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When terminating employment contract, how to calculate the notice period or payment in lieu of notice?

Labour Department

When terminating a contract of employment, the party who requested for termination is required to give the other party due notice or payment in lieu of notice. The length of notice or the amount of payment in lieu of notice required are:

EmploymentLength of noticePayment in lieu of notice
During Probation PeriodWithin the first month of probationNot requiredNot required
After the first month of probationwhere contract makes provision for the required length of noticeAs per agreement, but not less than 7 days   Please refer to 2.  Calculation of Payment in Lieu of Notice   
where contract does not make provision for the required length of noticeNot less than 7 days' notice
For a continuous contract* with no/after probation periodwhere contract makes provision for the required length of noticeAs per agreement, but not less than 7 days
where contract does not make provision of the required length of noticeNot less than 1 month

* For a non-continuous contract with no/ after probation period, the length of notice shall be the agreed period; please refer to 2 for the corresponding payment in lieu of notice.

After confirming the number of days required for notice, please make reference to the materials below to find out when the employee will terminate his/her service, or the amount of payment in lieu of notice required -
 

1. How to calculate notice period

  1. If the notice period is calculated in terms of days, to avoid disputes, the day when notice of termination of employment contract is given may be excluded from the notice period.
  2. If the notice period is calculated in terms of months, the Employment Ordinance has stipulated that the day when notice of termination of employment contract is given should be included in the notice period. According to the Employment Ordinance, a “month” means a period of time commencing on the day when notice of termination of employment contract is given, and ending –
  • at the end of the day before the corresponding date in the following month (e.g. 13 th February to 12 th March);
  • where there is no corresponding date in the following month, at the end of the last day of the following month (e.g. 30 th January to the last day of February); or
  • where the commencing day is the last day of a month, at the end of the last day of the following month (e.g. the last day of February to 31 st March).
     

2. Calculation of Payment in Lieu of Notice   

The formula for calculating payment in lieu of notice is as follows -

Notice period expressed in days or weeksAverage daily wages earned by an employee in the 12-month period preceding the day when a notice of termination of contract is given*XNumber of days in the notice period for which wages would normally be payable to the employee=Payment in lieu of notice
Notice period expressed in monthsAverage monthly wages earned by an employee in the 12-month period preceding the day when a notice of termination of contract is given**XNumber of months specified in the notice period=Payment in lieu of notice

*In case a notice has not been given, one shall adopt the average daily wages of the employee in the 12-month period preceding “the day when the contract is terminated”.
**In case a notice has not been given, one shall adopt the average monthly wages of the employee in the 12-month period preceding “the day when the contract is terminated”. 

Please note that in calculating the average daily wages, an employer has to exclude (i) the periods for which an employee is not paid his/her wages or full wages, including rest day, statutory holiday, annual leave, sickness day, maternity leave, paternity leave,sick leave due to work injuries or leave taken with the agreement of the employer, and any normal working day on which the employee is not provided by the employer with work; together with (ii) the sum paid to the employee for such periods. For more information on the calculation, please refer to “ A Concise Guide to the Employment Ordinance - Appendix 1” (PDF).

 The is not a legal document. The Ordinance remains the sole authority for the provisions of the law explained. 

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Last update: 15 Oct 2019
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