1. Only Article 40 offers the choice
Article 40 covers three situations: incapacity to resume the original or reassigned work after the statutory medical period; incompetence remaining after training or reassignment; and a fundamental change in the objective circumstances that makes performance impossible where no variation can be agreed.
In those cases the employer may give 30 days written notice, or pay one extra month and terminate immediately. Choosing the second option means severance (N) plus one month, which is where N+1 comes from.
2. How the extra month is measured
Article 20 of the Implementing Rules ties the extra month to the employee’s previous month wage. Practice diverges on whether bonuses are included, so this site approximates the figure with the twelve-month average and labels the approximation.
The extra month is not doubled, and it does not replace severance: it is paid in addition to N.
3. Where no +1 arises
These routes do not produce pay in lieu of notice:
- Economic layoffs under Article 41, which require 30 days of consultation but offer no extra month.
- Fault-based dismissal under Article 39, which requires no notice and no severance.
- Unlawful termination, where the claim is 2N instead.
- Mutual termination and fixed-term expiry, which are severance-only routes under Article 46.
4. Relationship with N and 2N
The order of analysis matters: first whether a statutory ground existed, then whether notice complied, and only then the amount. A dismissal outside Article 40 that proceeds without a lawful ground may be unlawful, exposing the employer to 2N rather than N+1.
- Service: 4 years 0 months → N = 4
- Total pay for the last 12 months: CNY 240,000 → monthly average CNY 20,000
- Local average monthly wage CNY 7,000, three times = CNY 21,000 → cap not triggered
- Article 40 dismissal with no 30 days written notice
Result: Severance 4 × 20,000 = CNY 80,000; pay in lieu CNY 20,000; total CNY 100,000
FAQ
What if only 10 days notice was given?
Article 40 requires 30 days written notice or the extra month. Short notice without payment may be a procedural defect whose consequences depend on local practice.
Does verbal notice count?
The statute requires writing. Verbal notice usually leaves the employer with the weaker evidence position.
How is the extra month taxed?
It is generally treated as salary, unlike qualifying severance which has separate individual income tax treatment.
This site provides automated calculations and general information only. It is not legal advice.