Severance Pay and Long Service Payment in Hong Kong

The question many people ask: which payment, and how much?

These are really one question. The Ordinance first decides which of the two you fall into, then applies what is almost the same formula to both — and that formula is written into the Employment Ordinance (Cap. 57). It is not something an employer quotes you.

Many people assume severance payment and long service payment are two separate schemes, or that longer service must mean a bigger cheque. In fact the entry conditions differ (24 months for one, 5 years for the other) but the money is worked out the same way, and both are held down by the same monthly-wage cap and the same overall ceiling. So what usually decides the amount is not how much you earn but how many years you served — plus the statute's two ceilings.

The thirty-second version

• Which one? — 24 months' service, plus either dismissal by reason of redundancy or lay-off within the meaning of s.31E: severance payment (s.31B(1)). Lay-off is a separate limb in s.31B(1)(b) and is not a dismissal at all; for a lay-off the "relevant date" is fixed by s.31E(3), not by the s.2 definition. Five years' service ending via (i) dismissal where the employer owes no severance, (ii) health-ground termination under s.10(aa), or (iii) termination at age 65+ — is long service payment (s.31R(1)). A single termination produces one, never both.
• How is it worked out? — for a monthly rated employee, for every year of service, "two-thirds of his last full month’s wages, or two-thirds of $22,500, whichever is less", with pro rata for an incomplete year (ss.31G(1)(a), 31V(1)(a)).
• What is the ceiling? — Seventh Schedule, Table A: where the relevant date is on or after 1 October 2003, the maximum amount is $390,000.
• Is there a deadline? — for severance payment, yes: within 3 months of the "relevant date" the payment must have been agreed and paid, or a written claim given to the employer, or a claim filed with the adjudication board or the Labour Tribunal — otherwise there is no entitlement at all (s.31N). One exception to remember: s.31M gives effect to Part II of the Third Schedule (death of an employee), and paragraph 13 of that Part provides that "In relation to the making of a claim by a personal representative of a deceased employee who dies before the end of the period of 1 month beginning with the relevant date, section 31N shall apply with the substitution, for the words “3 months”, of the words “6 months”."
• Can an employer make you sign it away? — s.70: any term of an employment contract that "purports to extinguish or reduce any right, benefit or protection conferred upon the employee by this Ordinance shall be void".

Scope of this article: it describes the Ordinance's general rules and the published scheme arrangements. It cannot and does not decide whether any individual reader qualifies, or for how much. Actual amounts turn on wage structure, length of service, the reason for termination and how service falls either side of the transition date — work for a practising solicitor or the Labour Department.

What this actually is

Neither payment is compensation for wrongdoing. Each is a statutory debt the Ordinance places on the employer: once the conditions are met the employer "shall … be liable to pay", and you do not have to prove the employer did anything wrong.

Severance payment: 24 months plus redundancy or lay-off

Section 31B is headed "General provisions as to right to severance payment". Section 31B(1):

Chinese text (第31B條「關於領取遣散費權利的一般條文」)：

"Redundancy" is not a word the employer gets to define. The Ordinance defines it, in section 31B(2):

Chinese text, s.31B(2):

The burden of proof may run the opposite way to what you expect. Section 31Q is headed "Presumption", and reads in full:

Chinese text (第31Q條「推定」)：

So a dismissed employee does not begin by proving redundancy. The statute starts from redundancy, and it is the other side that has to displace it.

The presumption is not the whole story: section 31C sets out four ways the severance claim fails. The section is headed "General exclusions from right to severance payment by reason of dismissal", and it is the twin of s.31S on the long service payment side:

• s.31C(1) — summary dismissal under s.9. "An employee shall not be entitled to a severance payment by reason of dismissal where his employer, being so entitled by reason of the employee’s conduct, terminates his contract of employment without notice or payment in lieu in accordance with section 9." This mirrors s.31S(1) word for word, and s.9 is wider than "serious misconduct" suggests.
• s.31C(2) — unreasonable refusal of an identical-terms offer. Where, not less than 7 days before the relevant date, the employer has offered to renew the contract or re-engage the employee on terms not differing as to capacity, place and other terms and conditions, taking effect on or before the relevant date, and the employee has unreasonably refused that offer.
• s.31C(3) — unreasonable refusal of a written offer on different but suitable terms. Again 7 days, but the offer must be in writing, and the terms may differ wholly or in part; it is enough that the offer "constitutes an offer of suitable employment in relation to the employee" and "an offer of employment no less favourable to the employee than hitherto". (s.31C(4): where the relevant date falls on a rest day or holiday, the dates in (2)(b) and (3)(c) move to the next day.)
• s.31C(5) — leaving before the notice expires. An employee given notice under s.6 who leaves before that notice expires loses the entitlement, unless he leaves with the employer's prior consent or after making a payment in lieu to the employer under s.7. Section 31S(2) does the same for long service payment.

So the s.31Q presumption answers one question — whether the reason for dismissal was redundancy. It does not clear the four gates in s.31C. The offer alone is not enough — the employee must have unreasonably refused an offer of renewal on identical terms for the claim to fail.

Domestic servants are not outside these Parts. Section 31B(3) provides: "For the purposes of the application of this Part to an employee who is employed as a domestic servant in, or in connection with, a private household, this Part (except section 31J) shall apply as if the household were a business and the maintenance of the household were the carrying on of that business by the employer." Section 31RB makes the same deeming for long service payment. But there is a family exception: s.31F(e) (severance) and s.31U(d) (long service payment) each exclude domestic-servant employment where the employer is a close relative of the employee — the two paragraphs list father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother and half-sister — and ss.31F(a) and 31U(a) separately exclude an employer who is the employee's husband or wife.

Long service payment: 5 years plus no severance liability

Section 31R is headed "General provisions as to employee’s right to long service payment". Section 31R(1):

Chinese text (第31R條「僱員領取長期服務金權利的一般條文」)：

Section 10(aa), to which s.31R(1)(a)(ii) points, is the health limb of "Termination of contract without notice by employee": at least 5 years under the contract, plus a certificate in the form specified by the Commissioner and issued by a registered medical practitioner or registered Chinese medicine practitioner certifying the employee permanently unfit for a particular type of work specified in it, where the employee is engaged in that type of work under the contract.

