Termination Notice Period in China: 30-Day Notice, Pay in Lieu and Article 40

China does not generally recognize at-will employment. An employer cannot lawfully terminate an employee simply by providing notice and paying the employee’s final salary. For a broader explanation, see HROne’s guide to terminating employees in China.

The employer must first establish a lawful statutory basis for ending the employment relationship. It must then complete the required notice, severance, payroll, documentation and employee-exit procedures.

The 30-day rule appears most frequently in two situations:

• An employee resigns by giving 30 days’ written notice under Article 37; and
• An employer terminates an employee under one of the limited no-fault grounds in Article 40.

In an Article 40 termination, the employer may give 30 days’ written notice or pay one additional month’s salary in lieu of that notice. However, the additional month does not replace statutory severance and cannot turn an unlawful termination into a lawful one.

Quick answer: what is the termination notice period in China?

The notice requirement depends on how the employment relationship is ending.

The central rule is:

Notice is a procedure, not an independent legal ground for dismissal.

An employer must first determine whether Article 40 or another statutory termination route applies.

Employee resignation: the 30-day rule under Article 37

Under Article 37 of the Labor Contract Law, an employee may revoke a labor contract by providing the employer with 30 days’ written notice.

During probation, an employee may resign by providing three days’ notice.

The employee does not normally need the employer’s approval for an ordinary Article 37 resignation to take effect. However, the employee should be able to prove that written notice was delivered.

Employers should preserve:

• The employee’s resignation letter or traceable written notice;
• The date the notice was received;
• The proposed final working day;
• Confirmation of the notice period;
• The handover plan;
• Final payroll calculations;
• Company property records; and
• The termination certificate.

A genuine voluntary resignation generally does not trigger statutory severance. However, severance may be required when the employee ends the contract because of a qualifying employer breach under Article 38, such as failure to pay wages or make social-insurance contributions.

What if an employee leaves before completing 30 days?

If an employee submits a resignation but wants to leave before the 30-day period ends, the employer and employee can agree to an earlier final working day.

That agreement should be documented. It should clarify:

• The agreed final date;
• Whether the employer waives the remaining notice;
• Required handover;
• Final salary;
• Unused annual leave;
• Company property;
• Confidentiality obligations; and
• Any unfinished expense or commission items.

If the employer does not agree to the early departure, it should document the actual departure date and any incomplete handover.

The employer should not automatically deduct 30 days’ salary or impose a penalty. Any claim against the employee would generally require a lawful basis and evidence of actual loss caused by the failure to complete the notice period.

Can an employee withdraw a resignation?

An employee should not assume that a resignation can always be withdrawn unilaterally.

Once the employer receives a clear resignation notice, it may begin replacement hiring, handover planning, payroll preparation and system-access changes. Withdrawal may therefore require the employer’s agreement.

Employers should nevertheless review sensitive cases carefully, particularly where:

• The employee claims the resignation was involuntary;
• The employee was pressured to sign;
• Pregnancy or a medical condition becomes relevant;
• The resignation wording is ambiguous; or
• The employee submitted the notice during a workplace dispute.

The employer should preserve the original communication and any subsequent agreement about withdrawal or continuation of employment.

Employer termination under Article 40

Article 40 of the Labor Contract Law permits an employer to terminate a labor contract by giving 30 days’ written notice or paying one additional month’s salary in three specified circumstances.

These grounds should be interpreted and documented carefully.

Article 40(1): inability to work after the medical treatment period

This route may apply when:

1. The employee has an illness or non-work-related injury;
2. The legally applicable medical treatment period has expired;
3. The employee cannot perform the original position; and
4. The employee also cannot perform another job arranged by the employer.

The employer should not terminate an employee simply because the employee is sick or absent.

Before considering termination, the employer should review:

• The employee’s length of service;
• The applicable medical treatment period;
• Medical certificates and leave records;
• The employee’s current work capacity;
• The original job requirements;
• Possible alternative positions;
• Communication with the employee; and
• Whether the employee has protected status.

An employee who is still within the statutory medical treatment period is generally protected from termination under Article 40.

Article 40(2): incompetence after training or reassignment

Article 40 may apply when an employee:

1. Is unable to perform the requirements of the position;
2. Receives training or is reassigned to another position; and
3. Remains unable to perform after that corrective step.

