30.How to calculate double-wage damages in the absence of a written employment contract?

Answer: The Employment Contract Law imposes punitive double-wage damages on those employer who fail to sign employment contracts with their employees due to the employer’s reasons. If an employee claims for the damages, the employer shall, in principle, pay the employee double-wage damages on a monthly or daily basis for the period during which the employment contract should have signed but was not, and at the level of the employee¡¯s corresponding wage. When calculating the amount of double-wage damages, there are two issues as follows:

The first issue is how to calculate the wage standard of the employee. Many court rulings, typically those courts in Guangdong Province, hold that the base should include overtime wages and other monthly benefits,1Guangdong Ruisheng Machinery Manufacturing Co., Ltd., Su Shengren Employment contract Dispute Civil Judgment of Second Instance Civil Judgment of Intermediate People’s Court of Foshan City, Guangdong Province (2022) Yue 06 Min Zhong 14814 No., Guangdong Wanyang Zhongchuangcheng Real Estate Co., Ltd. Guo Zhiming Civil Ruling on Labor Dispute Retrial Review and Trial Supervision Civil Ruling of Guangdong Provincial People¡¯s High Court (2019) Yue Min Shen 12560 No.while the courts of many other provinces, such as Liaoning, Gansu, Xinjiang Autonomous Region, Fujian and Heilongjiang, advocate that the base should be only ordinary wages, which is for standard eight hours time every work day.2Lanzhou Chen Zuolin Chen Ji Catering Service Co., Ltd. and Tingting Labor Dispute Civil Judgment of Second Instance Civil Judgment of Lanzhou Intermediate People’s Court of Gansu Province (2022) Gan 01 Min Zhong No.4646. ¡°The determination of double-wage damages base should be based on the monthly wage of normal wages after deducting overtime wages, unconventional bonuses, welfare, risk and other items.¡± Dalian Nianqiang Food Co., Ltd. and Gu Jibin Labor Dispute Judgment of Second Instance Civil Judgment of Dalian Intermediate People’s Court of Liaoning Province (2022) Liao 02 Min Zhong No.8855. ¡°Nianqiang Company recognized that in addition to the fixed monthly wage of RMB 2,420, the monthly wage paid to Gu Jibin also included commission wage, independent delivery subsidy, goods return reward, etc. Except for the paid annual leave wage of RMB 300 included in the wage in February 2021, other commission wages, subsidies and return incentives are the remuneration obtained by Gu Jibin for his normal work, which should be used as the base for calculating the double-wage damages difference.¡± Wu Meiru, Shenyang Luyou Business Information Consulting Co., Ltd. Labor Dispute Judgment of Second Instance Civil Judgment of Shenyang Intermediate People’s Court of Liaoning Province (2022) Liao 01 Min Zhong 10318 No. Liu Changping v. Urumqi Dadequan Trading Co., Ltd., Civil Ruling of the High Court of Xinjiang Uygur Autonomous Region (2015) Xin Min Shen Zi No.232. ¡°The base for calculating the double-wage damages in the absence of a written employment contract shall be determined by the monthly wage of the normal wages after deducting overtime pay, bonus, commission and other items from the monthly income of the employee.¡± Hu Jianping and Xiamen Xiaotong Catering Management Co., Ltd., Huang Xiaobing and other labor dispute review and trial supervision cases Fujian Provincial People¡¯s High Court Civil Ruling (2015) Min Min Shen Zi No.2091. Zhao Yongpan, Harbin Hesheng Labor Dispatch Co., Ltd. Labor Dispute Retrial Review and Trial Supervision Civil Ruling Heilongjiang Provincial People¡¯s High Court Civil Ruling (2019) Heimin Shen 3514. ¡°The court of second instance deducted the above-mentioned welfare income, I. E. traffic allowance of RMB 100, overtime allowance of RMB 2,400 and social insurance allowance of RMB 1,000. It is not improper to take the basic wage and performance wage totaling RMB 6,500 as the calculation base of double-wage damages.¡±It appears that most courts believe that non-monthly benefits such as bonuses and commissions should not be included in the wage base.

The second issue is how to calculate the period for double-wage damages. During this period, accounting is affected by the following factors. The first is the type of liability for not signing an employment contract (including new employees, the expiration of a fixed-term contract, and the situation where a permanent contract should be signed), the second is the maximum compensation period under the legal rules (that is, the 11-month or 12-month time limit caused by the automatic conversion of a contract to a permanent contract after one year under the third paragraph of article 14 of the Employment Contract Law), and the third is the limitation of arbitration. To find out how to determine this period, please refer to How do I calculate the compensation period for double-wage damages in the absence of a written employment contract?