The words "subject to subsections (3) to (5)" at the head of s.31R(1)(a)(ii) carry real content, and they can cost the employee the payment entirely. Those subsections read:

• s.31R(3) — the employer may require a second opinion. "Where an employee has terminated his contract in the circumstances specified in section 10(aa) upon being certified as being permanently unfit for a particular type of work, the employer may require the employee to undergo a medical examination, at the employer’s expense, to obtain a second opinion as to whether or not the employee is permanently unfit for that type of work." Subsection (3A) provides that the examination is conducted by a practitioner named by the employer, whichever kind of practitioner issued the original certificate.
• s.31R(4) — but the employer has two deadlines, and loses the option if it misses them. "An employer shall forfeit his right to exercise the option under subsection (3) unless—(a) he makes arrangements for a medical examination to take place not more than 14 days after the employer receives a copy of a certificate issued under section 10(aa); and (b) he notifies the employee in writing, not less than 48 hours before the examination is to take place, giving him details of the appointment."
• s.31R(5) — an employee who refuses without reasonable excuse loses the entitlement. "An employee referred to in subsection (3) who, without reasonable excuse, refuses to undergo a medical examination forfeits his right to a long service payment under this Part."
• s.31R(6) — where the two opinions conflict, the Commissioner decides. The employer must submit the certificate and the second opinion to the Commissioner, and "the Commissioner shall, after such consultation with such medical experts as he considers necessary, rule whether or not the employee is entitled to a long service payment under this Part."

So the health limb is not "get the certificate and the money follows": if the employer arranges the examination within 14 days and gives 48 hours' written notice, it is entitled to a second opinion, and an employee who refuses it without reasonable excuse forfeits the long service payment under subsection (5).

Section 31RA deals separately with death in service. Its own entry condition is also 5 years: "Where an employee dies and he had been at the time of his death employed under a continuous contract for not less than 5 years of service on the date of his death", with the payment going to the spouse, issue, parent or personal representative in that order. Section 31RA(8) adds a point that matters to a bereaved family: "A long service payment is payable in accordance with this Part by an employer on the death of an employee from whatever cause and is payable in addition to any compensation payable by the employer under the Employees’ Compensation Ordinance (Cap. 282)." — so the long service payment and Cap. 282 compensation are two separate sums, not alternatives.

Why you never get both

This site's reading (s.31B(1) read with s.31R(1)(a)(i)): the Ordinance has no free-standing "no double recovery" section. The bar sits inside the long service payment entry condition itself — s.31R(1)(a)(i) requires that the employee "is dismissed and his employer is not liable to pay him a severance payment by reason thereof". Once severance liability exists, that limb of long service payment cannot arise. Long service payment is the fallback, not a parallel entitlement. The other two limbs — s.31R(1)(a)(ii) and (b), resignation on health grounds and termination at 65 or over — are not dismissal situations at all, so severance payment never arises alongside them.

A waiver clause does not work

Section 70 carries different headings in the two texts: "Contracting out" in English, 「訂立本條例不適用的合約條款」 in Chinese. The section reads in full:

In short: what the Ordinance gives you cannot be contracted away. Note the words "extinguish or reduce" — a clause that merely trims the entitlement is caught just as squarely as one that removes it.

<table>

<caption>Employment Ordinance (Cap. 57), Parts VA, VB and VC and section 70: the provisions this article cites. Source: Employment Ordinance (Cap. 57), Parts VA, VB and VC and section 70 (version in force 14 May 2026). This table lists only the provisions cited here; it is not a complete list of Parts VA and VB.</caption>

<thead>

<tr><th>Provision</th><th>Heading (English / Chinese text)</th><th>What it governs</th></tr>

</thead>

<tbody>

<tr><td>s.31B</td><td>General provisions as to right to severance payment／關於領取遣散費權利的一般條文</td><td>Entry conditions for severance: 24 months' continuous contract plus redundancy or lay-off; also defines redundancy</td></tr>

<tr><td>s.31G</td><td>Amount of severance payment／遣散費的款額</td><td>The formula, the $22,500 monthly-wage cap, the 18-day method for employees not paid monthly, and the Seventh Schedule ceiling</td></tr>

<tr><td>s.31I</td><td>Severance payment to be reduced by amount of gratuities and benefits in certain cases／在某些情況下，遣散費須扣除酬金及利益或權益的款額</td><td>What may still be set off: length-of-service gratuities, employer-funded (specified) ORS benefits, employer-funded (voluntary) MPFS benefits</td></tr>

<tr><td>s.31N</td><td>Claims for severance payments／遣散費的申索</td><td>The 3-month requirement running from the relevant date</td></tr>

<tr><td>s.31O</td><td>Making of severance payment／遣散費的支付</td><td>Payment within 2 months of the written notice; level 5 fine for failure</td></tr>

<tr><td>s.31P</td><td>Written particulars of severance payment／遣散費詳情說明書</td><td>Written statement showing how the amount was calculated</td></tr>

<tr><td>s.31Q</td><td>Presumption／推定</td><td>A dismissed employee is presumed dismissed by reason of redundancy unless the contrary is proved</td></tr>

<tr><td>s.31R</td><td>General provisions as to employee’s right to long service payment／僱員領取長期服務金權利的一般條文</td><td>Entry conditions for long service payment: 5 years plus no severance liability, or s.10(aa) health grounds, or age 65</td></tr>

<tr><td>s.31RA</td><td>Death of employee／僱員的死亡</td><td>Payment to spouse, issue, parent or personal representative</td></tr>

<tr><td>s.31V</td><td>Amount of long service payment／長期服務金的款額</td><td>The same formula and the same ceilings as s.31G</td></tr>

