As an employer exploring the prospect of hiring in Hong Kong, understanding the region's labor and employment laws is a prerequisite that goes far beyond simply knowing how to terminate an employee. In fact, familiarizing yourself with the complexities of employee termination rules is an integral part of your groundwork before you even consider making your first hire.
Although employment termination is a sensitive and challenging aspect of workforce management, it is sometimes necessary. However, navigating the legal intricacies surrounding this process in Hong Kong can be daunting. Therefore, we have consolidated some key aspects of Hong Kong's termination rules into this guide. Keep in mind that while this information aims to cover general scenarios, specific cases may vary, and it is always wise to seek legal counsel tailored to your unique situation.
5 essential things to know before hiring in Hong Kong
- Establish clear terms for notice periods in your employment contracts. In Hong Kong, notice periods are typically regulated by the employment contract. Generally, either party intending to terminate the contract should give notice or payment in lieu of notice. For continuous contracts, the standard notice period is usually one month. However, during a probationary period, this can be as short as seven days. Being aware of these rules will help you plan ahead and avoid potential conflicts during termination.
- Ensure you are prepared for severance pay and long service payments. When it comes to termination, employees who have served a continuous contract for 24 months or more may be entitled to severance payments or long service payments. These payments are mandated by the Employment Ordinance and must be paid on top of any outstanding wages or annual leave payments due.
- Be clear on grounds for summary dismissal. Summary dismissal in Hong Kong means terminating an employee without notice or payment in lieu of notice, typically for severe misconduct or dereliction of duty. Employers need to tread carefully here, as the reasons for summary dismissal are explicitly defined under the Employment Ordinance.
- Be aware of protections for employees on maternity and sick leave. Terminating an employee who is on maternity leave or sick leave is generally considered unlawful in Hong Kong. Special protections for these employees are embedded in the Employment Ordinance, and going against these rules can lead to penalties, including fines and imprisonment.
- Continue Mandatory Provident Fund (MPF) contributions until the last employment day. Upon termination, the employer's obligation to contribute to the employee's Mandatory Provident Fund (MPF), Hong Kong's statutory retirement scheme, doesn't cease. Contributions should be made up until the last day of employment. Any default on this can attract legal consequences.
Termination rules in Hong Kong: What are acceptable grounds for firing an employee?
In Hong Kong, employers are permitted to dismiss an employee on the following legal grounds (these grounds for termination should be viewed as guidelines—always consult with legal counsel to ensure compliance with Hong Kong's labor laws):
- Serious misconduct or dereliction of duties. If an employee engages in serious misconduct such as theft, violence, or breach of trust, or consistently neglects their duties, this can constitute a legal ground for dismissal. Concrete evidence supporting these allegations should be documented for legal support.
- Performance-related issues: Employees failing to meet their employment contract's performance standards can be grounds for termination. However, employers should have measures to address the problem through performance reviews, documented warnings, and opportunities for improvement before deciding on termination.
- Redundancy or business closure: If your company undergoes restructuring, which renders some roles redundant, or if a business closure is necessary, redundancies are acceptable grounds for termination. However, employers must comply with statutory regulations regarding severance payments and notification procedures.
- Fraud or dishonesty: If an employee is found to engage in fraudulent acts, embezzlement, or any form of dishonesty, immediate dismissal without notice can be justified. Legal advice should be sought in these situations to ensure proper procedures are followed.
- During probationary period: In Hong Kong, employees can be terminated during the probationary period without cause. However, statutory notice or payment in lieu of notice is required, unless otherwise stated in the employment contract.
- Termination without cause: In Hong Kong, an employer can terminate an employee without cause, provided that they give the required notice or make a payment in lieu of notice. However, this should be approached cautiously to avoid allegations of unfair or wrongful dismissal. Unfair, unreasonable, and unlawful dismissal includes the dismissal of pregnant employees or employees who are on sick leave.
What are the mandatory notice periods and termination pay for Hong Kong employees?
In Hong Kong, both employers and employees are required to give notice of termination, with the length of the notice period typically specified in the employment contract. If the contract does not specify a notice period, the standard statutory requirement is one month.
In terms of termination pay, employers must provide payment for any outstanding wages, payment in lieu of notice (if applicable), any unused annual leave, end-of-year payments, and other entitlements under the Employment Ordinance. It's important to note that these payments must be made within seven days after the termination date.