A manager’s opinion that an employee has “poor performance” is not enough by itself.

The employer should be able to produce:

• A clear job description;
• Objective performance requirements;
• Evidence that the employee received those requirements;
• Performance records;
• Specific examples of unmet requirements;
• Feedback or performance discussions;
• Training records or reassignment documents;
• A reasonable assessment period; and
• Evidence that the employee remained incompetent afterward.

The employer should distinguish incompetence from misconduct.

Incompetence normally concerns the employee’s ability to perform the role. Misconduct concerns a breach of lawful and properly implemented company rules. The applicable termination route and severance consequences can be different.

Article 40(3): material change in objective circumstances

This ground can apply where:

1. The objective circumstances forming the basis of the employment contract materially change;
2. The original contract can no longer be performed;
3. The employer consults the employee about changing the contract; and
4. The parties cannot agree on a modification.

An ordinary preference to reduce headcount does not automatically satisfy this provision.

The employer should document:

• The original circumstances underlying the contract;
• The subsequent business or operational change;
• Why the original contract can no longer be performed;
• Alternatives considered;
• Proposed contract amendments;
• Consultation meetings;
• The employee’s response; and
• Why the parties could not reach agreement.

Employers should also determine whether the situation is an individual Article 40 case or a broader restructuring that may trigger Article 41 layoff procedures.

For larger workforce reductions, see HROne’s China Layoff Compliance Guide.

Thirty days’ notice versus pay in lieu

When Article 40 applies, the employer normally has two procedural options.

Option 1: 30 days’ written notice

The employment relationship continues during the notice period.

The employee should generally continue receiving:

• Contractual salary;
• Applicable benefits;
• Social-insurance coverage;
• Housing-fund contributions;
• Payroll withholding; and
• Normal employment protections.

The employer may arrange work handover, restrict access where reasonably necessary and prepare the employee’s exit. However, it should not treat the employee as already terminated before the final working day.

Option 2: one month’s salary in lieu

Instead of requiring the employee to work through 30 days, the employer may pay one additional month’s salary and end employment without the working notice period.

Under Article 20 of the official Implementation Regulations of the Labor Contract Law, this additional payment is determined using the employee’s wage standard for the previous month.

The employer should show pay in lieu as a separate item in the termination and payroll documents.

Is pay in lieu the same as severance?

No.

Pay in lieu replaces the 30-day notice period. Statutory severance compensates the employee based on the termination route and years of service.

Article 40 terminations generally require statutory severance in addition to notice or pay in lieu.

What does N+1 mean?

“N+1” is a common practical shorthand:

• N generally refers to statutory severance; and
• +1 generally refers to one month’s salary in lieu of Article 40 notice.

N+1 is not a universal legal termination method. It does not mean an employer can dismiss any employee by paying that amount.

The employer must still establish a lawful Article 40 ground, follow the appropriate procedure and check protected status.

The calculation bases can also differ:

• N commonly uses the employee’s average monthly wage during the 12 months preceding termination, subject to applicable statutory rules and caps.
• The Article 40 “+1” payment uses the employee’s previous month’s wage standard under the implementation regulations.

For complete calculations, see HROne’s China Severance Pay Guide.

Article 40 is different from Article 39 misconduct termination

Article 39 permits immediate employer termination in specified employee-fault situations, potentially including:

• Failure to meet lawful recruitment conditions during probation;
• Serious violation of company rules;
• Serious dereliction of duty causing substantial loss;
• Conflicting employment that seriously affects the employee’s work and is not corrected;
• Fraud or coercion affecting the labor contract; or
• Criminal liability.

A lawful Article 39 termination generally does not require the Article 40 notice period or statutory severance.

However, the employer carries an important evidence burden. It should not reclassify an unsupported performance issue as misconduct merely to avoid notice or severance.

Where a handbook violation is relied upon, the employer should be able to show:

• The rule was lawful;
• The rule was adopted using the required process;
• The employee received or acknowledged it;
• The conduct occurred;
• The violation met the stated seriousness threshold; and
• The termination decision was consistent with prior handling.

Article 40 is different from an Article 41 mass layoff

Article 41 addresses specified workforce reductions.

The provision may apply when an employer plans to reduce:

• At least 20 employees; or
• Fewer than 20 employees where the number represents at least 10% of the workforce.

