Draft Chinese labour law caps severance pay -media

BEIJING, Apr 25 (Reuters) The latest draft of China's proposed labour contract law would cap workers' severance pay at the equivalent of 12 months' salary, state media reported today.

The official China Daily said that the draft law stipulates that employees who are laid off should receive the equivalent of a month's salary for every year they worked at a firm, but would receive at most 12 months' pay as compensation.

The previous draft did not specify the standard for compensation, the paper said.

Further, the law would set an upper limit for the monthly salary used to calculate the compensation, capped at three times the average local salary, the paper said. It did not say how that average would be determined.

However, it cited Li Yuan, an official with the Standing Committee of the National People's Congress, the legislature, as saying the average monthly salary in Beijing was about 3,000 yuan (390 dollar).

That would mean an employee in the capital would receive at most (13,989 dollar) in severance pay, the paper said -- regardless of how much they actually earned or how long they had worked for their employer.

''The stipulation on compensation is a major change in the latest draft, and it directly affects the interests of employers and employees,'' it quoted Li as saying.

The previous draft of the law was criticised by some businesses for not giving them enough flexibility in firing workers. The paper said that draft had elicited nearly 200,000 comments from the public.

REUTERS LPB PM1230