Here is a simple table outlining the standard statutory notice periods based on length of service:
Hong Kong, with its unique blend of common law traditions and statutory provisions, provides a distinctive framework for employment relationships, including termination. By understanding these regulations, you can protect your business from costly legal disputes and build more transparent, trusting relationships with your employees.
Length of Service
During Probation Period
Not required within the first month of probation. After the first month of probation and until the end of the probation period, the length of notice required is as stated in the employment contract—note that this cannot be less than seven days.
Three months to less than 12 months for a continuous contract
As stated in the employment contract—this cannot be less than seven days.
One year and above
As stated in the employment contract—this cannot be less than seven days.
Note that these requirements can change depending on the specific terms outlined in the employment contract. Always consult with a legal expert or HR professional when in doubt.
The easiest way to comply with Hong Kong termination requirements
Navigating termination regulations can be a complex task, especially for organizations with a global reach. With employees scattered across various locations, understanding and adhering to the distinctive requirements becomes a challenge. Discrepancies in concepts like just cause, probation periods, notification protocols, and severance pay laws that change from one jurisdiction to another can make the task exceedingly intricate. This complexity amplifies when considering the unique labor and employment laws within individual countries. That’s why getting legal help can help you manage these requirements, which is a key step in ensuring compliance and reducing the risk of legal disputes.
An alternative is to hire through an EOR, which can monitor termination requirements for you.
Frequently asked questions about terminating employees in Hong Kong
Do you need a reason to terminate an employee in Hong Kong?
In Hong Kong, it's not necessary to provide a reason when terminating an employment contract, as long as the correct notice period is given or payment in lieu of notice. However, dismissing an employee without just cause during certain periods, such as maternity leave or sick leave, is unlawful.
What is considered just cause for terminating an employee in Hong Kong?
Just cause in Hong Kong typically involves serious misconduct or dereliction of duties. Examples include dishonesty, insubordination, or continual poor performance. Termination on such grounds can be executed without notice or payment in lieu of notice, but the employer must be able to substantiate the misconduct.
What qualifies as wrongful dismissal in Hong Kong?
Wrongful dismissal in Hong Kong refers to termination in violation of the Employment Ordinance. For example, dismissing an employee while they're on paid sick leave, maternity leave, or immediately after a work-related injury can be considered wrongful dismissal.
What is always required when an employer terminates an employee in Hong Kong?
Whether an employer terminates an employment contract with or without cause, they must provide the appropriate notice or payment in lieu of notice, and settle all outstanding wages and other entitlements, such as accrued annual leave and long service payments, if applicable.
What is the law for dismissing a contractor in Hong Kong?
In Hong Kong, contractors aren't covered under the Employment Ordinance. Therefore, the termination of a contractor is governed by the terms of the individual contract. It's important to ensure these contracts are well-drafted to protect both parties.
What are layoffs in Hong Kong?
In Hong Kong, layoffs, also known as redundancy, occur when an employer terminates an employee because the role is no longer required. In such cases, the employer must provide notice or payment in lieu of notice, and potentially a severance payment if the employee has been employed continuously for at least 24 months.
Does an employer have to provide severance payment in a redundancy situation?
Yes, an employer in Hong Kong is obligated to pay a severance payment to employees who have been employed continuously for at least 24 months if they're dismissed due to redundancy.
Can an employee be terminated during the probationary period in Hong Kong?
Yes, an employee can be terminated during the probationary period in Hong Kong. However, the notice period during this time may differ from the standard and should be stated in the employment contract.
What is the standard notice period for termination in Hong Kong?
In Hong Kong, the standard notice period for termination of employment is one month. However, this can be altered if both the employer and employee agree on a different duration in the employment contract.
Can an employee be terminated without cause in Hong Kong?
Yes, an employer can terminate an employee without cause in Hong Kong, but they must provide the appropriate notice or payment in lieu of notice. It's important to note that termination without cause is prohibited during certain periods, such as sick leave or maternity leave.
What is the “expiry” in terms of termination in Hong Kong?
The “expiry” typically refers to the end of a fixed-term contract. In Hong Kong, if the contract isn't renewed, it's not considered a dismissal or termination, so no severance payment or notice is required. However, if a fixed-term contract is terminated before its expiry date, standard termination rules apply.
