We previously talked about what employees need to know about being made redundant, but employers need to understand their obligations too! Hong Kong businesses are restructuring to streamline their operations, and in some cases, redundancies are part of the process. To ensure that you are compliant with HK regulations when making redundancies, we’ve listed out the important things you need to know:
Things You Need to Know as an Employer
Payment Time
- Employers are required to make the severance payment to the employee no later than 2 months from the receipt of a notice of claim made by the employee.
- Employers which fail to pay statutory severance payment are liable to prosecution.
Obligations
- The employer needs to notify the Inland Revenue Department if the employee plans to leave Hong Kong at least 1 month before the expected departure date. The employer must also temporarily withhold payments of salaries and all other money to that employee until the IRD issues a “letter of release”.
*To learn more about Severance Pay, Long Service Pay, and Notice Period, please refer to this article.
MPF Offset
- Employers can offset Severance Payment (SP) and Long Service Payment (LSP) paid to employees with accrued benefits derived from the employer’s MPF contributions.
- Calculation Examples:
If the accrued benefits from the employer’s contribution cannot completely offset the LSP/SP, the employer must pay the outstanding balance to the employee.
Currently, the government is looking to abolish the offsetting practice under the current framework, but are planning to offer increased financial assistance to businesses under a proposed subsidy scheme. This will help alleviate the financial pressure on businesses when the offsetting arrangement is abolished. Employers can continue to offset SP/LSP for now as it has yet to go through the legislative council. To keep up with the latest labour law developments read our onboard, subscribe to our blog or contact our team now!
*Please note that this is meant to be a general guide on redundancy in Hong Kong. For more information visit the Government Website or contact us for a chat now!
Planning to Restructure Your Business?
If you are planning to restructure your business you will need to ensure the process is smooth and your company’s reputation is not affected. You should consider using outplacement services to help employees transition to new opportunities and protect your brand! Contact us now to learn more about how our services can help.
Related Articles:
- What Employees Should Know About Redundancies in Hong Kong?
- Top Paying Jobs in Hong Kong
- Quick Guide to Calculating Hong Kong’s Average Daily Wage + Examples
- Why You Should Use Outplacement to Handle Employee Terminations
- How Has 2020 Changed Recruiting?
Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcing, visa application, PEO/EOR Secondment, outplacement, recruitment and more! Contact us for more information on how we can help leverage your HR function.