<tr><td>s.31ZE</td><td>Written particulars of long service payment／長期服務金詳情說明書</td><td>Written statement showing how the amount was calculated</td></tr>

<tr><td>s.31ZEA</td><td>Application of Parts VA and VB to certain employees／第VA及VB部對某些僱員的適用範圍</td><td>Specified employees are calculated with the Schedule 11 modifications (pre- and post-transition segments)</td></tr>

<tr><td>Seventh Schedule</td><td>[ss. 31G &amp; 31V]</td><td>Table A: maximum amount, $390,000 where the relevant date is on or after 1 October 2003</td></tr>

<tr><td>s.70</td><td>Contracting out／訂立本條例不適用的合約條款</td><td>Terms extinguishing or reducing Ordinance rights are void</td></tr>

</tbody>

</table>

How the process actually works

The Ordinance does not leave you with "the employer refused, so that is that". It gives you a route with deadlines — and the deadlines run fast, and are written differently for the two payments.

Step 1: within 3 months you must ask (severance payment only)

Section 31N is headed "Claims for severance payments". It reads in full:

Chinese text (第31N條「遣散費的申索」)：

Note how it is drafted: not "a late claim will not be pursued" but "shall not be entitled". Any one of the three routes is enough, but if none of them happened, the right itself does not arise. The section also expressly allows the Commissioner to agree an extended period.

The "relevant date" is defined in section 2 and depends on how the employment ended. There are seven paragraphs, and they are these: (a) where notice is given under s.6, the date the notice expires; (b) where payment in lieu is made under s.7, the date up to which those wages are calculated; (c) "where the employee terminates his contract of employment without notice or payment in lieu in accordance with section 10, the date on which termination takes effect"; (d) for a fixed-term contract, the date the term expires; (e) "where a continuous contract of employment specifies an age of retirement and the employee retires at that age, the date of retirement"; (f) where the employee dies, the date of death; (g) where the contract is terminated otherwise than in accordance with the Ordinance, the date of termination.

Paragraph (c) is the s.10(aa) health-grounds route discussed above, and paragraph (e) is the contractual-retirement case — both bear directly on the situations this article covers, so neither can be left out. Lay-off does not run on this definition at all: s.31E(3) supplies its own relevant date — "For the purposes of this Part the relevant date (有關日期) in respect of the right of an employee to a severance payment arising by reason of lay-off means any day on which the period of 4 consecutive weeks or 26 consecutive weeks, as the case may be, referred to in subsection (1) has expired."

This site's reading (Part VA read against Part VB): Part VB contains no general claim-period provision corresponding to s.31N. The only comparable claim period this article found inside Part VB is s.31RA(2), requiring the person entitled — spouse, issue, parent, or (absent those) the personal representative — to serve an application on the employer within 30 days of the day after the death, or within such extended period as the Commissioner allows. (Section 31RA also sets its own payment deadline — see Step 2 below; a claim period and a payment deadline are different things.)

Step 2: the employer has 2 months to pay

Section 31O is headed "Making of severance payment". Section 31O(1) requires the employer to make the severance payment "not later than 2 months from the receipt of a notice in accordance with paragraph (b) of section 31N", unless either party has, before that period expires, made the payment the subject of a claim filed with the Minor Employment Claims Adjudication Board or the Labour Tribunal. Section 31O(3)(a): an employer who without reasonable excuse fails to comply with subsection (1) "shall be guilty of an offence and shall be liable on conviction to a fine at level 5".

Failing to pay a severance payment is therefore not merely something you can sue over — it can itself be an offence. Note that criminal backing is the normal pattern in the Employment Ordinance rather than an exception: long service payment is likewise protected, and the penalty for wilfully and without reasonable excuse failing to pay sums due under ss.23, 24 or 25 on termination (s.63C — a fine of $350,000 and 3 years' imprisonment) is far heavier.

Long service payment does not run on this 2-month clock. Its deadline is much shorter. Section 25(1) ("Payment on termination") provides: "Subject to section 31O, where a contract of employment is terminated any sum due to the employee shall be paid to him as soon as is practicable and in any case not later than 7 days after the day of termination." Section 25(2) then lists what that sum comprises, and paragraph (ba) is "any long service payment due to the employee". So severance payment runs on the 2 months in s.31O, while long service payment runs on the 7 days in s.25 — materially shorter, and materially better for the employee. This is also why s.63C reaches these sums at all: that section bites on amounts due and unpaid under ss.23, 24 and 25.

But s.25 carries two qualifications, and it is not an unconditional 7 days.

• First, the next subsection lets the employer deduct. Section 25(3): "In addition to any deduction which may be made under section 32, and subject to any order made by a court, an employer may deduct from any sum payable under subsection (1) to an employee who terminates his employment otherwise than under section 6, 7 or 10 such sum as the employee would have been liable to pay if he had terminated his employment under section 7." So an employee who walks out other than under ss.6, 7 or 10 can have the equivalent of a payment in lieu taken out of the subsection (1) sum — which, by (2)(ba), includes the long service payment.
• Second, s.25 reaches a sum "due to the employee", so it does not cover death in service. Where the employee has died, s.31RA(1) makes the payment to the spouse, issue, parent or personal representative, not to the employee, and the deadline is set by s.31RA(5) itself: "Where a person is entitled to a long service payment under this section, the employer shall pay such person the long service payment to which he is entitled— (a) where the person so entitled is a spouse, not later than 7 days after the receipt of the application; or (b) where the person so entitled is not a spouse, not earlier than the day (hereinafter in this paragraph called the said day) next following the date of expiration of the period which, as regards the particular case, was the period during which an application under subsection (2)(a) could be served but not later than 7 days after the said day." Section 31RA(6) adds the criminal backing: "An employer who without reasonable excuse fails to pay a long service payment on or before the latest date for payment as required by subsection (5) shall be guilty of an offence and shall be liable on conviction to a fine at level 5."

