| 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. |
| 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. |
|
| 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. | |
| 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. | |
| 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. |
| 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". |
| 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.
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