Paying 2N does not close a termination during the medical treatment period. Reinstatement, sick pay and insurance sit on separate tracks.
An employee is still inside the legally protected medical treatment period, but the company wants to reduce headcount. Can the employer terminate the contract and simply pay double severance?
Under China's employment law framework this is a high-risk decision. An employer cannot use ordinary statutory termination or economic layoff procedures to dismiss an employee who is still within the applicable medical treatment period. An unlawful termination may trigger reinstatement or double economic compensation, depending on the employee's claim and the circumstances.
One distinction matters up front: 2N does not automatically mean the employer must also pay all of the employee's future medical expenses. Medical expenses, sick-leave pay, social insurance obligations and unlawful-termination liability are separate issues assessed under their own rules.
Under the Provisions on the Medical Treatment Period for Enterprise Employees Who Are Ill or Sustain Non-Work-Related Injuries, the medical treatment period is the period during which an employee who stops working for treatment because of illness or a non-work-related injury is protected against termination under the applicable rules.
Article 3 establishes a national framework of three to 24 months, based on the employee's total actual working years and years of service with the current employer.
Article 4 specifies the periods over which cumulative sick leave is calculated for the different treatment periods. Employers should verify the applicable local rules and the employee's actual service history before fixing the end date.
The practical risk is treating the period as an HR scheduling question. It is a statutory protection, and the date it ends determines which termination routes remain open.
Article 42(3) of the Labor Contract Law provides that an employer must not terminate an employee under Article 40 or Article 41 where the employee is ill or has a non-work-related injury and is within the prescribed medical treatment period.
The restriction is particularly relevant to two routes: Article 40 no-fault termination, including the situation where the medical treatment period has expired and the employee can perform neither the original job nor other work arranged by the employer; and Article 41 economic layoffs that satisfy the statutory conditions and procedures.
An employer therefore cannot classify a termination as restructuring or cost reduction and disregard the protected period. The protection is not immunity from every ground, though: the legal basis and facts still have to be examined separately, including whether a genuinely applicable ground outside Articles 40 and 41 exists.
Article 48 provides that where an employer unlawfully terminates or ends a contract, an employee who requests continued performance may be entitled to it. Where the employee does not request continued performance, or continued performance is no longer possible, the employer must pay damages under Article 87, set at twice the Article 47 standard. That is what is commonly called 2N.
The Article 47 calculation generally uses years of service with the employer: one month's wage per full year, six months or more but under one year counted as a full year, and under six months counted as half a month. The monthly wage is generally the average over the 12 months before termination, with statutory caps applying where wages exceed three times the locally published average monthly wage, including a 12-year cap on the compensation period in the circumstances Article 47 specifies.
The amount cannot be calculated accurately without the service history, wage information and other relevant facts. And 2N is not an automatic payment in every medical-leave termination: whether the termination was unlawful, and whether the employee seeks reinstatement or damages, matters.
This needs a separate analysis. Article 5 of the Provisions on the Medical Treatment Period states that sick-leave wages, sickness allowances and medical benefits during the period are governed by the applicable rules. Article 28 of the Social Insurance Law provides that qualifying medical expenses meeting basic medical insurance requirements are paid from the fund in accordance with national rules.
Those provisions do not establish a universal rule that every employer who unlawfully terminates must personally pay all future medical bills on top of 2N. The employer's potential obligations depend on the facts, including sick-leave pay and benefits under national and local rules, whether the employee was properly insured and contributions were handled lawfully, whether any claimed medical loss is legally recoverable with the required evidentiary basis, and whether continued performance of the contract is requested and legally available.
Before taking action involving an employee on medical leave, work through five checks.
China's medical treatment period is a statutory protection, not an HR scheduling issue. A termination during that period on a ground prohibited by Article 42 may be unlawful, and depending on the circumstances the employer may face reinstatement or 2N damages alongside separate obligations on wages, benefits or social insurance.
It would be equally inaccurate to conclude that every such case automatically requires both 2N and all future medical expenses. The practical lesson is to review the protected period, the proposed ground, the social insurance position and the potential liabilities together before acting. This is general legal information, not advice on a specific case; consult qualified China employment counsel before making a termination decision.
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