How the money must be paid also has its own provision on each side. For severance payment it is s.31O(2), with the offence in s.31O(3)(b). For long service payment it is s.31ZD ("Making of long service payment"), subsection (1): "A long service payment shall be made in legal tender except that, where the person entitled to the payment so consents, payment may be made— (a) by cheque, money order or postal order; (b) into an account in his name with any bank within the meaning of section 2 of the Banking Ordinance (Cap. 155); or (c) to his duly appointed agent." Section 31ZD(2) makes failure to comply, without reasonable excuse, an offence carrying a fine at level 3.

Step 3: the employer must write down how the figure was reached

Section 31P ("Written particulars of severance payment"), subsection (1): on making any severance payment, otherwise than in pursuance of a Board or Tribunal decision specifying the amount, the employer "shall give to the employee a written statement indicating how the amount of the payment has been calculated". Section 31ZE ("Written particulars of long service payment"), subsection (1), imposes the corresponding requirement for long service payment, but it is not worded identically: "On making any long service payment, the employer shall give to the person entitled to the payment a written statement indicating how the amount of the payment has been calculated." It carries none of s.31P(1)'s "otherwise than in pursuance of a decision of the Minor Employment Claims Adjudication Board or Labour Tribunal which specifies the amount" carve-out. The long service payment statement is therefore owed unconditionally, even where a Board or Tribunal fixed the amount.

Failing to give the statement is itself an offence, without waiting for any notice. Section 31P(2)(a): "An employer who without reasonable excuse fails to comply with subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine at level 3." Section 31ZE(2)(a) does the same for long service payment: "An employer who without reasonable excuse fails to comply with subsection (1) shall be guilty of an offence and shall be liable to a fine at level 3." Both bite on the breach of subsection (1) itself, independently of the notice route below.

Both sections then add a follow-up mechanism: if the employer does not provide the statement, the employee (or the person entitled to the long service payment) may require it by written notice, specifying a period of not less than 1 week beginning with the day the notice was given. Failure to comply with that notice without reasonable excuse carries a level 3 fine on a first conviction and a level 5 fine on a second or subsequent one. Knowingly or recklessly including something false in a material particular in the statement carries a level 5 fine.

Why this step is worth using: to check the arithmetic you need to know which month's wages the employer used, how many years it counted, and what it deducted. The s.31P / s.31ZE statement is that working, and the Ordinance requires the employer to hand it over unprompted.

Relevant Procedures

An employer should pay severance payment or long service payment as required by the Ordinance when the employment ends. Where an employer fails or refuses to pay, the employee has several avenues:

• Lodging a complaint with the Labour Department, which may conciliate between the parties through its Labour Relations Division
• Where conciliation fails, bringing a claim in the Labour Tribunal or the Minor Employment Claims Adjudication Board. Paragraph 1(b) of the Schedule to the Labour Tribunal Ordinance (Cap. 25) gives the Tribunal jurisdiction over "the failure of a person to comply with the provisions of the Employment Ordinance (Cap. 57), the Minimum Wage Ordinance (Cap. 608) or the Apprenticeship Ordinance (Cap. 47), other than a claim specified in the Schedule to the Minor Employment Claims Adjudication Board Ordinance (Cap. 453)." Paragraph 4 covers severance payment separately: "Any question as to—(a) the right of an employee to a severance payment under Part VA of the Employment Ordinance (Cap. 57); or (b) the amount of such payment, other than a claim specified in the Schedule to the Minor Employment Claims Adjudication Board Ordinance (Cap. 453)." Both paragraphs carry that carve-out, so the Tribunal's jurisdiction is not exclusive: a claim specified in the Schedule to the Minor Employment Claims Adjudication Board Ordinance (Cap. 453) belongs to the Board, and s.5(2) of Cap. 453 provides that "Save as is provided in this Ordinance, no claim within the jurisdiction of the Board shall be actionable in any court." The s.31N(c)(i) route quoted above names that Board for exactly this reason.

Which claims are the Board's? There is an express threshold. The current limb of the Schedule to Cap. 453 is paragraph (c): a claim whose right of action arose on or after 17 September 2021, "made by not more than 10 claimants for a sum of money not exceeding $15,000 per claimant", arising (among other things) from a failure to comply with the Employment Ordinance (Cap. 57) or from any question as to the right to a Part VA severance payment or its amount. A claim outside those two thresholds is not in that Schedule, and so is not touched by the carve-out. Note also the two exclusions in Cap. 453 s.5(3): "The Board shall not have jurisdiction to inquire into, hear or determine— (a) any claim for a sum of money, or otherwise in respect of a cause of action, founded in tort whether arising from a breach of contract or a breach of duty imposed by a rule of common law or by any enactment; and (b) any claim submitted to proof in a bankruptcy or winding up under the Bankruptcy Ordinance (Cap. 6) or the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32)." Limb (b) matters to the next bullet: once the debt is submitted to proof in the employer's bankruptcy or winding up, it is not the Board's.

Two more paragraphs of the Cap. 25 Schedule have to be read with paragraphs 1 and 4. Paragraph 3 removes tort from the Tribunal: "Notwithstanding paragraphs 1 and 2, the tribunal shall not have jurisdiction to hear and determine a claim for a sum of money (whether liquidated or unliquidated), or otherwise in respect of a cause of action, founded in tort whether arising from a breach of contract or a breach of a duty imposed by a rule of common law or by any enactment." Paragraph 6 then qualifies the "not exclusive" conclusion drawn above: "Notwithstanding paragraphs 1, 2, 4 and 5, the tribunal shall have jurisdiction to hear and determine a claim transferred to the tribunal under section 8(3) of the Minor Employment Claims Adjudication Board Ordinance (Cap. 453) or section 7 or 10 of the Small Claims Tribunal Ordinance (Cap. 338)." So a Schedule claim starts with the Board, but once transferred under s.8(3) the Tribunal has jurisdiction over it.

