How do you terminate an employee in Hong Kong in 2026?
Hong Kong's Employment Ordinance (Cap. 57) caps severance at a monthly wage ceiling of HK$ 22,500 per month, total payout capped at HK$ 390,000, and there are no collective redundancy rules at all: every termination, however many employees are affected, follows the same individual procedure.
· Hong Kong guide
Illustration · Hong Kong
Hong Kong termination law is set by the Employment Ordinance (Cap. 57). The minimum notice an employer must give is 1 week. Most contracts set one month. Employees who resign must give 7 days notice, though contracts typically require one month too.
Severance is owed to employees who are made redundant or laid off after 2 years of continuous service. It does not apply to employees who resign. The rate is two-thirds of a month's wages per year worked. Wages are capped at HK$ 22,500 for this calculation. The maximum total payout is HK$ 390,000. Employers can offset their MPF contributions against the severance amount. For long-serving employees this often reduces or wipes out the cash payment entirely.
Protection against unreasonable dismissal starts after 24 months of continuous service. Hong Kong has no collective redundancy rules. There is no consultation period, no obligation to notify any authority, and no extra cost for dismissing several employees at once.
How much notice must you give in Hong Kong?
The minimum notice an employer must give is 1 week. Employees who resign must give 7 days notice. Most professional contracts set one calendar month for both sides. That contract term overrides the minimum. (Employment Ordinance (Cap. 57) s.6)
In the first month of employment, either side can end employment without any notice. After the first month, 7 days notice is required.
| Scenario | Required notice |
|---|---|
| During first month of employment (or probation in first month) | None (either party) |
| After first month, statutory floor (employer) | 1 week |
| After first month, statutory floor (employee resignation) | 7 days |
| Contractual standard (most professional roles) | One calendar month (contractual, not statutory) |
The contract governs where it specifies longer notice. Pay in lieu of notice (PILON) is permitted and common: the employer pays the wages that would have been earned during the notice period, and the employment ends immediately. Hong Kong does not tax termination payments as heavily as many jurisdictions, though any payment above the statutory amount is treated as income for salaries tax purposes.
Notice and the MPF settlement window
Final wages, severance pay, and all other terminal payments must be settled within 7 days of the termination date under Employment Ordinance (Cap. 57) s.48. This applies regardless of whether notice was worked or paid in lieu. Late payment exposes the employer to a civil claim and potential prosecution by the Labour Department.
What procedure is required before dismissal?
Hong Kong law does not set a formal disciplinary process the way UK or EU law does. Dismissing someone with no process at all carries two real risks. The first is an unreasonable dismissal claim under Part VIA of the Employment Ordinance. The second is a common-law wrongful-dismissal claim.
Protection against unreasonable dismissal starts after 24 months of continuous service. An employee the Labour Tribunal finds was unreasonably dismissed can claim up to HK$ 150,000.
"Unreasonable dismissal" under the Employment Ordinance is not the same concept as UK unfair dismissal. The Tribunal asks whether the employer's decision fell within a range of reasonable responses, with lower procedural formality required than in common-law systems with statutory fair-procedure codes. That said, several triggers make dismissal automatically unlawful regardless of tenure:
- Dismissal of a pregnant employee during pregnancy or maternity leave
- Dismissal for filing a work injury claim
- Dismissal for giving evidence in proceedings against the employer
- Dismissal for trade union activities or membership
These are protected categories under the Employment Ordinance and related ordinances; dismissal for any of these reasons is unlawful even during probation or before the 24 months qualifying period.
Practical procedure steps
Even without a statutory code, following a documented process significantly reduces tribunal risk. Grounds most commonly accepted as reasonable include: persistent underperformance after documented feedback, serious misconduct, redundancy of the role, or business closure. Written documentation at each stage is the primary defence in any Labour Tribunal proceeding.
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Confirm the grounds in writing
Document the reason for dismissal before serving notice. Redundancy, misconduct, capability, or business closure are the standard bases; each carries different severance and payment implications.
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Calculate notice or PILON
Check the contract for the notice period; apply the statutory minimum of 1 week if the contract is silent. Decide whether to work the notice or pay it in lieu.
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Assess severance entitlement
Confirm whether the employee has 2 or more years of continuous service and whether the dismissal ground triggers severance. Calculate the MPF offset before stating any net cash figure.
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Prepare the final-pay statement
Include wages to termination, unused annual leave, notice pay or PILON, and severance or long service payment as applicable. All amounts must be settled within 7 days of the termination date.
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Serve notice and issue documentation
Provide a written termination letter stating the effective date, the notice arrangement, and the payment breakdown. Notify the MPF trustee and process the final MPF contribution for the month of termination.
