LaoBanFa [1996] No.33 February 15, 1996

Labor Department of Hebei Province:

Request for Instructions on the Calculation and Payment of Economic Compensation While Labor Contract is Terminated or Dissolved (JiLaoBan [1996] No.31) from your department has been received; after disquisition, the following is the reply:

1. On the problem of calculation and payment of economic compensation after the termination of labor contract. Opinions on Several Problems of Implementing Labor Law of the People’s Republic of China (LaoBuFa [1995] No.309) prescribes that "The labor contract shall be terminated when the labor contract expires or the termination conditions promised by the parties occurs. On this Circumstance employing work unit may not pay economic compensation to its workers or stuffs." At the same time it prescribes that "If there are any other regulations connected, it may act accordingly." Above-mentioned "other regulations" here refer to the related provisions in Interim Provisions on State-operated Enterprises Implementing the System of Labor Contract (GuoFa [1986] No.77) and Provisions on Enterprises Owned by the Whole People Employing Peasants as Contractual System Workers (Decree No.87 of the State Council in 1993) that are still in effect. They prescribes that "After the termination of labor contract, the provisions on the payment of economic compensation in the labor contract shall still be executed when one of the contract parties is the worker or stuff of state-owned enterprise, worker of stuff that has labor contract relations with state organs, public institutions or social organizations and peasant work under contractual system employed by enterprise owned by whole people."

2. On the problem of calculation and payment of economic compensation when workers and stuffs under contractual system shift or transfer to other working units. After full implementation of labor contract system, shifting or transferring to other units could be realized only after the labor relations with original working units were terminated and new labor relations with new working units were established. The worker or stuff who proposes to shift or transfer to other working units shall sign labor contract with new working unit after the termination of the labor contract with original working unit. The working unit shall pay labors economic compensation, if the working unit proposes to terminate the labor contract with worker or stuff according to Article 24 of Labor Law, and the labor contract is terminated under consensus of the two parties. The working unit needs not pay laborers economic compensation, if the worker or stuff proposes to terminate the labor contract by him/herself.

3. Economic compensation shall be calculated and paid according to the working years when permanent workers worked in the original working unit before the labor contract system was implemented.

4. If shift of working units is result of incorporation, merger, jointing investment, changing nature of the working unit, changing names of the legal person or other reasons, the working time before the shift shall be regarded as "the working time in the new working unit". If shift of working units is result of change of organizational system, whether the working time before the shift shall be regarded as "the working time in the new working unit" and the shift among corporations directly under the industry shall be regulated by supervision of branches of trade; other kinds of shifts shall be regulated by the provinces, autonomous regions, municipalities directly under the Central Government.

Promulgated by The General Office of the Labor Ministry on 1996-2-15