Before terminating an employee in China

Different routes, different requirements

Mutual agreement, termination for employee misconduct, non-fault termination and economic redundancy are distinct routes under the Labor Contract Law. Articles 36 and 39–43 provide key rules on grounds and procedure.

Poor performance is not automatically enough. For the route under Article 40(2), review the evidence of inability to perform and whether the employee remains unable to perform after training or reassignment. Check any applicable special protection, including medical-treatment periods, pregnancy, maternity, nursing or work-related injury circumstances.

What do N, N+1 and 2N mean?

These are informal shorthand, not a menu of interchangeable exit options. First determine whether statutory economic compensation is payable under Article 46. Article 47 then governs the relevant service period, wage basis and applicable caps.

The “+1” generally refers to the additional one month’s wages that may replace 30 days’ prior written notice for the specific non-fault termination grounds in Article 40. It is not payable in every termination.

For unlawful termination, Articles 48 and 87 address continued performance of the contract or compensation at twice the statutory economic-compensation standard, depending on the circumstances. Budgeting for “2N” does not remove the need to assess whether the termination is lawful.

A restructuring is not automatically an economic redundancy

Article 41 requires an assessment of statutory grounds and headcount or percentage thresholds, together with explanation, consultation, reporting and priority-retention requirements. Review the actual proposal rather than relying only on its label.

Prepare before making the decision

Collect the contract and renewals, job and pay records, the evidence supporting the proposed ground, policy-adoption records and previous communications. Identify affected employees with potentially protected circumstances. Preserve original records rather than creating a retrospective paper trail.