You just got the meeting invite with HR and a stranger from legal, and your first thought is a number. Here is the honest one.
Here is the honest number, before you sign anything. If your company is ending your contract in Shanghai, your severance is N, one month of your average pay for every year you worked there. You get one extra month (the +1) only when they skip the required 30 days of notice on specific grounds. You get double (2N) when the dismissal is unlawful. And you can walk away with nothing if you sign the wrong form. The law does not care how your manager phrases the meeting. It cares which article they are using.
N, N plus one, or double: the three numbers
Chinese labour law runs on a formula, not a negotiation, and the whole thing turns on three outcomes. Learn which one you are in before you reply to the calendar invite. As of August 2026, this is how they split.
| The payout | What it is | When you get it |
|---|---|---|
| N | One month of average pay per year of service | A lawful end to your contract, layoff or mutual split |
| N + 1 | N, plus one extra month in lieu of notice | Only the three Article 40 grounds, when they skip the 30 day notice |
| 2N | Double the N figure | An unlawful dismissal, no legal ground or the wrong procedure |
| Nothing | Zero economic compensation | If you resign, or sign a resignation letter they hand you |
Notice what is missing from the common talk. N + 1 is not the default. Most lawful firings pay plain N, and the +1 shows up far less often than people assume. So the first thing to work out is your N.
How to work out your N
Two numbers make your N: your years of service, and your monthly pay. Years are counted whole, and this is the part people underclaim. Six months or more but under a year rounds up to one month of severance. Under six months is half a month. Your probation time counts too, so a two year, three month stint is 2.5 months of N, not two.
Now the pay, and here is the piece worth remembering. Your "monthly pay" is not your base salary. It is your average total monthly wage over your last 12 months, bonuses, allowances, commission and overtime included. If your pay swings, add up the full year before termination and divide by twelve. On a commission or bonus job that one habit can lift your N by a lot, so do the sum yourself rather than trusting the figure HR writes down. If you want the wider picture of what you were putting in, our guide to Shanghai social insurance and what you get back covers the contributions side.
The ceiling, if you earn well
High earners hit a cap, and it is worth knowing where. If your monthly wage is above three times the Shanghai average wage, your N is calculated at that capped figure, and the years counted stop at twelve. As of August 2026 the city average wage in force is about 12,434 yuan a month, which puts the three times cap near 37,302 yuan. Treat these as the current published figures and confirm the exact base for your own case, because Shanghai has at times used a slightly different wage base for this specific cap.
| The 2026 number | Amount | What it sets |
|---|---|---|
| Shanghai average monthly wage | ¥12,434 USD 1,727 | The base for the high earner cap |
| Three times monthly cap | ¥37,302 USD 5,181 | The most monthly pay counted, if you earn above it |
| Most N a capped high earner gets | ¥447,624 USD 62,170 | 37,302 across the 12 year ceiling |
| Most 2N a capped earner gets | ¥895,248 USD 124,340 | Double the capped N, for an unlawful firing |
If you earn below the cap, ignore all of this. Your N is simply your real average monthly pay times your years, uncapped.
When the +1 is actually owed, and when it is not
The extra month, 代通知金, has a reputation it has not earned. It is owed only under three narrow Article 40 grounds, and only when the employer chose not to give you 30 days of written notice: you cannot return to your job after medical leave, you cannot do the work even after retraining, or a major change in circumstances has voided the contract. That is the whole list.
It is not owed for a properly noticed layoff, for a mutual separation, or for a dismissal over misconduct. So if someone promises you "N + 1" as a favour, check the ground. Sometimes it is real. Often it is a round number used to make an ordinary N feel generous.
When it doubles, and the trap that pays zero
2N is the law's penalty for firing you badly. If the company ends your contract with no lawful reason, or skips the required procedure, Article 87 doubles your compensation. That is the number a good outcome at arbitration protects.
Which is exactly why the paperwork matters more than the conversation. The most common way people lose their severance is not a cruel boss. It is a form. If you resign, or sign a resignation letter, you generally get nothing. A "mutual separation agreement" is different: its floor is N and you can negotiate up to N + 2 or N + 3, but once you sign it you usually give up any later claim to 2N.
So the rule of thumb is short. If they hand you a mutual separation agreement, read the number and negotiate. If they push a resignation letter, you are being asked to give away your severance, so do not sign it in the room. Take it home. Nothing good is lost by reading it overnight.
What else you are owed on the way out
Severance is not the only line. Any statutory annual leave you did not take is paid out at 300% of your daily wage per untaken day, where your daily wage is your monthly pay divided by 21.75. Unpaid salary, an earned bonus and expenses are all still yours. Get your last payslip, your contract and the termination notice in writing before you leave the building, because those documents are your evidence later. When the dust settles, the exit checklist for leaving Shanghai for good and the way your Shanghai income tax is settled both matter for the final figure that lands in your account.
How to actually claim it
If the number is wrong or the payout does not come, the route is labour arbitration, 劳动仲裁. It is free, it usually runs about 45 to 60 days, and you have one year from your termination date to file. You do not need a lawyer to start, though for a large or contested claim one is worth it. Keep every document, and call the labour bureau on 12333 to confirm how the rules apply to your own situation. Your work and residence status is a separate clock, so read up on your work and residence permit if the job was what tied you to it.
Good to know
- Good for: anyone in Shanghai who has just been called into a meeting with HR, or who wants to know their number before it happens.
- The one move: work out your own N first (average of your last 12 months of total pay, times your years of service), then check which article they are using before you sign.
- Do not sign in the room: a resignation letter usually pays zero. A mutual separation agreement is negotiable and takes home at least N. Take either one home to read.
Common questions
What is the difference between N, N+1 and 2N in China?
N is one month of your average pay per year of service. N + 1 adds one extra month, owed only when the employer uses an Article 40 ground and skips the 30 day notice. 2N is double N, owed when the dismissal is unlawful. Most lawful firings pay plain N, not N + 1.
Does severance include my bonus or only base salary?
It uses your average monthly wage over the last 12 months, which includes bonuses, allowances, commission and overtime, not just base. If your pay swings month to month, add up the full year before termination and divide by twelve to get the correct figure. On a bonus heavy job this raises your N noticeably.
Should I sign the resignation letter HR is offering me?
Be careful. If you resign, you generally get zero economic compensation, and pushing a resignation is a common way to avoid paying N. Read which article and wording the form uses, take it home rather than signing in the meeting, and confirm the ground before you agree to anything.
How long do I have to file labour arbitration in Shanghai?
One year from your termination date. Labour arbitration is free and usually takes about 45 to 60 days. Keep your contract, payslips and the termination notice as evidence. Confirm how the rules apply to your case with the labour bureau on 12333 or a licensed employment lawyer.
Does my probation time count toward severance?
Yes. Probation counts as service years for your N. During probation an employer can dismiss you only for a proven failure to meet the stated hiring conditions, and a dismissal without that ground is unlawful, which can trigger compensation the same as at any other stage.
What if my employer says it cannot afford to pay my severance?
Cannot afford is not a legal defence. Severance is a debt the company owes you, enforced through labour arbitration exactly like unpaid wages. If the firm is genuinely closing, employee wage and severance claims rank ahead of most creditors in a liquidation, so file your claim early and in writing rather than waiting for the company to decide it is generous.