Note that the Board has its own limitation period: Cap. 453 s.7(1) provides that "Subject to subsection (2), the Board shall not have jurisdiction to inquire into, hear or determine a claim or part of a claim if the right of action arose more than 12 months before the date on which the claim is filed, unless the parties to the claim, by a memorandum signed by them and filed with the registrar, have agreed that the Board shall have jurisdiction."

But those 12 months bar the forum, not the claim — s.7 has two more subsections. Section 7(2): "When the right of action in a claim arose partly before and partly after the 12-month period of limitation prescribed by subsection (1), the Board may, with the consent of the parties, sever that part of the claim over which it has no jurisdiction and inquire into, hear and determine the part over which it has jurisdiction." And s.7(3) is the one that matters most to a late claimant: "Nothing in this section shall preclude the institution of proceedings in the Small Claims Tribunal, the District Court or the Court of First Instance in respect of a claim which, by reason of the expiration of the limitation period prescribed by subsection (1), is not actionable in accordance with this Ordinance." What is lost after 12 months is that forum, not the right of action itself. The opening words of s.7(1), "Subject to subsection (2)", refer to that severance power in subsection (2).

• Where the employer has gone into liquidation or is insolvent, applying for an ex gratia payment out of the Protection of Wages on Insolvency Fund — but the ex gratia scheme covers severance payment only, not long service payment. The application goes to the Commissioner, not to the Board: Cap. 380 s.15(2) provides that "An application under subsection (1) (in this Part called an application (申請)) shall be made to the Commissioner in writing in a form approved by him", s.16 leaves the decision and the payment with the Commissioner, and the Board's role is to administer the Fund (s.4(1)(a)) and to conduct a review under s.17 — s.17(1) lets an aggrieved applicant ask the Commissioner in writing for reasons and then ask him to refer the application to the Board. Section 15(1) of the Protection of Wages on Insolvency Ordinance (Cap. 380) sets out what may be applied for: "an applicant to whom—(a) wages are due and unpaid; (b) wages in lieu of notice are due and unpaid; (c) the liability to be paid a severance payment has arisen and the severance payment is unpaid, whether or not the severance payment is then due; (d) pay for untaken statutory holidays is due and unpaid; or (e) pay for untaken annual leave is due and unpaid, may apply for an ex gratia payment from the Fund in respect of the wages, wages in lieu of notice, the severance payment, the pay for untaken statutory holidays or the pay for untaken annual leave, as the case may be, or all or any of them." Long service payment is not on that list.

Being able to apply is not the same as recovering in full: s.16(2)(f) imposes both a cap and a hard deadline on the severance limb, and both cut against the applicant. Section 16(2) restricts the Commissioner's power to pay under subsection (1), and paragraph (f) provides, for a severance payment: (i) no payment "of an amount exceeding the aggregate of $200,000 and half of that part of the applicant’s entitlement to severance payment in excess of $200,000"; and (ii) no payment where "the liability for payment of which arose more than 6 months prior to the date of application". So anything above $200,000 is met at half rate, and an application made more than 6 months after the liability arose cannot be paid at all. (Section 16(1B) separately allows the Commissioner to defer consideration where the severance payment is not yet due at the date of application.)

Because the calculation involves several ordinance-level details and depends on individual wage structure, employees often under- or over-estimate their entitlement. The Labour Tribunal will reach its own determination applying the Ordinance if the matter reaches it.

Related guides: see also unreasonable vs unlawful dismissal , the Labour Tribunal , and employees' compensation , or browse our Hong Kong employment law overview .

Severance and long service payment disputes commonly turn on whether the stated redundancy was genuine (for example, whether the position was actually eliminated), which pay items counted as statutory "wages" in the calculation (commissions and allowances are recurring battlegrounds), and whether the employer had made a timely written offer of renewal that the employee refused without good reason.

Severance Payment vs Long Service Payment

Severance payment is generally triggered by redundancy. Where an employer dismisses employees because of a business closure, workforce reduction, or because a fixed-term contract is not renewed in circumstances amounting to redundancy, qualifying employees may be entitled to severance payment — provided they have completed the Employment Ordinance's minimum period of continuous employment.

Long service payment is directed at employees who have given long service to the same employer and leave the job in circumstances that do not amount to redundancy. Where an employee has completed a longer period of continuous employment set by the Ordinance, and the employment ends in one of the ways Part VB recognises — dismissal without severance liability, resignation on health grounds under s.10(aa), death in service, or termination by the employee at 65 or over under s.31R(1)(b) — the employee may qualify for long service payment.

Three points of accuracy about that list.

First, the exclusion for misconduct is not framed as "serious misconduct": s.31S(1) provides that "An employee shall not be entitled to a long service payment by reason of dismissal where his employer, being so entitled by reason of the employee’s conduct, terminates his contract of employment without notice or payment in lieu in accordance with section 9." — and s.9 is wider than the phrase "serious misconduct" suggests.

Second, the two fixed-term exclusions in s.31S — subsections (3) and (4) — each open "Subject to subsection (6)", and subsection (6) is a restoring provision: "Without affecting the application of section 31R(1)(a)(ii) and (b), where an employee employed under a contract for a fixed term, on or before the day on which the contract for a fixed term expires, refuses an offer of any of the descriptions mentioned in subsection (3) or (4)— (a) the employee is entitled to terminate that contract under section 31R(1)(a)(ii) and that expiration shall be regarded as termination of contract by the employee under section 31R(1)(a)(ii) for the purposes of the application of this Part; or (b) the employee is entitled to terminate that contract under section 31R(1)(b) and that expiration shall be regarded as termination of contract by the employee under section 31R(1)(b) for the purposes of the application of this Part." So what subsections (3) and (4) appear to take away, subsection (6) hands back where s.31R(1)(a)(ii) or (b) is satisfied.