Let’s use a case to explain the calculation method of double-wage damages. Ms. Li of Shenzhen joined a company on January 1, 2022. Her monthly wage in 2023 is RMB 5,000, and her monthly overtime wages RMB 500. The employer has never signed an employment contract with her, and she applied for employment arbitration on December 31, 2022, demanding that the employer to pay her double-wage damages. How much double-wage damages can she be awarded?

First of all, the employer should sign a written employment contract with her on or before January 31, 2022. From February 1, 2022, the employer began to violate the obligation to sign a written contract until December 31, 2022. Ms. Li has been employed for one year on December 31, 2022. According to Article 14 of the Employment Contract Law, from January 1, 2023, the employment contract between Ms. Li and the employer will automatically be converted to a permanent employment contract, and the employer will then no longer bear the liability of double-wage damages. Therefore, Ms. Li can get double-wage damages for a total of 11 months from February to December 2022. Ms. Li’s total wages during this period was RMB 60,500 (11 * 5,500), so the double-wage damages she should receive is the same as her total wages during the same period, which is also RMB 60,500.

In this case we have not shown the effect of the limitations of arbitration on the compensable period for double-wage damages. In fact, if Ms. Li applies for employment arbitration in 2025, she will lose the right to compensation of RMB 60,500. For the specific method of double-wage damages accounting affected by the limitation of arbitration, please refer to Is it too late for me to claim the double-wage damages?

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  • 1
    Guangdong Ruisheng Machinery Manufacturing Co., Ltd., Su Shengren Employment contract Dispute Civil Judgment of Second Instance Civil Judgment of Intermediate People’s Court of Foshan City, Guangdong Province (2022) Yue 06 Min Zhong 14814 No., Guangdong Wanyang Zhongchuangcheng Real Estate Co., Ltd. Guo Zhiming Civil Ruling on Labor Dispute Retrial Review and Trial Supervision Civil Ruling of Guangdong Provincial People¡¯s High Court (2019) Yue Min Shen 12560 No.
  • 2
    Lanzhou Chen Zuolin Chen Ji Catering Service Co., Ltd. and Tingting Labor Dispute Civil Judgment of Second Instance Civil Judgment of Lanzhou Intermediate People’s Court of Gansu Province (2022) Gan 01 Min Zhong No.4646. ¡°The determination of double-wage damages base should be based on the monthly wage of normal wages after deducting overtime wages, unconventional bonuses, welfare, risk and other items.¡± Dalian Nianqiang Food Co., Ltd. and Gu Jibin Labor Dispute Judgment of Second Instance Civil Judgment of Dalian Intermediate People’s Court of Liaoning Province (2022) Liao 02 Min Zhong No.8855. ¡°Nianqiang Company recognized that in addition to the fixed monthly wage of RMB 2,420, the monthly wage paid to Gu Jibin also included commission wage, independent delivery subsidy, goods return reward, etc. Except for the paid annual leave wage of RMB 300 included in the wage in February 2021, other commission wages, subsidies and return incentives are the remuneration obtained by Gu Jibin for his normal work, which should be used as the base for calculating the double-wage damages difference.¡± Wu Meiru, Shenyang Luyou Business Information Consulting Co., Ltd. Labor Dispute Judgment of Second Instance Civil Judgment of Shenyang Intermediate People’s Court of Liaoning Province (2022) Liao 01 Min Zhong 10318 No. Liu Changping v. Urumqi Dadequan Trading Co., Ltd., Civil Ruling of the High Court of Xinjiang Uygur Autonomous Region (2015) Xin Min Shen Zi No.232. ¡°The base for calculating the double-wage damages in the absence of a written employment contract shall be determined by the monthly wage of the normal wages after deducting overtime pay, bonus, commission and other items from the monthly income of the employee.¡± Hu Jianping and Xiamen Xiaotong Catering Management Co., Ltd., Huang Xiaobing and other labor dispute review and trial supervision cases Fujian Provincial People¡¯s High Court Civil Ruling (2015) Min Min Shen Zi No.2091. Zhao Yongpan, Harbin Hesheng Labor Dispatch Co., Ltd. Labor Dispute Retrial Review and Trial Supervision Civil Ruling Heilongjiang Provincial People¡¯s High Court Civil Ruling (2019) Heimin Shen 3514. ¡°The court of second instance deducted the above-mentioned welfare income, I. E. traffic allowance of RMB 100, overtime allowance of RMB 2,400 and social insurance allowance of RMB 1,000. It is not improper to take the basic wage and performance wage totaling RMB 6,500 as the calculation base of double-wage damages.¡±

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