The employer must generally explain the circumstances to the trade union or all employees 30 days in advance, consider their opinions and report the layoff plan to the labor administration.

This is a collective consultation and reporting process. It is not the same as providing an individual employee with 30 days’ Article 40 notice.

Employers should not assume that paying one additional month’s salary eliminates Article 41 procedural requirements.

Protected employees and Article 42

Even when an apparent Article 40 ground exists, the employer must determine whether the employee has statutory protection.

Article 42 of the Labor Contract Law restricts Article 40 and Article 41 termination for certain employees, including individuals who:

• Are undergoing diagnosis or medical observation for a suspected occupational disease;
• Have an occupational disease or work-related injury resulting in total or partial loss of work capacity;
• Are within the prescribed medical treatment period for illness or non-work-related injury;
• Are pregnant, on maternity leave or breastfeeding;
• Have worked continuously for the employer for at least 15 years and are within five years of statutory retirement age; or
• Fall within another protected category established by law.

Thirty days’ notice or one month’s pay does not override Article 42 protection.

A mutual termination may be possible if genuinely agreed, and a properly supported Article 39 misconduct case follows a different analysis. Employers should obtain case-specific legal advice before proceeding.

Trade union notification

Under Article 43, an employer intending to terminate an employment contract unilaterally should notify the trade union of the reasons in advance where the employer has a trade union.

The trade union may require the employer to correct a termination that violates laws, regulations or the labor contract. The employer should consider the union’s opinion and provide written notification of the outcome.

The termination file should retain:

• The union notice;
• Proof of delivery;
• Any union response;
• The employer’s consideration of that response; and
• The written outcome provided to the union.

Employers should not wait until after delivering the termination notice to consider whether advance union notification was required.

Employer checklist before issuing notice

Before communicating an Article 40 termination, the employer should:

1. Confirm the legal ground. Identify the exact Article 40 provision being relied upon.
2. Review the evidence. Ensure the facts satisfy each legal element.
3. Check protected status. Review medical, maternity, work-injury and near-retirement information.
4. Confirm the employer entity. Ensure the correct legal employer issues the notice.
5. Complete consultation where required. Document training, reassignment or contract-modification discussions.
6. Notify the trade union where applicable.
7. Choose notice or pay in lieu.
8. Calculate severance separately.
9. Prepare final payroll.
10. Draft the termination notice.
11. Prepare handover and property-return documents.
12. Prepare the termination certificate.
13. Plan social-insurance and housing-fund handling.
14. Obtain internal and legal approval.

The file should be prepared as though it may later be reviewed in labor arbitration or court.

What should the written notice include?

The notice should be specific and consistent with the employer’s evidence.

It may include:

• Employer and employee names;
• The labor contract being terminated;
• The statutory termination ground;
• The material supporting facts;
• Previous training, reassignment or consultation where relevant;
• The notice date;
• The final working day;
• Whether the employee will work the notice period;
• Pay-in-lieu treatment where applicable;
• Severance;
• Final payroll arrangements;
• Handover obligations;
• Company property return;
• Termination-certificate arrangements; and
• A contact for employee questions.

The stated reason should match the internal approval record. An employer may have difficulty replacing the original reason with a different justification after a dispute begins.

Final payroll and exit documents

Final payroll may include:

• Salary through the final working day;
• Overtime;
• Pay in lieu of notice;
• Statutory severance;
• Additional settlement compensation;
• Unused annual leave;
• Earned bonus or commission;
• Expense reimbursement;
• IIT withholding; and
• Other contractual payments.

The employer should also prepare:

• The termination certificate;
• Final payslip;
• Severance worksheet;
• Payment evidence;
• Handover record;
• Company property checklist;
• Social-insurance transfer or deregistration records;
• Housing-fund records;
• Confidentiality reminder; and
• Non-compete documents where applicable.

HROne’s China Employee Exit Compliance Guide explains the payroll, leave, benefits, handover and recordkeeping steps that follow the legal termination decision.

Companies with a China entity can use HROne’s China payroll outsourcing service to support final salary calculations, IIT withholding, statutory contributions, payslips and payroll records.

For terminating an employee hired through an EOR, coordinate the legal route, notice and final payroll with the EOR’s employing entity.