Third, employment law sets no compulsory retirement age. What the Ordinance has is the age-65 limb in s.31R(1)(b) — an entitlement threshold, not a requirement to retire — and the contractual case, which paragraph (e) of the s.2 "relevant date" definition captures as "where a continuous contract of employment specifies an age of retirement and the employee retires at that age, the date of retirement". As for the Employment Ordinance (Cap. 57) and the Mandatory Provident Fund Schemes Ordinance (Cap. 485): Cap. 57 contains no compulsory retirement age, while Cap. 485 s.2(1) does define, for its own purposes, retirement age (退休年齡), in relation to an employee or self-employed person, means 65 years of age or, if the regulations prescribe an earlier age, that earlier age — an age for drawing MPF benefits, not an age at which employment must end. Ordinances governing particular public bodies may make their own provision.

And one frequently mis-cited provision. Section 31ZF is not a neutral statement of what the Ordinance says about contractual retirement ages. It is headed "Re-employment after retirement at a specified age", and it operates like this: where a continuous contract specifies an age of retirement, the employee retires at that age, has 5 years of service at the relevant date, the long service payment that would have been due is wholly available to be reduced under s.31Y, and the employee is re-employed immediately afterwards by the same person, then "for the purposes of Parts VA and VB of this Ordinance, the employment after retirement shall be regarded as a fresh employment". The effect is that the service clock restarts — which is adverse to the employee, not reassuring. (Sections 31ZF(1)(c) and (2) are repealed empty shells in the current text; that is not an omission.)

A key principle: a single termination cannot give rise to both severance payment and long service payment. The Ordinance treats severance as the primary entitlement. An employee eligible for severance payment does not also receive long service payment, and vice versa.

Background: two statutory payments and the 2025 change

On termination of employment in Hong Kong, an employee may be entitled to one of two statutory payments: severance payment or long service payment. Both are provided for under the Employment Ordinance. While the triggers for each differ, the calculation mechanics are similar — and importantly, no single termination gives rise to both payments. An eligible employee receives one or the other, never both.

In 2025, a significant structural change took effect: the abolition of the MPF offsetting arrangement. This reform materially affects how severance and long service payment liabilities are funded and calculated on the employer's side, and in some cases how much the employee actually receives. This article describes the two payments in general terms, the differences between them, and the principal effects of the 2025 reform.

Actual amounts depend on wage structure, length of service, the reason for termination, and how service periods fall on either side of the 2025 transition date — all of which should be assessed in specific cases by a qualified Hong Kong solicitor or through the Labour Department.

The Calculation Framework (Conceptual Level)

The Ordinance sets a similar calculation framework for both payments, based on the employee's last monthly wages and length of service. "Wages" are defined by the Ordinance and may include basic salary, commissions, attendance allowances, and other elements — subject to a statutory cap. On length of service the provision says only "pro rata as respects an incomplete year"; it does not specify months, days or any other unit of apportionment.

Because the Ordinance prescribes several statutory caps and formula details, employees seeking to estimate their entitlement in a specific case can refer to the Labour Department's published materials or consult a qualified Hong Kong solicitor.

On the total amount, the Employment Ordinance currently fixes a statutory ceiling of HK$390,000 on the maximum severance payment or long service payment. Regardless of an employee's monthly wage or length of service, the amount generated by the statutory formula cannot exceed this cap.

An important point: the caps are set in the statute at both the wage-input level and the total-payment level. For higher-earning employees, the statutory severance or long service payment may be significantly lower than the figure that would result if the employer simply applied the formula to actual earnings without the caps.

How the Ordinance works out the figure (the statutory formula)

The previous section gives the concepts; this one gives the words. Both payments use the same formula, the same wage cap and the same ceiling table — the only real difference is the section number.

Severance payment: section 31G

Section 31G is headed "Amount of severance payment". Section 31G(1):

Chinese text (第31G條「遣散費的款額」)：

This site's observation (how the two texts are arranged): the two texts state the same formula but lay it out differently. The English puts "for every year (and pro rata as respects an incomplete year) of employment under a continuous contract by his employer" after (a) and (b), as a tail shared by both limbs; the Chinese puts 「根據連續性合約為僱主工作每滿一年(不足一年者按比例計算)」 inside each of (a) and (b). The content matches; only the arrangement differs.

Long service payment: section 31V

Section 31V is headed "Amount of long service payment". Section 31V(1):

Chinese text (第31V條「長期服務金的款額」)：

Put plainly: apart from the words "severance payment" / "long service payment" and the opening reference to which provision the payment is made under, the calculating parts of ss.31G(1) and 31V(1) are word for word the same.

Employees not paid monthly

The statute picks them up with "in any other case" — daily, piece and hourly rated employees. For every year of service they get "18 days’ wages based on any 18 days chosen by the employee and occurring during his last 30 normal working days", again compared with "two-thirds of $22,500" and capped at the lower figure. The 18 days are the employee's choice, not the employer's: the words are "chosen by the employee".

The option of a 12-month average

Section 31G(2) (and s.31V(1A) for long service payment) lets the employee elect to use the wages "averaged over the period of 12 months immediately preceding the relevant date": for a monthly rated employee, two-thirds of the average monthly wages over that period, again against "two-thirds of $22,500, whichever is less"; in any other case, "18 times the employee’s average daily wages during such a period". Section 31G(2A) (and s.31V(1B)) adds a limit on that route: "For calculating the average daily wages under subsection (2)(b), the total wages for the period of 12 months must not exceed 12 times $22,500."

That election matters most to employees whose commissions or attendance bonuses move from month to month. If the last full month happened to be a slow one, the 12-month average can produce a materially different figure.

Overtime pay is a separate case, and fluctuating overtime is precisely not a reason to elect. The section 2 definition of "wages" opens "subject to subsections (2) and (3)", and section 2(2) then deals with overtime for these two payments specifically:

Paragraphs (c) and (ca) of that list are severance payment and long service payment. So overtime pay counts only conditionally: either it is of a constant character, or its monthly average over those 12 months is at least 20% of average monthly wages over the same period. "Merely fluctuating" does not by itself mean neither condition is met — fluctuation only defeats the "constant character" limb. If the 12-month monthly average still reaches 20% or more of average monthly wages over the same period, fluctuating overtime is still counted in these two payments. What is genuinely excluded is overtime that both fluctuates and falls short of the 20% threshold, so fluctuation alone is not a ground for choosing the 12-month route. What the election actually moves are commissions, attendance bonuses and other month-to-month items.