How is Hong Kong severance pay calculated?
Severance is owed to employees made redundant or laid off after 2 years of continuous service. It does not apply to employees who resign or are dismissed for misconduct.
The rate is two-thirds of one month's wages per year worked. The wage used is either the employee's actual monthly pay or HK$ 22,500, whichever is lower. Total severance cannot exceed HK$ 390,000.
The accrual rate is 0.667 months of capped monthly wages per year of service. For a monthly wage of HK$30,000 (above the cap), the calculation uses the HK$ 22,500 ceiling: 0.667 months of HK$ 22,500 per year. For a monthly wage of HK$18,000 (below the cap), actual wages apply: 0.667 months of HK$18,000 per year. Service up to the maximum counted by the cap governs when the lifetime maximum HK$ 390,000 is reached.
Severance is owed on redundancy or lay-off after 2 years' continuous service. Monthly wage cap: HK$ 22,500. Maximum total payout: HK$ 390,000. Employers may offset accrued MPF mandatory contributions against the statutory severance liability.
Source: RPC Legal: Redundancy in Hong Kong (citing Employment Ordinance Cap. 57 s.31G)
The MPF offset: the reduction that surprises employers
Employers may offset their mandatory MPF (Mandatory Provident Fund) contributions made on behalf of the employee against the severance payment obligation. Both employer and employee contribute 5% of relevant income to MPF. For long-tenured employees, accumulated employer MPF contributions can match or exceed the statutory severance entitlement, reducing the cash severance to nil. This is a feature of Hong Kong's system that frequently surprises employers from other jurisdictions: the pension contribution and the redundancy payment are treated as partially substitutable.
Long service payment: a parallel entitlement
Separate from severance, the Employment Ordinance also provides long service payment for employees dismissed other than for serious misconduct after 5 years of continuous service, or who resign after 10 years. The formula and cap are the same as severance payment, but the two are not cumulative: only one applies to any single termination event. Which entitlement applies depends on the grounds for termination and the employee's service length.
Are there collective redundancy rules in Hong Kong?
No. Hong Kong has no collective redundancy rules. You do not need to notify any government authority. You do not need to consult employee representatives. There is no waiting period when letting multiple employees go at once.
Every termination follows the same individual notice and severance rules, no matter how many employees are affected. No headcount level triggers extra obligations.
This is a significant structural difference from Europe and many Asian jurisdictions. An employer closing a Hong Kong office or making fifty redundancies at once faces no collective process, no mandatory information-and-consultation period, and no protective award for failing to follow a non-existent collective procedure. The individual obligations (notice or PILON, severance if eligible, final pay within 7 days) simply multiply by headcount.
Practically, most employers in Hong Kong still choose to communicate redundancies collectively and offer enhanced packages to avoid reputational damage and individual claims. But this is commercial practice, not a legal requirement. The absence of a collective regime makes Hong Kong notably more operationally flexible than comparable financial centres such as Singapore (which has MOM retrenchment notification requirements for employers of a given size) or the European Union.
The Labour Department encourages employers to notify it voluntarily of large-scale redundancies, but voluntary notification is not legally required and carries no penalty for omission. Employers should check for any sector-specific rules (for example, in the finance sector, the Securities and Futures Commission may have separate notification requirements related to licensed individuals).
Mutual separation and settlement in Hong Kong
Both sides can agree to part ways at any time. A written separation agreement can waive Employment Ordinance claims. The employee must receive at least their minimum entitlements: notice pay, accrued annual leave, and severance if it applies. The agreement must not be signed under duress.
The employee does not need independent legal advice for the agreement to be valid. Getting advice is still sensible practice for any contested exit.
Settlement agreements typically cover:
- Payment in lieu of notice, wages for the notice period
- Severance or long service payment, statutory amount or an enhanced figure
- Accrued and unused annual leave, paid out at the daily wage rate
- MPF offset amount, stated explicitly so the net cash position is clear
- Ex gratia payment, any amount above the statutory floor, agreed commercially
- Reference and confidentiality terms
- Restrictive covenants, enforceability reviewed by Hong Kong courts under a reasonableness test
All terminal payments must be made within 7 days of the termination date. Where a severance or long service payment is disputed, the employee may file a claim with the Labour Relations Division of the Labour Department or proceed directly to the Labour Tribunal, which handles claims up to HK$500,000 without lawyers in most cases.
