It is generally known that Hong Kong legal provisions concerning
employee dismissal make it easier for Hong Kong employers to reduce
the size of their workforce than their counterparts in Mainland
China. Hong Kong employers should, however, note that the
Employment Ordinance (Chapter 57, Laws of Hong Kong) also imposes
on them the obligation to compensate a departing employee under
For example, the employer may be obliged to make a severance
payment when it dismisses an employee by reason of redundancy who
has been employed under a continuous contract for not less than 24
Under the Employment Ordinance, a "continuous
contract" may be found in different scenarios, such as where
the employee has been employed for four or more weeks and has
worked at least 18 hours each week. (A "week" is defined
as ending on Saturday.)
A dismissal shall be considered due to redundancy if wholly or
mainly attributable to the fact that:
the employer has ceased, or intends to cease, to carry on the
business for the purposes of which the employee was employed or in
the place where the employee was so employed; or
the requirements of that business for employees to carry out
work of a particular kind, or for employees to carry out work of a
particular kind in the place where the employee was so employed,
have ceased or diminished or are expected to cease or
The law presumes redundancy to be the reason for an
employee's dismissal, but allows an employer to prove
otherwise. For example, employee misconduct can be so serious to
entitle the employer to terminate the relationship without notice
or payment in lieu (in other words, a "summary
dismissal"), in which case a severance payment will not be
If a dismissed monthly rated employee is entitled to a severance
payment, it is calculated as follows:
[last full month's wages (subject to a maximum limit of HKD
22,500.00) x 2/3] X years of service
If the employee's pay was cut shortly before the dismissal,
the employee may instead use the average or his or her wages over
the 12 months immediately preceding the termination date in the
calculation. For a monthly rated employee, however, such monthly
average is still subject to the same statutory cap of HKD 22,500.
The maximum severance payment awardable under the law is HKD
The law allows the employer to reduce the severance payment by
all gratuities and benefits payable to or in respect of that
employee that relate to the period used for calculating the
Unless the severance payment has already been made in the
interim, an employee entitled to a severance payment under the
Employment Ordinance must submit a written claim to the employer
within three months after termination, and the employer must
deliver the severance payment within two months after receiving the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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