The ceiling: Seventh Schedule, Table A

The Seventh Schedule is headed "[ss. 31G & 31V]". Table A has two columns, "Relevant date" and "Maximum amount". The last row reads:

Chinese text, 附表7[第31G及31V條]，表A，欄名為「有關日期」及「最高款額」，末行為：

So the HK$390,000 figure used above comes straight from Table A of the Seventh Schedule; it is not an administrative guideline. The provision also makes the ceiling depend on which period the "relevant date" falls into — the rows above are the lower ceilings that stepped up year by year between 1995 and 2003 ($210,000 rising to $370,000), and they still govern employments that ended in those earlier windows. The topmost row is not an amount at all: where the relevant date falls before the commencement of the Employment (Amendment) Ordinance 1995, column 2 reads "The total amount of wages earned by the employee during the period of 12 months immediately preceding the relevant date, or $180,000, whichever is less" — a calculation, not a fixed ceiling.

Working the numbers, using only the statute's own figures

The Ordinance states just two money figures here — $22,500 and $390,000. Put those beside "two-thirds", "24 months" and "5 years" and the shape of the whole scheme falls out. Every step below uses only figures stated in the provisions quoted above.

First, though: $22,500 is not a fixed number. Section 67A is headed "Amendment of limitation imposed on severance payment and long service payment", and reads in full:

So $22,500 can be changed by a Legislative Council resolution in the Gazette, without amending the Ordinance. Every figure derived in Steps 1 to 7 below — $15,000, $30,000, $75,000, 26 years, $397,500, $7,500, $270,000 — is derived from $22,500, so all of them move the day such a resolution is published. As for $390,000: Cap. 57 confers no power on anyone to amend the Seventh Schedule by notice or resolution (the amendment powers it does confer reach, among others, Schedule 1A, Part II of the Second Schedule, the Ninth Schedule and Schedule 12; s.32NA(3) adds that "The Commissioner may, by notice published in the Gazette, amend subsection (1)(b)(i) by substituting another amount for the amount specified in that subsection." — but that amount sits in the Part VIA employment-protection provisions, not in the Seventh Schedule. On any count, none of them reaches the Seventh Schedule), so that ceiling moves only when an amending Ordinance moves it.

• Step 1: what one year is worth at most. The text says "two-thirds of $22,500". $22,500 × 2 ÷ 3 = $15,000. So for a monthly rated employee, however high the salary, one completed year of service can generate at most $15,000.
• Step 2: where extra salary stops helping. The formula takes the lesser of two-thirds of the last full month's wages and two-thirds of $22,500. The two are equal when the last full month's wages are exactly $22,500. Below that, a pay rise raises the payment; at or above it, a pay rise does nothing for this entitlement at all.
• Step 3: the bare-minimum cases. Severance payment needs 24 months = 2 years: at the wage cap, 2 × $15,000 = $30,000. Long service payment needs 5 years: 5 × $15,000 = $75,000.
• Step 4: when does $390,000 bite? $390,000 ÷ $15,000 = 26. So for an employee at or above the $22,500 wage cap, exactly 26 years of service uses up the Seventh Schedule maximum.
• Step 5: what happens past 26 years. The text says "pro rata as respects an incomplete year". The figure of 26 years and 6 months below is used purely as an illustration and asserts no unit of apportionment — the Ordinance specifies none — since half a year is half a year on any pro-rata basis. On the formula that computes as 26.5 × $15,000 = $397,500; but the same subsection says the payment must in all cases not exceed the Table A amount, so the sum actually payable is $390,000 and $397,500 − $390,000 = $7,500 disappears at the ceiling. Every further year adds $15,000 to the formula and nothing to the cheque.
• Step 6: employees not paid monthly hit the same $15,000. Limb (b) is measured against the same "two-thirds of $22,500", so the per-year ceiling is $15,000 there too. The method changes; the ceiling does not.
• Step 7: the cap on the averaging route. Sections 31G(2A) / 31V(1B) say the 12-month total "must not exceed 12 times $22,500": $22,500 × 12 = $270,000 is the most that 12-month total can be taken as, for the purpose of computing average daily wages.

This site's reading (ss.31G(1) and 31V(1) read with the Seventh Schedule): the two ceilings pull in different directions. The $22,500 one works from the inside, capping what each year can be worth and pushing high earners and middle earners towards the same annual figure. The $390,000 one works from the outside, capping the total so that, past 26 years, further service adds nothing. The formula therefore compresses both "high pay, short service" and "moderate pay, long service"; the only people who reach the ceiling are those who can earn the full $15,000 a year — monthly-rated employees on at least $22,500 a month, or non-monthly-rated employees whose 18 days' wages reach two-thirds of $22,500 — who also served 26 years or more.

(The arithmetic above is worked from the amounts stated in the provisions quoted, to show how they operate. It is not an assessment of any individual reader's case. It also leaves out: the reductions available against severance payment under s.31I; the corresponding reductions against long service payment under s.31Y; the reductions running the other way under ss.31IA and 31YAA — each of which uses its own payment name: s.31IA(2) (severance) provides that "Subsection (1A) has effect even though the years of service for which the severance payment was made exceed those to which the gratuity or benefit is attributable.", and s.31YAA(2) (long service payment) that "Subsection (1A) has effect even though the years of service for which the long service payment was made exceed those to which the gratuity or benefit is attributable."; ss.31YA and 31YB on death in service; and the two-segment modifications that Schedule 11 applies to specified employees.)

The 2025 Abolition of MPF Offsetting

Historically, Hong Kong's Mandatory Provident Fund system permitted an employer to use the accrued benefits derived from its mandatory MPF contributions to offset amounts it owed the employee as severance or long service payment. As a practical matter, this meant the employer's actual cash outlay on termination could be substantially reduced.

