Employment: Termination of contract and dismissal

Severance payment and long service payment

Severance payment

An employer should pay a severance payment when an employee, who has been employed under a continuous contract for not less than 24 months, is dismissed due to redundancy or is laid off.

For severance payments, an employer must make payment not later than two months from the receipt of a notice from an employee who is claiming a severance payment.

Long service payment

An employer should pay a long service payment to an employee who has been employed under a continuous contract for not less than 5 years if the employee: -

• is dismissed for a reason other than serious misconduct or redundancy;
• is certified by a registered medical practitioner as permanently unfit for the present job and has resigned on such grounds;
• is aged 65 or above and has resigned on such grounds; or
• dies during service.

A long service payment should be paid to an employee within seven days after the date of termination of the employment contract.

NOTE: An employee will not be simultaneously entitled to both long service payment and severance payment.

For details of the calculation of severance payment and long service payment, please visit the Labour Department’s webpage or call the Labour Department's hotline at 27171771.

Employers who fail to pay severance payment to employees are liable to prosecution and, upon conviction, to a fine of $50,000.

Employers who fail to pay long service payment to employees are liable to prosecution and, upon conviction, to a fine of $200,000 and to imprisonment for one year.