When is severance payment due in Hong Kong

When Is Severance Payment Due in Hong Kong

Severance payment is due when an employee who has been employed under a continuous contract for at least 24 months is dismissed by reason of redundancy, or is laid off as defined under the Employment Ordinance (Cap. 57). The payment must be made within a reasonable time after the termination date, and the Labour Department advises that it should be paid no later than the date on which wages for the notice period or payment in lieu of notice falls due.

Hong Kong Severance Payment Eligibility

An employee qualifies for severance payment if they have been employed continuously for at least 24 months and are dismissed due to redundancy, or are laid off. Redundancy occurs where the employer ceases or intends to cease carrying on the business, or where the requirement for employees to carry out work of a particular kind has ceased or diminished. The 4-18 rule determines continuous employment: an employee who works at least 18 hours per week for four or more consecutive weeks is under a continuous contract. Employees dismissed for summary dismissal, misconduct, or who resign voluntarily do not qualify.

Severance Payment Calculation HK

The amount of severance payment is calculated as follows: for each year of service, the employee receives two-thirds of one month's wages, capped at two-thirds of HK$22,500 per month (or HK$15,000 per year of service). For an employee paid on a piece-rate or daily basis, the calculation uses the average monthly wages over the last 12 months. The maximum total severance payment is capped at HK$390,000. Where the employee has less than 24 months of service, no severance payment is due.

Employment Ordinance Severance

The Employment Ordinance (Cap. 57) sets out the statutory framework for severance payment in Part VA. The ordinance also governs related entitlements such as long service payment, payment in lieu of notice, and end-of-year payment. An employee cannot claim both severance payment and long service payment for the same period of service. If the employee qualifies for both, the employer pays the higher amount.

MPF Offsetting Severance Payment

The abolition of MPF offsetting took effect on 1 May 2025. Before that date, employers could use the accrued benefits from their mandatory MPF contributions to offset severance payment. From 1 May 2025, employers may no longer use mandatory MPF contributions to offset severance payment for service on or after that date. For employees whose employment began before 1 May 2025, the accrued benefits from mandatory contributions may still offset the portion of severance payment calculated on years of service before that date. Accrued benefits from voluntary MPF contributions and gratuities based on length of service may still be used to offset severance payment. The Government operates a subsidy scheme to share employers' expenses on severance payment for service on or after 1 May 2025.

When Severance Payment Is Not Due

Severance payment is not due where the employee is summarily dismissed for misconduct, or where the employee resigns voluntarily. It is also not due where the employee unreasonably refuses an offer of suitable alternative employment from the same employer. Where the employee is dismissed but the employer continues to carry on the business and the employee's role is not redundant, the employee may be entitled to payment in lieu of notice or damages for wrongful dismissal, but not severance payment.

What to Do If Severance Payment Is Not Paid

If an employer fails to pay severance payment when it is due, the employee may lodge a claim with the Labour Department. The department will attempt conciliation. If conciliation fails, the employee may bring proceedings in the Labour Tribunal. The tribunal can order the employer to pay the outstanding amount plus interest. Employers who fail to pay severance payment without reasonable excuse may be prosecuted under the Employment Ordinance.