixed](/pricing)core
- [EOR vs Entity Crossover Calculator](https://www.teamed.global/tools/crossover-calculator)tool
- [Employer Cost Calculator](https://www.teamed.global/tools/employer-cost)tool
- [Talk to an expert](https://www.teamed.global/contact)CTA

A note on this page.

This is a guide, not legal, tax or accounting advice. Rules change and vary by jurisdiction, so verify current requirements with the relevant authorities, the Ministry of Human Resources and Social Security and local human resources and social security bureaus for China, or speak to a qualified professional before relying on any specific framework. Social security contribution rates vary by city and province and must be confirmed with the relevant local bureau. The Labour Contract Law 2008 (as amended 2013) governs; verify that no provincial or municipal regulations vary the position for your specific location.