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When terminating employment contract, is the employee entitled to long service payment? How to calculate the amount?

Labour Department

When terminating an employment contract, if the employee can meet all of the following requirements, he/she is qualified for long service payment -

  1. The employee has been employed under a  continuous contract for not less than 5 years;
  2. The employment contract is terminated due to one of the following reasons -
    • Employee was dismissed, or a fixed term contract was prematurely terminated by the employer; but for reasons other than summary dismissal due to serious misconduct or redundancy ;
    • Fixed term contract is not renewed by employer upon contract expiry (Note 1);
    • Employee, aged 65 or above, resigns on ground of old age;
    • Employee resigns on ground of ill health, with a certificate in the form of LD424(S) (PDF) issued by a registered medical practitioner or a registered Chinese medicine practitioner certifying the employee as being permanently unfit for his/her present job; or
    • Death of the employee.

Note 1: If not less than 7 days before the date of dismissal or expiry of the fixed term contract, the employer has offered in writing to renew the contract of employment or to re-engage the employee under a new contract, but the employee has unreasonably refused the offer, the employee will not be eligible for the long service payment. (That the employer who offered to renew the employment contract with not less favourable terms has been rejected by the employee is an example of unreasonable refusal.)

If the employee is employed under a continuous contract for not less than 24 months, and the employment contract is terminated due to redundancy, the employee is eligible for severance payment. Please refer to “ When terminating employment contract, is the employee entitled to severance payment? How to calculate the amount?”. Note that an employee will NOT be simultaneously entitled to both severance payment and long service payment.

The formula for calculating the amount of long service payment is as follows -

Monthly-paid employee(Wages in final month X 2/3) * X Reckonable years of service ** 
Daily-rated or piece-rate employeeAny 18 days’ wages * chosen by the employee out of his/her last 30 normal working days * X Reckonable years of service **

*The sum should not exceed 2/3 of $22,500 (i.e. $15,000). The employee may also choose to use his/her average wages in the last 12 months for the calculation.
**Service of an incomplete year should be calculated on a pro rata basis.

There is a maximum limit for the amount of long service payment. If the relevant date of termination of employment is on or after 1 st October 2003, the maximum amount of long service payment is $390,000. 

Please note that the accrued benefit held in the Mandatory Provident Fund (MPF) Scheme, gratuities based on length of service, and occupational retirement scheme benefits, can be used to offset long service payment; but is limited to the part attributable to employer's contributions only. Please click here for details.

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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