Workers whose contracts have been broken by their
employers will be paid no more than 12 months' salary as
compensation, under a new draft law proposed yesterday.
But the compensation cap will not apply if employees
have been fired for serious workplace breaches or disciplinary
action, or if the employer can prove they have serious economic
Legislators started to read the third draft of the
controversial labor contract law, which for the first time details
a standard compensation for contract termination.
The draft, discussed at the 27th meeting of the
Standing Committee of the 10th National People's Congress (NPC),
the top legislature, states that if employers want to end
contracts, they should pay employees the equivalent of one month's
salary for every year of service, capped at 12 months.
The calculations will be based on the employee's
average monthly salary over a 12-month period, prior to the end of
However, high earners will be paid compensation no
more than three times the local monthly average salary, according
to the draft.
Li Yuan, director of the administrative law division
of NPC Standing Committee's legislative affairs commission, said
the average monthly salary in Beijing last year was about 3,000
Hu Guangbao, deputy director of the NPC Law Committee,
said such stipulations were made in response to public
The existing Labor Law spells out the need for
economic compensation, but does not provide uniform guidelines. The
previous draft of the labor contract law did not detail the issue
either, leaving it to be set by State Council
Li said many overseas enterprises and organizations,
including the American Chamber of Commerce in Shanghai (AmCham
Shanghai) and the Hong Kong Chamber of Commerce, have also
suggested setting the standard by law so that employers were able
to calculate costs.
The AmCham Shanghai said in a letter to China Daily it
applauds the Chinese government for its initiative.
"The stipulation on compensation is a major change in
the latest draft, and it directly affects the interests of
employers and employees," Li said.
But Li said that because the labor contract issue is
very complicated, the draft law needs further
Official figures show that the NPC received about
192,000 public responses in the month after the draft was published
last March for consultation. Only the Constitution, in 1954,
(China Daily April 25, 2007)