In labor compensation, we often hear about N+1, N+2, 2N, but they actually refer to different concepts. In fact, they can be explained separately: N is one thing, +1 is another rule, and 2N is yet another rule. This article will explain each one with reference to legal provisions.
First, where does N come from?
First, N refers to the number of months of economic compensation. Multiply this number by your monthly salary to get the amount the company should pay you. The term "economic compensation" comes from Article 46 of the Labor Contract Law: "Under any of the following circumstances, the employer shall pay economic compensation to the employee: … (seven clauses on termination of labor contracts, too long to list here)." OK, now we know where economic compensation comes from. Don't worry about whether your layoff situation meets those seven clauses—rest assured, most situations we encounter will qualify.
This economic compensation embodies "parting on good terms." The law requires the company to lawfully hire you, and also obligates the company to lawfully lay you off and compensate you with N months' salary.
Next, how is N calculated?
As mentioned above, when a labor contract is terminated under these circumstances, the company should provide compensation. How much? According to Article 47 of the Labor Contract Law: "Economic compensation shall be paid to the employee based on the number of years the employee has worked for the employer, at the rate of one month's salary for each full year worked. If the period is six months or more but less than one year, it shall be counted as one year; if it is less than six months, the employee shall be paid half a month's salary as economic compensation."
This provision is easy to understand. To help further, let's use some examples:
- Xiao Wang joined Company A and worked for 2 years and 1 month. N = 2 + 0.5 = 2.5 months' salary.
- Xiao Li joined Company A and worked for 2 years and 6 months. N = 2 + 1 = 3 months' salary.
- Xiao Zhao joined Company A and worked for 2 years and 8 months. N = 2 + 1 = 3 months' salary.
Why do we need to add +1 to N?
As mentioned above, N is the compensation the company should give the employee under the seven circumstances for terminating a labor contract. But the labor law also stipulates that just paying money does not allow immediate termination! Article 40: "Under any of the following circumstances, the employer may terminate the labor contract after giving the employee 30 days' prior written notice, or after paying the employee one month's salary in lieu of notice: … (details omitted)."
Do you see? Even if the company strictly follows the law and gives you N months' salary compensation under Articles 46 and 47, it still cannot make you leave immediately! Instead, it must either give you 30 days' prior written notice or pay you one month's salary in lieu of notice so you can leave immediately. This is the origin of the "+1" in N+1. So this "1" is the payment in lieu of notice.
What does this mean? Using the example above: Xiao Wang worked for Company A for 2 years and 1 month. The company is optimizing staff and wants to lay him off. What must the company do? First, pay 2.5 months' economic compensation (which we already learned above). Then, if the company needs Xiao Wang to leave immediately, it must also pay one month's salary as payment in lieu of notice; otherwise, it gives Xiao Wang a written notice (not just an oral statement) today and he leaves after 30 days.
So here we understand: adding +1 is not mandatory. The company can simply give N months' salary compensation without the +1, but it must provide 30 days' prior written notice.
As for companies that offer N+2, N+3 — that's essentially giving extra payment in lieu of notice. Such companies are truly generous and deserve your gratitude.
What is 2N and where does it come from?
First, 2N is based on N. If you haven't understood where N comes from, please review. Or I'll tell you directly: N is the economic compensation the company must pay the employee when legally terminating a labor contract. But what if the company does not follow the law and lays you off illegally? According to Article 87 of the Labor Contract Law: "If an employer terminates or ends a labor contract in violation of the provisions of this Law, it shall pay the employee compensation at twice the standard of economic compensation specified in Article 47."
What does this article say? It means that if the company illegally dismisses an employee without following regulations, it must pay twice the amount of economic compensation as damages. As we calculated earlier: Xiao Wang worked for 2 years and 1 month, N=2.5. If the company legally dismisses Xiao Wang, it needs to pay 2.5 months' economic compensation; if the company forces an illegal dismissal, it must pay 2N as compensation, i.e., 2.5 × 2 = 5 months' salary.
Here, we need to distinguish between economic compensation and damages (compensation for illegal termination). They are completely different concepts. The former is the amount of money for lawful layoffs according to regulations; the latter is the amount payable for illegal layoffs.
By now, I believe you understand how various compensation amounts are calculated. Due to space limitations, I have not included the full text of the legal provisions in this article. Interested readers can reply with "labor law" in the public account to obtain all the legal text.