Many employees are aware that if a company unilaterally terminates an employment contract, it must pay compensation to the employee. However, many employees are not fully aware of their rights if the employer does not renew the contract upon its expiration.
Article 46 of the Labor Contract Law of PRC stipulates that, except in cases where the employer maintains or improves the terms of the original employment contract but the employee disagrees with the renewal, the employer must provide severance payment to the employee if it chooses not to renew the contract upon its expiration. In other words, the only exception to providing severance payment is when the employee is unwilling to renew the contract. However, this is contingent on the employer maintaining or improving the original terms of employment and not forcing the employee to decline renewal by reducing benefits.
If the employer decides not to renew the contract, it must pay severance payment to the employee. The specific calculation method is as follows: starting from January 1, 2008, when the Labor Contract Law came into effect, for every year worked by the employee at the company, one month's salary is paid as severance payment. For periods of six months to less than one year, it is calculated as one year; for periods of less than six months, half a month's salary is paid.
If the employee's monthly salary exceeds three times the local average monthly wage where the employer is located in the previous year, the standard for paying severance payment to the employee shall be three times of local average monthly wage, with the maximum number of years for paying severance payment not exceeding twelve years. Here, the term "wage" refers to the average wage of the employee over the twelve months prior to the termination or expiration of the labor contract, including bonuses, allowances, and monetary income.
For example: If David has worked for a company for two years and the employer is unwilling to renew the contract upon its expiration, according to the labor contract law, the employer must compensate the employee with two months' salary.
If the employer refuses to provide compensation, the employee can apply for labor arbitration.
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