[Guozun Law Firm] Full Interpretation of Layoff Compensation in 2020: Latest Standards, Detailed Legal Rules, and Practical Guide

Comprehensive Analysis of Compensation Standards for Employees Laid Off in 2020

Against the background of economic fluctuations and transformation, layoff incidents are not uncommon. In order to protect the lawful rights and interests of workers, our country has made clear provisions on layoff compensation standards. The following is an in-depth interpretation of the compensation standards for employees laid off in 2020.

Specific Standards for Economic Compensation

Basic provisions: For each full year that an employee has worked in the unit, the employee may receive economic compensation equal to one month’s salary. If the working period is between six months and one year, it shall be calculated as one year; if it is less than six months, compensation of half a month’s salary shall be paid.

Special circumstances: If the employee’s monthly salary exceeds three times the average monthly salary of employees in the previous year as announced by the people’s government of the municipality directly under the central government or the city divided into districts where the unit is located, the economic compensation shall be calculated according to three times the average monthly salary of employees, and the maximum payment period shall not exceed twelve years.

Method of wage calculation: The “salary” here refers to the employee’s average salary in the 12 months before the termination or ending of the labor contract, including hourly wages, piece-rate wages, as well as bonuses, allowances, subsidies, and other monetary income.

Difference Between Lawful Layoffs and Unlawful Layoffs

Lawful layoffs: During the contract period, where the employer lawfully lays off employees, the standard for economic compensation in a lawful layoff is: one month’s salary shall be paid for each full year; where the period is more than six months but less than one year, it shall be counted as one year; where it is less than six months, half a month’s salary shall be paid.

Unlawful layoffs: If the unit dismisses employees without justified reasons, it shall pay double economic compensation. The additional one-fold compensation paid for an unlawful layoff serves as damages.

Comparison Between Layoff Compensation and Dismissal Compensation

Layoff compensation: The standard for company layoff compensation in 2020 is determined according to the number of years the laid-off employee has worked in the company, and the compensation amount is calculated with reference to the employee’s average monthly salary.

Dismissal compensation: If an enterprise dismisses an employee for reasons other than statutory reasons, it belongs to unlawful termination of the labor contract, and compensation shall be paid in accordance with the Labor Contract Law, with the amount of compensation being two times the standard of economic compensation.

Requirements for Layoff Notice and Advance Notice

Advance notice: A unit must give advance notice when dismissing an employee. Dismissal without employee fault usually requires 30 days’ advance notice to the employee; dismissal for fault generally does not require advance notice.

During the epidemic period: During the epidemic period, enterprises must strictly comply with laws and regulations when laying off employees, and avoid unlawfully dismissing employees, so as not to bear legal liability for double economic compensation or damages.

The formulation of the compensation standards for employees laid off in 2020 is intended to protect the lawful rights and interests of workers. Enterprises shall strictly comply with the relevant laws and regulations, carry out layoffs reasonably, and ensure that employees obtain the compensation they are entitled to.