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Understanding Employment Termination in Hong Kong: A Comprehensive Guide

Employment termination in Hong Kong follows specific regulations and practices designed to protect both employers and employees. An employment contract can be terminated in two ways:

  • Termination by notice

  • Immediate termination

Immediate Termination

An employer may terminate the contract without notice if the employee commits:

  • Willful disobedience of a lawful and reasonable order

  • Misconduct

  • Fraud or dishonesty

  • Habitual neglect of duties

During the first month of a probation period (if agreed upon), no notice is required for termination. An employee may terminate the contract without notice if there is:

  • Reasonable fear of physical danger by violence or disease

  • Ill-treatment by the employer

  • Permanent unfitness for the type of work engaged in, as judged by a medical practitioner

Termination by Notice or Payment in Lieu of Notice

Either party can terminate an employment contract by giving notice or providing payment in place of notice. The default notice period is seven days during probation and one month afterward. Parties may agree to shorter notice, but it must be at least seven days. If termination occurs within the first month of the probation period, neither notice nor payment is required.

Calculation for Payment in Lieu of Notice

The payment is calculated based on the employee's average daily or monthly wages earned in the 12 months preceding the notice of termination or the actual termination date if no notice is given.

Notice and Payment Requirements

Employment Condition

Length of Notice

Payment in Lieu of Notice

During probation period



Within the first month of probation

Not required

Not required

After the first month of probation

As per agreement, but not less than 7 days


Continuous contract with no/after probation period



Contract specifies notice period

As per agreement, but not less than 7 days


Contract does not specify notice period

Not less than 1 month


Calculating Payment in Lieu of Notice

Notice Period Expressed in Days or Weeks

Table 1: Employment Condition, Length of Notice, and Payment in Lieu of Notice

Employment Condition

Length of Notice

Payment in Lieu of Notice

During probation period



Within the first month of probation

Not required

Not required

After the first month of probation



Where the contract makes provision for the required length of notice

As per agreement, but not less than 7 days

Refer to Table 2

Where the contract does not make provision for the required length of notice

Not less than 7 days

Refer to Table 2

For a continuous contract* with no/after probation period



Where the contract makes provision for the required length of notice

As per agreement, but not less than 7 days

Refer to Table 2

Where the contract does not make provision for the required length of notice

Not less than 1 month

Refer to Table 2

*For a non-continuous contract with no/after probation period, the length of notice shall be the agreed period; please refer to Table 2 for the corresponding payment in lieu of notice.

Table 2: Calculation of Payment in Lieu of Notice

Notice Period Expressed in Days or Weeks


Average daily wages earned by an employee


in the 12-month period preceding the day when a notice of termination of contract is given**

x

Number of days in the notice period for which wages would normally be payable to the employee

= Payment in lieu of notice

Notice Period Expressed in Months


Average monthly wages earned by an employee


in the 12-month period preceding the day when a notice of termination of contract is given**

x

Number of months specified in the notice period

= Payment in lieu of notice

**Note: In calculating average daily/monthly wages, exclude periods when employees are not paid or not paid in full, such as rest days, statutory holidays, annual leave, sickness days, maternity leave, paternity leave, and any day when the employer does not provide work.

Termination Prohibition

An employee cannot be terminated in the following cases:

  • Confirmed pregnancy after submitting a pregnancy notice

  • While on paid sick leave

  • For giving evidence or information related to court proceedings or an employment law inquiry

  • For trade union membership or activities

  • After being injured at work without an agreement on compensation or before the issue of a certificate of assessment

Termination Payments

The amount payable to an employee upon termination depends on several factors, including the length of service, terms of the employment contract, and the reason for termination. Termination payments usually include:

  • Outstanding wages

  • Wages in lieu of notice, if applicable

  • Payment in lieu of untaken leave

  • Any outstanding sum of end-of-year payment and pro-rata end-of-year payment for the current period

  • Severance payment or long service payment, where appropriate

  • Other payments under the employment contract, such as gratuity, provident fund, etc.

Severance Payment

Employees who have worked for at least 24 months under a continuous contract are eligible for a severance payment if dismissed due to redundancy, non-renewal of contract, or layoff.

Severance Payment Calculation

Payment Type

Formula

Monthly-paid employee

2/3 of the last full month's wages × accountable service years

Daily-rated/piece-rated employee

18 days’ wages (chosen by the employee from the last 30 normal working days) × accountable service years

The sum should not exceed 2/3 of HK$22,500 (US$2,879). The total entitlement is subject to a maximum payment of HK$390,000 (US$49,908). Severance payment must be made within two months of receiving a notice of claim from the employee.

Long Service Payment

Employees employed under a continuous contract for at least five years are entitled to long service payment if:

  • Terminated for reasons other than serious misconduct or redundancy

  • Contract expires and is not renewed

  • Employee dies (payment goes to spouse, children, or parents)

  • Employee is certified permanently unfit for the job and resigns

  • Employee resigns on grounds of old age (above 65)

Long Service Payment Calculation

The formula is the same as for severance payment, with a maximum entitlement of HK$390,000 (US$49,908). Part of the retirement scheme payment due to employer contributions may be deducted from the long service payment. Payment must be made within seven days of termination.


This comprehensive guide aims to provide clarity on the processes and regulations surrounding employment termination in Hong Kong. For specific details and updates, always refer to the latest guidelines from the Hong Kong Labour Department.



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