Frequently Asked Questions about
The Employment Ordinance, Cap. 57
Severance Payment and Long Service Payment

Q1.	Under what circumstances should an employer pay severance payment to his employee?
Q2.	What is dismissal by reason of redundancy?
Q3.	What is the meaning of lay-off?
Q4.	Under what circumstances should an employer pay long service payment to his employee?
Q5.	Is an employer required to pay an employee (who has no less than 5 years' service) BOTH long service payment and severance payment upon redundancy?
Q6.	Is there any difference in the calculation of long service payment and severance payment?
Q7.	Can MPF scheme benefits, retirement scheme benefits and gratuities be used to offset severance payment or long service payment?
Content
Q1.	Under what circumstances should an employer pay severance payment to his employee?
A1.	An employer should pay severance payment when an employee, who has been employed under a continuous contract for not less than 24 months, is dismissed by reason of redundancy or is laid off. Back to questions
Q2.	What is dismissal by reason of redundancy?
A2.	An employee is taken to be dismissed by reason of redundancy if the dismissal is due to the fact that -  (a) the employer closes or intends to close his business; (b) the employer has ceased, or intends to cease, the business in the place where the employee was employed; or (c) the requirement of the business for employees to carry out work of a particular kind, or for the employee to carry out work of a particular kind in the place where the employee was employed, ceases or diminishes or is expected to cease or diminish. Back to questions
Q3.	What is the meaning of lay-off?
A3.	An employee is taken to be laid off if -  (a) he is not provided with work and not paid for more than half of the total number of normal working days in any 4 consecutive weeks; or (b) he is not provided with work and not paid for more than one-third of the total number of working days in any 26 consecutive weeks. Back to questions
Q4.	Under what circumstances should an employer pay long service payment to his employee?
A4.	An employer should pay long service payment when an employee who has been employed under a continuous contract for no less than 5 years, -  (a) is dismissed by reason other than serious misconduct or redundancy; (b) is certified by a registered medical practitioner or registered Chinese medicine practitioner as permanently unfit for the present job and he resigns; (c) is aged 65 or above and he resigns; or (d) dies in service. Back to questions
Q5.	Is an employer required to pay an employee (who has no less than 5 years' service) BOTH long service payment and severance payment upon redundancy?
A5.	Not both. An employee who is dismissed by reason of redundancy is eligible for severance payment but not long service payment. Back to questions
Q6.	Is there any difference in the calculation of long service payment and severance payment?
A6.	No difference. Long service payment and severance payment are calculated as follows -  Monthly-paid employee: (monthly wages X 2/3)* X reckonable years of services Daily-rated/piece-rated employee: 18 days' wages* X reckonable years of service * Note: The sum should not exceed 2/3 of $22,500.  Service of an incomplete year should be calculated on a pro rata basis. Click here for information on the reckonable years of service (PDF) shown in the pamphlet "A Concise Guide to the Employment Ordinance". Back to questions
Q7.	Can MPF scheme benefits, retirement scheme benefits and gratuities be used to offset severance payment or long service payment?
A7.	If an employee becomes entitled to severance payment or long service payment and: gratuitues based on length of service or occupational retirement scheme benefits (excluding any part attributable to employee's contributions) have been paid to the employee; or accrued benefit (excluding any part attributable to employee's contributions) is being held in a mandatory provident fund scheme in repect of the employee, or has been paid to the employee. The severance payment / long service payment is to be reduced by the aforementioned amount of gratuities and benefits to the extent that they relate to the employee's years of service for which the severance payment / long service payment is payable. Back to questions