How does the Employees’ Compensation Ordinance relate to termination in Hong Kong?
The Employees’ Compensation Ordinance in Hong Kong stipulates that an employer cannot terminate an employee while they are receiving medical treatment for a work-related injury, or they could face fines and imprisonment. Employers must be mindful of these rules when considering termination.
How do trade union activities factor into termination laws in Hong Kong?
In Hong Kong, it's unlawful to terminate an employee for participating in trade union activities, including acting as an officer of a registered trade union or taking part in lawful trade union activities. Employers must tread carefully to avoid contravening these statutory protections.
What does “valid reason” for termination mean in Hong Kong?
A “valid reason” for termination in Hong Kong can include misconduct, redundancy, or other substantial reasons pertaining to the employee’s capacity or conduct. It's advisable to seek legal advice before proceeding with termination on these grounds to avoid potential disputes.
What is the statutory severance pay in Hong Kong?
In Hong Kong, statutory severance pay is due to employees who have been employed continuously for at least 24 months and are dismissed due to redundancy or laid off. It's calculated as two-thirds of the employee's last month's wages (or two-thirds of HK$22,500, whichever is less) for each year of service.
What does “willfully” and “unreasonably” dismissing an employee mean in Hong Kong?
In Hong Kong, “wilful” dismissal could be interpreted as intentionally terminating an employee with full knowledge of the consequences, such as avoiding paying end-of-year payments or other dues. “Unreasonable dismissal” may refer to termination without a valid reason, such as on the grounds of discrimination, which is prohibited under Hong Kong law.
How does the first month of employment impact termination in Hong Kong?
During the first month of employment in Hong Kong, either the employer or employee may terminate the contract without notice or payment in lieu of notice. However, wages and any other payments earned up to the date of termination must still be paid.
What is the role of the Labour Tribunal in termination cases in Hong Kong?
The Labour Tribunal in Hong Kong handles claims arising from disputes between employers and employees, including those concerning termination. It provides a quick, inexpensive, and informal means to resolve such disputes. If a party is dissatisfied with the Labour Tribunal's decision, they may appeal to the Court of Appeal on a point of law.
What is the significance of the date of termination in Hong Kong?
The date of termination is important in Hong Kong as it determines the employee's entitlements, such as notice pay, long service payment, or severance payment. It's also the date from which time limits for certain actions, such as filing claims with the Labour Tribunal, are calculated.
What are the rules around sickness allowance and termination in Hong Kong?
In Hong Kong, it's unlawful to terminate an employee while they're on paid sick leave. Moreover, if an employee has accumulated a sufficient number of paid sickness days, they are entitled to sickness allowance, which must be paid by the employer.
What is the termination of an employment contract under the employment ordinance in Hong Kong?
Under the employment ordinance in Hong Kong, an employment contract can be terminated by either the employer or employee giving the other party due notice or payment in lieu of notice. Certain situations allow for immediate termination without notice or payment, such as serious misconduct by the employee or redundancy.
Is there a statutory sick leave provision in the event of termination in Hong Kong?
Yes, in Hong Kong, an employee is entitled to sickness allowance if they have accrued sufficient sick leave days. If the employee is dismissed while on paid sick leave, it could constitute an unlawful termination, and the employer may face penalties.
What happens in the event of redundancy in Hong Kong?
In Hong Kong, redundancy occurs when an employer terminates an employee because the job is no longer needed. If the employee has been continuously employed for at least 24 months, the employer is required to provide a severance payment in addition to any outstanding wages, annual leave pay, and end-of-year payments. The employee may also be entitled to long service payment in certain situations.
What is a notice of pregnancy in relation to termination in Hong Kong?
In Hong Kong, if an employee provides a notice of pregnancy to her employer, she is protected from termination. If an employer dismisses a pregnant employee after she has served a notice of pregnancy, it will be deemed as an unlawful dismissal under the Employment Ordinance, and the employer can be liable to prosecution and, upon conviction, face fines.
What is a certificate of assessment in relation to termination in Hong Kong?
A certificate of assessment relates to the Employees' Compensation Ordinance in Hong Kong. If an employee is injured at work, a certificate of assessment is issued to determine the degree of the employee's permanent incapacity. The employer cannot terminate an employee while they are receiving medical treatment or within the first month after a certificate of assessment has been issued.
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Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.