The short answer: a valid legal reason, a set process, and usually severance. Termination in China is tightly regulated — the opposite of US at-will flexibility — and any procedural slip can make the termination unlawful.
Legal basis
- Article 39: termination for cause (serious breach of rules, gross negligence, fraud in the contract, etc.) — no severance.
- Article 40: no-fault termination (incompetence after reassignment/training, medical issues, major change in circumstances) — requires 30 days' written notice or an extra month's pay.
- Article 41: conditions and process for economic redundancy.
- Articles 46–47: severance is one month's pay per year; six months to a year counts as a full year, under six months gets half a month; capped at three times the local average wage and 12 years.
- Article 87: unlawful termination requires double severance as damages (the "2N" rule).
Key points
- Every legal reason is required — you cannot simply "pay to leave"; the employee may demand reinstatement or double damages.
- Termination for incompetence requires training or reassignment first; other termination grounds have no such requirement.
- Except for cause-based termination, pay severance — typically one month's pay per year of service.
- Redundancy adds extra steps: prioritizing long-serving employees, consulting the union or all employees, and reporting to the local labor authority.
Practical tips
- Fix the evidence before termination and complete the union-notification procedure.
- Prefer mutual termination where possible, and confirm both sides' rights in writing.
Note for foreign employers
- Termination during probation also needs a valid legal reason — no arbitrary dismissal.
Termination is a high-risk area for foreign employers in China — process matters even more than the reason. Need compliant termination support? Contact CRBPO.
About CRBPO
Founded in 2003, CRBPO (中瑞岳华) is a professional HR service provider with 20+ years in the China market, offering executive search, RPO recruitment, staffing & dispatch, global EOR, tax & accounting, and monthly HR subscription — across 30+ cities — to help foreign companies run compliant, efficient operations in China.
Follow us: WeChat Official Account "中瑞岳华科技服务" | LinkedIn; Hotline: 400-658-9852; Email: os@crbpo.com.