Labour disputes over year-end bonuses to departing employees are rampant. Companies often believe they fall within the scope of independent management rights and so can choose not to distribute year-end bonuses to departing employees.
However, employees often believe that even if the employer is not required to distribute the full amount of the year-end bonus, given their actual labour contribution they should still receive a proportionate share based on their length of service during the year.
To assist companies in improving their year-end bonus management system, this article analyses and summarises factors that affect distribution of year-end bonuses to departing employees.
Although Chinese law stipulates that a year-end bonus is a component of total wages, there are no clear regulations on its distribution.
In other words, it is not a legal obligation for enterprises, and the specific distribution method depends on business decisions of the enterprise itself.
If a company has not made a commitment to its employees regarding the distribution of year-end bonuses – and instead chooses to award a certain amount of bonus based on its annual operating status – it generally does not need to pay the bonus to employees who leave before the end of the year.
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