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Termination and Severance Pay in Hong Kong

Hiring employees abroad means that a company will be required to follow the termination rules in the host country, even if they are very different from the home country.  This will include justifiable reasons for termination, notice periods and severance payments.

For a US company that is used to an ‘at will’ employment policy, adjusting to the foreign country laws may be a challenge.  If you are new to Hong Kong, how will you know the correct procedures and calculations to use to avoid non-compliance?  This guide will give you the basics to get you started, but you might need in country expertise as well.

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Reasons for Termination in Hong Kong

The first thing to know is that any employee that is dismissed after two years of employment must be given a reason for the termination.  Those justifiable reasons include misconduct, lack of qualifications, redundancy due to business reasons, or violating the law.

Employee Protections Against Dismissal in Hong Kong

Some types of employees enjoy special protection from dismissal including:

  • On statutory sick leave
  • Pregnant on maternity leave
  • Injured at work
  • Joins a trade union
  • Serves on jury duty

Termination Notice Entitlements in Hong Kong

Termination in Hong Kong requires notice, and the period shall be either 30 days or specified in the employment contract.  The contractual notice period must be a minimum of 7 days.  No notice is required if the dismissal is for serious misconduct.  The employee can be paid in lieu of working during the notice period.

Calculating Severance Payment for an Employee in Hong Kong

Upon termination with notice and employee is entitled to several types of payments.

  • All wages up to termination date
  • Any payments in lieu of notice
  • Accrued, unused leave
  • Pro rata payment of contractual bonuses
  • Statutory severance payment if more than two years of service and dismissed for redundancy (the payment is two-thirds of the last month’s wage)

If an employee is terminated unlawfully (protected class of employee), there are additional severance payments due, as well as potential fines for the employer.  It is possible for employees to bring claims against the employer, so it is recommended to follow the termination rules.

Client Case: Calculating the Payment of Accrued Leave

We had a client who was terminating an employee in Hong Kong and wanted to understand how the accrued leave payout was calculated.  We let them know that the formula used is the daily average wage for the past 12 months, multiplied by the number of unused, accrued leave days

Do you need more information about Hong Kong?

The termination and employment rules in Hong Kong are complex, and you might have more questions such as:

How can employers avoid making an unfair dismissal?

Are the final severance payments run through payroll?

What happens if an employee challenges a termination?

Responding to these types of issues is how we support our clients with employees abroad, including all employment, immigration and payroll rules. We make international employment simple.

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Looking to hire an employee in Hong Kong? Get in touch.

The information in this article is subject to changes in local legislation.

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