In 2025, this offsetting arrangement was legally abolished. For severance and long service payment referable to service on or after 1 May 2025 (the "transition date"), the employer's mandatory MPF contributions can no longer be used to offset the employee's statutory entitlement. From that service point onward, the employee's protection under the Ordinance is no longer reduced by the MPF mechanism.

Several important qualifications apply:

• The reform is not retrospective. Service completed before the 2025 transition date continues to be subject to the old offsetting rules. Only service accrued from the transition date onward falls under the new rules.
• Voluntary contributions and service gratuities are unaffected. Employers may continue to use accrued benefits from voluntary MPF contributions — contributions above the statutory minimum — and contractual gratuities based on length of service, to offset severance or long service payment.
• A government subsidy scheme applies. To share the financial impact on employers, the Hong Kong Government has introduced a subsidy scheme — the Subsidy Scheme for the Abolition of MPF Offsetting Arrangement — which provides a multi-year cost-sharing arrangement for employers on the post-transition portion of severance and long service payments. Subsidy levels, caps, the span of the scheme and the application process are set out on the scheme's dedicated website.
• Pre-existing employees fall under transitional rules. Employees employed before the 2025 transition date whose employment ends after it will see their statutory payment calculated in two segments — pre-transition and post-transition — with different offsetting rules applying to each.

Abolition of offsetting: which parts are in the Ordinance, and which are transitional or administrative

The four qualifications above are not all the same kind of thing. Three of them have express footing in the Employment Ordinance; one is a government scheme sitting outside it. Knowing which is which tells you what you can put to an employer as law.

1. What is in the Ordinance

• The "transition date" is a defined term in section 2. The English text: "transition date (轉制日) means the date on which the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (4 of 2022) comes into operation*". The Chinese text: 「轉制日 (transition date)指《2022年僱傭及退休計劃法例(抵銷安排)(修訂)條例》(2022年第4號)開始實施＊的日期」. The definition itself carries no date; the date appears in the e-Legislation editorial note — "Operation date: 1 May 2025." in English, 「實施日期：2025年5月1日。」 in Chinese. This site's reading: so "1 May 2025" is fixed by the commencement arrangements rather than written into the body of the section.
• The "two segments" are a statutory modification in Schedule 11, not a practice. Section 31ZEA is headed "Application of Parts VA and VB to certain employees". Subsection (2) sets three conditions, all of which must be met before Parts VA and VB "have effect in relation to such an employee with the modifications set out in Schedule 11": (a) the employment under the continuous contract began before the transition date; (b) the relevant date for termination falls on or after it; and (c) "either or both of the following conditions are met in relation to the employee—(i) contributions are payable by the employer to an occupational retirement scheme because of the operation of that contract; (ii) contributions are payable by the employer to a mandatory provident fund scheme under the Mandatory Provident Fund Schemes Ordinance (Cap. 485)." Condition (c) is easily missed — an employer with no contribution liability leaves the employee outside the definition even where (a) and (b) are satisfied. Schedule 11, Part 2 ("Modifications to Part VA"), section 2 then rewrites s.31G so that the severance payment is the sum of an amount for the employee's "pre-transition employment period" and an amount for the "post-transition employment period", each of them separately subject to "two-thirds of $22,500, whichever is less"; the rewritten subsections (2) and (3) keep the combined total within the Table A figure (which they call the "applicable ceiling") and set out which segment is cut back first if the total would exceed it. Part 3 of Schedule 11 does the same for long service payment.
• "Voluntary contributions still offset" is the structure of section 31I. Section 31I ("Severance payment to be reduced by amount of gratuities and benefits in certain cases"), subsection (1)(b), lists three categories: gratuities "based on length of service", "employer-funded (specified) ORS benefits", and "employer-funded (voluntary) MPFS benefits". Subsection (2) then reduces the severance payment by the aggregate of those "to the extent that it relates to the employee’s years of service for which the severance payment is payable". Section 31Y does the corresponding work for long service payment. This site's reading (of the unmodified s.31I only): what is absent from that list is any employer-funded mandatory MPF benefit. At the level of the unmodified text, abolition of offsetting was done by taking mandatory contributions off the list of things that reduce the payment, not by adding a separate prohibition.

But s.31I closes with a Note that must be read, because it reverses the scope of that conclusion. The Note reads: "See also section 31ZEA, and section 3 of Schedule 11." Section 3 of Schedule 11 is headed "Sections 31I and 31IA modified" — it rewrites both sections, not s.31I alone — and it does so in full for specified employees. The rewritten s.31I(4) lists five "qualifying items", and paragraph (e) is: "every one of the employer-funded MPFS benefits referred to in subsection (1)(b)(iii) that are employer-funded (mandatory) MPFS benefits". The rewritten s.31I(2) then provides, in full:

Those closing limbs cannot be dropped: (a) confines the reduction to the matching years of service, and (b) stops the same gratuity or benefit being counted once against each of the two portions. Subsection (3) allows only items (a) to (c) against the post-transition portion, with the mirror-image condition that the item "has not been used for a reduction under subsection (2)".

This site's reading (s.31I read with section 3 of Schedule 11): so for a specified employee hired before the transition date and leaving after it — the very people the next section is about — employer-funded mandatory MPF benefits remain a reduction item against the pre-transition portion. Abolition of offsetting bites on the post-transition portion. Section 31Y and section 5 of Schedule 11 do the same for long service payment.

2. What is outside the Ordinance

The subsidy scheme is not part of the Employment Ordinance. The "Subsidy Scheme for the Abolition of MPF Offsetting Arrangement" described above is a government arrangement addressing the financial impact on employers. Its subsidy levels, caps, span and application process are not found in Cap. 57. Its detailed parameters are as the scheme itself publishes.

And keep the beneficiaries apart: the subsidy scheme is about how the employer shares the cost. The Ordinance is about whether the employee is entitled, and to how much. Whether or not an employer obtains a subsidy changes neither the figure produced by ss.31G / 31V nor the payment deadline in s.31O.