The Covid-19 pandemic has many companies reverting back to basics and streamlining their business. With many corporations restructuring and employees facing potential redundancies, it is important for employees to know their rights and obligations.
Important Notes if You Are Being Made Redundant
- In general, most permanent employees will be entitled to some length of notice period. A notice period of one month is required if no specific agreement was made on the contract.
- However, this does not apply during the probationary period.
- During the first month, no notice is required, while after the first month of the probationary period at least 7 days of notice is required.
Outstanding Payment & Entitlements
- Employees will be entitled to payment of outstanding wages, untaken annual leave, due sickness allowance, and other entitlements.
- Entitlements must be calculated through Hong Kong’s Average Daily Wage.
Severance Payment (SP) & Long Service Payment (LSP)
- If you been under a continuous contract for at least 24 months and you are dismissed due to:
- Fixed-term employment contract expires without being renewed due to redundancy; or
- Being laid off
You will be entitled to a statutory severance payment.
- Severance Payment calculation method: (last month wage x 2/3)* x years of service.
- *The sum should not exceed 2/3 of $22,500 (Up to $15,000)
- Statutory severance payment is capped at HK$390,000
Long Service Payment:
- If you have been under a continuous contract for 5 years and you are:
- Dismissed (*Except for redundancy or serious misconduct);
- On a fixed-term employment contract expires without being renewed;
- Certified to be permanently unfit for your current job and resigned; or
- Aged 65 or above and resigned on the grounds of old age
- You are only eligible for severance pay and not long service payment if the reason for the dismissal is redundancy.
- The calculation for LSP is the same as SP.
Employers Can Offset Payment
- Employers can offset Severance Payment (SP) and Long Service Payment (LSP) paid to employees with accrued benefits derived from the employer’s MPF contributions.
- If your immigration sponsorship is terminated as a result of redundancy, you cannot take up new employment without approval from the immigration department.
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