Navigating employment termination in Hong Kong requires a thorough understanding of the legal framework governing employer-employee relationships. The Employment Ordinance (EO) sets out the minimum requirements for ending an employment contract, whether initiated by the employer or the employee. Adhering to these regulations is crucial for employers to ensure compliance and avoid potential disputes or legal challenges.
Properly managing the termination process involves understanding notice periods, calculating final payments including potential severance or long service payments, and ensuring the grounds for termination are legally sound. Employers must also follow specific procedural steps and be aware of employee protections against unfair or unlawful dismissal.
Notice Period Requirements
The required notice period for terminating an employment contract in Hong Kong depends on the terms of the individual contract and the employee's length of service. If the employment contract specifies a notice period, that period applies, provided it is not less than the statutory minimum. If the contract does not specify a notice period, the statutory minimum applies.
For contracts of employment that are continuous contracts (where an employee has worked for the same employer for at least 4 weeks, with at least 18 hours worked in each week), the minimum notice periods are as follows:
| Contract Type | Length of Service | Minimum Notice Period |
|---|---|---|
| Contract specifying notice period | Any | As specified in the contract (must be at least the statutory minimum) |
| Contract not specifying notice period | During the first month of employment | No notice required by either party |
| Contract not specifying notice period | After the first month of employment | Not less than 7 days' notice |
| Monthly-rated employee (continuous contract) | After probation (if any) or after first month | One month's notice (calculated from the day notice is given to the day before the same date in the following month) |
Either party can terminate the contract by making a payment in lieu of notice. The payment in lieu of notice is calculated based on the employee's average daily or monthly wages earned in the 12 months preceding the date of termination.
Severance Pay and Long Service Payment
In Hong Kong, employees under a continuous contract may be entitled to either Severance Pay (SP) or Long Service Payment (LSP) upon termination, but generally not both. Eligibility depends on the reason for termination and the employee's length of service.
An employee is typically entitled to Severance Pay if they have been employed under a continuous contract for not less than 24 months and are dismissed by reason of redundancy, or are laid off.
An employee is typically entitled to Long Service Payment if they have been employed under a continuous contract for not less than 5 years and their employment is terminated for reasons other than serious misconduct or redundancy, or if they die in service, or if they resign due to ill health or old age.
The calculation formula for both SP and LSP is the same:
(Last full month's wages OR average monthly wages over the past 12 months, whichever is higher) x 2/3 x Years of service
- Service for an incomplete year is calculated on a pro-rata basis.
- The maximum amount of SP or LSP payable is capped. As of the current framework expected to apply in 2025, the maximum amount is HK$390,000.
- Mandatory Provident Fund (MPF) contributions made by the employer can be used to offset the amount of SP or LSP payable.
Grounds for Termination
An employer can terminate an employment contract based on various grounds, which can be broadly categorized as termination with cause (summary dismissal) and termination without cause.
Termination Without Cause: This is the most common form of termination where the employer ends the contract by providing the required notice or payment in lieu of notice. No specific "cause" related to employee misconduct or performance is strictly required, provided the correct notice or payment is given. However, the termination must not be unlawful or discriminatory.
Termination With Cause (Summary Dismissal): An employer can summarily dismiss an employee without notice or payment in lieu of notice if the employee:
- Willfully disobeys a lawful and reasonable order.
- Is guilty of misconduct inconsistent with the due and faithful discharge of their duties.
- Is guilty of fraud or dishonesty.
- Is habitually neglectful in their duties.
- Commits any other act where the employee has shown themselves to be unfit for the position they occupy.
Summary dismissal is a serious action and should only be used in cases of gross misconduct. The employer must be able to prove the employee's serious misconduct.
Procedural Requirements for Lawful Termination
To ensure a termination is lawful, employers must follow specific procedures:
- Provide Proper Notice or Payment in Lieu: Ensure the correct notice period is given or the equivalent payment is made according to the contract and the Employment Ordinance.
- Calculate and Pay Final Entitlements: This includes:
- Wages earned up to the termination date.
- Payment in lieu of notice (if applicable).
- Pro-rata annual leave pay for accrued but untaken leave.
- Any outstanding holiday pay or sickness allowance.
- Severance Pay or Long Service Payment (if applicable and eligible).
- Provide Required Documentation:
- A written termination letter clearly stating the effective date of termination.
- A statement of final payments.
- Reference letter (if requested by the employee, though not legally mandatory unless specified in the contract or company policy).
- MPF scheme documents for contribution cessation.
- MPF Contributions: Ensure final MPF contributions are made within the statutory timeframe.
- Return of Company Property: Arrange for the return of company assets by the employee.
Common pitfalls include miscalculating notice pay or final entitlements, failing to provide a clear termination letter, or not having sufficient evidence to support summary dismissal.
Employee Protections and Wrongful Dismissal
The Employment Ordinance provides significant protections to employees against unfair or unlawful termination. A termination may be deemed wrongful or unlawful if it:
- Occurs while the employee is on paid sick leave.
- Occurs while the employee is on maternity leave (for female employees).
- Is due to the employee giving evidence or information in proceedings under the EO.
- Is due to the employee participating in trade union activities.
- Is discriminatory based on sex, disability, family status, or race under relevant anti-discrimination ordinances.
- Constitutes unreasonable dismissal (dismissal without a valid reason as defined by the EO, applicable after a qualifying period of service).
If a termination is found to be wrongful or unlawful, an employee may be entitled to remedies including reinstatement, re-engagement, or compensation. Employers should seek legal advice in complex termination cases to mitigate risks.
