Termination of employment in Hong Kong is generally more straightforward compared to China, Europe, Australia, and other Asian regions, provided notice periods and severance obligations are met. Although employees with two or more years of service theoretically have the right to challenge a dismissal without a valid reason at the labour tribunal, such claims are infrequent. In practice, unless special circumstances apply, employees are typically only entitled to the benefits specified under the Employment Ordinance. There is effectively no significant right to contest a dismissal as long as there is no discrimination and the restrictions outlined in the Employment Ordinance are followed.
Termination of Employment
Employment contracts may end through resignation, dismissal by the employer, constructive dismissal, expiry of a fixed term, or mutual agreement.
Dismissal by Employer
The process, formalities, and costs involved in terminating employment are governed by the individual's contract and the Employment Ordinance. Employers must ensure that the employee does not fall into a restricted category (see below) and that the reason for dismissal does not involve discrimination on grounds such as sex, race, pregnancy, marital status, family status, or disability. There is no qualifying period for discrimination claims.
Notice Period
Unless restricted by specific categories, an employer can end an employment contract with either oral or written notice. The contract usually specifies the notice period and any additional requirements, with a minimum notice period of seven days unless a probationary period applies. Without an agreed notice period, either party may terminate the contract with at least one month's notice. Notice periods cannot include statutory annual or maternity leave. Termination without notice is possible if a payment in lieu of notice is made.
Probationary Periods
During the first month of probation, either party can terminate the contract without notice or payment in lieu. For the remainder of the probationary period, the minimum notice is seven days, or seven days' notice if no notice period is stated.
Summary Dismissal
An employer may dismiss an employee without notice or payment in lieu only if the employee wilfully disobeys a lawful and reasonable order, commits gross misconduct, engages in fraud or dishonesty, or is habitually neglectful of duties. Summary dismissal is also permitted for any other grounds where dismissal without notice is allowed by common law.
Dismissal Without a Valid Reason
Employees with 24 months' continuous service may theoretically file a claim for dismissal without a valid reason. However, such claims are rare and, barring special circumstances, employees are usually entitled only to termination benefits specified under the Employment Ordinance. A dismissal is considered without a valid reason unless the employer can prove it was due to conduct, capability, redundancy, legal contravention, or other substantial reasons. If a court or tribunal finds the dismissal was without a valid reason, remedies may include reinstatement or re-engagement (if both parties agree) or a "terminal payment" (though this is generally due anyway).
Termination Entitlements
Upon termination, the following payments may be due:
Wages until the last day of employment
Payment in lieu of notice (if notice or full notice is not given)
Payment for untaken annual leave
Pro rata end-of-year payment (if contractually entitled)
(Possibly) pro rata bonus
Statutory severance or long service payment
Retirement scheme benefits (payable or retained in the scheme)
Statutory severance is payable to employees with at least 24 months of continuous service terminated due to redundancy. Statutory long service payment is due to employees with at least five years of continuous service who are dismissed for reasons other than summary dismissal, become permanently unfit for their role, or are 65 years or older at termination. Employees cannot receive both severance and long service payments, which are capped at HK$390,000.
Employers can deduct from severance or long service payments any gratuities or retirement scheme benefits based on the employer’s contributions, potentially reducing these payments significantly.
Restricted Categories
Employment termination is not permitted for employees who have notified pregnancy, are on statutory sick leave, have a pending claim under the Employees Compensation Ordinance, or are involved in trade union activities, jury duty, or proceedings related to the Employment Ordinance or workplace accidents. Such cases should be handled individually, and mutual agreement may be necessary for termination.
Constructive Dismissal
Employees may terminate their contracts without notice or payment if they reasonably fear physical danger not covered under their contract, are permanently unfit for their role after five years of employment, or are subjected to ill treatment. Employees may also terminate their contracts without notice for any other common law reasons or if wages are unpaid for over one month. In these cases, the employee is considered dismissed by the employer and entitled to payment in lieu of notice.
Mutual Agreement and Settlement
Employers and employees can mutually agree to end an employment contract, often formalised through a settlement agreement to ensure finality and address any potential future claims. There are no specific rules for the validity of such agreements.
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