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Chinese Lawyer: Why A Company May Pay Higher Compensation When It Fires Its Employees

Many companies in China want unqualified employees to leave and turns out companies need to pay high compensation. They do not understand why they need to pay when an employee cannot meet their expectation.





A quick answer is: because many companies do not have a proper company regulation in place.


Normally speaking only if a company establishes the following points, the company could terminate the contract with their employees seriously violated company regulation. Otherwise the termination is very likely to be deemed as illegal termination and company shall pay compensation (normally two times the standard of severance pay).


1.The company rules and regulations are lawfully established and through appropriate procedures


Pursuant to Article 4 of the Labor Contract Law, employers shall establish and improve internal rules and regulations in accordance with the law, so as to ensure that Employees enjoy their labor rights and perform their labor obligations.


Article 4 of the Announcement of publishing the explanation of several articles of the Labor Law by the Office of Ministry of Labor (Chinese name: 劳动部办公厅关于印发《关于<劳动法>若干说明》的通知, hereinafter referred to as the ‘Announcement’) states that, employers shall establish and improve internal rules and regulations in accordance with the law; “the law” shall be interpreted broadly, meaning that the rules and regulations shall comply to all official laws and regulations, including but not limited to Constitution, Law, Administrative Regulations, and Regional Regulations.