What happens after unlawful termination?

If an employer unlawfully terminates a labor contract, the employee may request continued performance of the contract.

If the employee does not request reinstatement, or continued performance is no longer possible, the employer may face compensation under Article 87, potentially calculated at twice the statutory severance standard.

Other exposure can include:

• Back pay;
• Salary or bonus claims;
• Unused leave payments;
• Social-insurance corrections;
• Housing-fund issues;
• Arbitration and litigation costs; and
• Disruption to a restructuring or employee transition.

Paying N+1 does not automatically eliminate these risks. A payment cannot replace the lawful ground and procedure unless the employee voluntarily accepts a properly structured mutual termination agreement.

Common employer mistakes

Treating 30 days’ notice as a universal dismissal right

Notice does not replace a statutory termination ground.

Using N+1 for every employer-initiated exit

The “+1” notice payment is primarily connected to Article 40. It should not automatically be used for misconduct, contract expiry, layoffs or mutual termination.

Using the same salary base for N and +1

Severance commonly uses the preceding 12-month average, while the Article 40 additional month uses the previous month’s wage standard.

Treating poor performance as immediate incompetence

Article 40 generally requires evidence of incompetence followed by training or reassignment and continued inability to perform.

Ignoring protected status

Pregnancy, medical treatment, work injury, occupational disease and near-retirement seniority can prevent Article 40 termination.

Skipping trade union notification

Where a trade union exists, advance notification should be addressed before the termination is communicated.

Processing payroll before confirming the legal route

Payroll cannot determine whether N, N+1 or another payment applies without a documented termination basis.

Using a vague termination notice

The legal ground, facts, dates and payments should be consistent with the evidence file.

Conclusion

The termination notice period in China is a procedural requirement attached to specific statutory routes.

An employee may generally resign with 30 days’ written notice after probation or three days’ notice during probation. An employer may use 30 days’ notice or one month’s salary in lieu only in qualifying Article 40 situations.

For an Article 40 termination, the employer must:

• Establish one of the three statutory grounds;
• Check protected status;
• Complete training, reassignment or consultation where applicable;
• Notify the trade union where required;
• Choose notice or pay in lieu;
• Pay statutory severance;
• Complete final payroll; and
• Preserve the evidence and exit file.

Employers should not communicate the termination until the legal ground, documentation and payment treatment have been reviewed.

For support with final payroll and employee-exit records, review HROne’s payroll outsourcing service or contact HROne.

This article provides general information about mainland China employment law. It does not constitute legal, tax, payroll or employment advice. Termination outcomes can depend on the employee’s city, contract, evidence, protected status, compensation and local practice. Obtain case-specific legal advice before communicating or implementing a termination.

Frequently Asked Questions

What is the standard termination notice period in China?

An employee may generally resign with 30 days’ written notice after probation or three days’ notice during probation. For qualifying Article 40 employer terminations, the employer may give 30 days’ written notice or pay one additional month’s salary.

Can an employer terminate someone by giving 30 days’ notice?

Only when a lawful statutory termination ground exists. Thirty days’ notice by itself does not make an employer termination lawful.

What are the three Article 40 grounds?

They cover inability to work after expiration of the applicable medical treatment period, continued incompetence after training or reassignment, and a material change in objective circumstances where the contract cannot be performed and consultation does not produce an agreement.

Is one month’s pay in lieu the same as severance?

No. Pay in lieu replaces the 30-day Article 40 notice period. Statutory severance is a separate payment.

What does N+1 mean?

N generally refers to statutory severance based on service and the applicable salary base. The additional month generally refers to pay in lieu of Article 40 notice. N+1 is not a universal termination method.

Which salary is used for the additional month?

The Implementation Regulations state that the additional month under Article 40 is based on the employee’s wage standard for the previous month.

Can a pregnant employee be terminated under Article 40?

Article 42 generally prohibits Article 40 or Article 41 termination during pregnancy, maternity leave and breastfeeding. Case-specific advice should be obtained.

Does an employer need to notify the trade union?

Where a trade union exists, Article 43 requires advance notification of the reasons for a proposed unilateral termination.

What documents should be prepared?

The employer should prepare the legal-basis review, evidence, protected-status check, union notice where applicable, written termination notice, payroll and severance calculations, handover documents, termination certificate and payment records.