LMI[1994]No.481 issued by the Ministry of Labour on December 3,1994

Article 1　These measures are worked out in accordance with the Labour Law of the People’s Republic of China in order to regulate the standards of economic compensations paid to laborers for the violation and revocation of labour contracts.

Article 2　An employing unit shall pay lump-sum economic compensations to laborers.

Article 3　Where an employing unit deducts wages or delays paying wages to labourers without reason, or refuses to pay labourers remuneration for the extended working hours, in addition to the payment of remuneration in full within the stipulated time limit, the unit shall pay labourers economic compensations equivalent to 25 percent of their remuneration.

Article 4　Where wages paid to labourers by an employing unit are lower than the local standards on minimum wages, the employing unit shall, in addition to making up the part lower than the standards on minimum wages, pay economic compensations equivalent to 25 percent of the part lower than the standards on minimum wages.

Article 5　Where an employing unit revokes a labour contract upon the agreement reached between the parties involved through consultation, the employing unit shall pay a labourer economic compensations according to the length of service in the unit. That is, it shall pay an equivalent of his monthly wage for each year of service, however, the maximum amount shall not exceed his total wages of 12 months. Where the length of service is less than one year, it shall pay economic compensation in accordance with the standard calculated as one year.

Article 6　Where a labour contract is revoked because a labourer is unable to engage in his original work or any new work arranged by an employing unit for illness or injury not suffered at work with the confirmation by the labour appraisal committee, the employing 0 shall pay him economic compensations according to the length of service in the unit. That is, it shall pay an equivalent of his monthly wage for each year of service, and also pay medical subsidy equivalent to one’s monthly wage of 6 months or more. Where a labourer suffers from serious diseases or incurable diseases, the medical subsidy shall be increased. The increased amount for a labourer suffering from serious diseases shall be 50 percent or more of the medical subsidy; the increased amount for a labourer suffering from incurable diseases shall be 100 percent or more of the medical subsidy.

Article 7　Where a labour contract is revoked by an employing unit because a labourer in unqualified for his work and remains unqualified even after receiving training’s or an adjustment to another work, the employing unit shall pay him economic compensations according to the length of service. That is, it shall pay an equivalent of his monthly wage for each year of service, however, the maximum amount shall not exceed his total wages of 12 months.

Article 8　Where a labour contract is revoked by an employing unit because the original labour contract is unable to be carried out due to the fact that the objective circumstances taken as the basis for the conclusion of the contract have greatly changed and no agreement on modification of the labour contract can be reached through consultation by the parties involved, the employing unit shall pay economic compensations to the labourers according to the length of service in the unit. That is, it shall pay an equivalent of their monthly wages for each year of service.

Article 9　During the period of statutory consolidation when an employing unit comes to the brink of bankruptcy or runs deep into difficulties in production and management, and if reduction of its personnel becomes really necessary, the employing unit shall pay the reduced personnel economic compensations according to the length of service in the unit. That is, it shall pay an equivalent of their monthly wages for each year of service.

Article 10　Where an employing unit fails to pay a labourer economic compensations in accordance with the provisions after the revocation of a labour contract, the unit shall, in addition to the payment of economic compensations in full, pay a labourer extra economic compensations equivalent to 50 percent of the economic compensations.

Article 11　"Wage calculating standards of economic compensations" used in these Provisions refers to the average monthly wage of the preceding 12 months before the revocation of the contract of the labourers under the circumstances of normal production of an enterprise.
Where the average monthly wage of a labourer is lower than that of an enterprise when the employing unit revokes its labour contract in accordance with Article 6,8 and 9 of these Provisions, the wages shall be paid to the labourer according to the standard of the average monthly wage of the enterprise.

Article 12　Economic compensations shall be listed as costs of an enterprise. The welfare funds extracted by the enterprise according to the rate as prescribed shall not be used as economic compensations.

Article 13　These Measures shall be implemented as of January 1, 1995.