When to use a settlement agreement: any contested performance exit, any senior departure where reputational or restrictive-covenant concerns apply, or any situation where the employer wants finality on potential unreasonable-dismissal claims. For employees past the 24 months qualifying period, the capped award of HK$ 150,000 provides a natural anchor for settlement negotiations.
How Teamed runs Hong Kong terminations
Teamed becomes your legal employer of record in Hong Kong for from $599 per employee per month, with zero FX mark-up in any currency. Our partner entity in Hong Kong is the legal employer. The termination process, notice calculation, severance assessment, and final-pay filing all run through Teamed.
We handle the MPF offset calculation, the notice or pay-it-out decision, and the 7 days settlement window on one platform. The decision to dismiss, the grounds, and the terms of any enhanced package remain the client's.
Real HR and legal experts handle your Hong Kong hires from offer letter through every MPF contribution and annual leave reconciliation. An actual person, not a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for Hong Kong terminations:
| What Teamed handles | What the client decides |
|---|---|
| Notice period calculation against statutory minimum and contractual terms | Whether to dismiss, on what grounds, and on what timeline |
| Severance or long service payment calculation including MPF offset | Whether to enhance above the statutory floor |
| Final-pay settlement within the 7 days statutory window | Reference clause wording and communication to the wider team |
| MPF contribution reconciliation and final trustee notifications | Any ex gratia payment above statutory entitlement |
| Settlement agreement support through our partner employment law network | Settlement versus Labour Tribunal strategy on contested exits |
| Compliance with Labour Department final-pay requirements | Restrictive covenant terms and enforcement decisions |
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Hong Kong contractor who converts to payroll keeps their record, and that same employee can graduate from EOR to your own Hong Kong entity without switching systems. Run the Crossover Calculator to see when the model flips. EOR is the right structure for a first Hong Kong hire, until it isn't. Start from the Hong Kong hiring overview; each guide here takes one layer of employment law.
Key sources: Hong Kong Labour Department, 1823 Government Helpline on terminal payments, and MPFA mandatory contributions.
Frequently asked questions
What is the statutory minimum notice period in Hong Kong?
Under Employment Ordinance (Cap. 57) s.6, the statutory minimum employer notice is 1 week, and the statutory minimum employee resignation notice is 7 days. During the first month of employment (including a probationary first month), no notice is required by either party. Most professional contracts specify one calendar month for both sides, which governs over the statutory floor.
Who qualifies for severance payment in Hong Kong?
Employees dismissed by reason of redundancy or laid off who have completed 2 years of continuous service. Employees who resign, or who are dismissed for serious misconduct, do not qualify for severance. A parallel long service payment entitlement applies to employees dismissed otherwise than for misconduct after five years, or who resign after ten years, using the same formula.
How is Hong Kong severance pay calculated and what is the cap?
The formula accrues at 0.667 months of monthly wages per year of service, using the lower of the employee's actual monthly wages or HK$ 22,500 as the wage base. The maximum total severance payment is HK$ 390,000. Employers may offset their mandatory MPF contributions made on behalf of the employee against the statutory severance liability, which often reduces the net cash payment significantly.
Are there collective redundancy rules in Hong Kong?
No. Hong Kong has no collective redundancy regime under the Employment Ordinance. There is no headcount threshold that triggers special obligations, no mandatory consultation period, and no requirement to notify any government authority before making multiple redundancies. Each termination follows the same individual notice and severance rules regardless of how many employees are affected.
When does unreasonable dismissal protection start in Hong Kong?
Unreasonable dismissal protection under Employment Ordinance (Cap. 57) Part VIA applies after 24 months of continuous service. The maximum compensatory award is HK$ 150,000. Certain dismissals are unlawful regardless of tenure, including dismissal during pregnancy or maternity leave, for filing a work injury claim, or for trade union activities.
How quickly must final pay be settled after termination in Hong Kong?
All final wages, severance or long service payment, accrued annual leave, and other terminal payments must be made within 7 days of the termination date under Employment Ordinance (Cap. 57) s.48. Late payment exposes the employer to civil claims and potential prosecution by the Labour Department. Pay in lieu of notice counts toward this obligation.
The MPF offset is the number most employers get wrong on a first Hong Kong termination. The severance entitlement looks clear on paper, but once you net off the employer MPF contributions, the actual cash owed is often far lower than the headline figure suggests. Get that calculation wrong in either direction and you have either an underpayment claim or an overpayment you can't recover.
Hong Kong severance caps at HK$ 390,000 total, monthly wages capped at HK$ 22,500.
Then the MPF offset reduces it further. Long-tenured, well-paid staff often find the net cash owed is close to nil.
No collective redundancy rules. All terminal payments due within 7 days.
