Introduction
Hong Kong's Employment Ordinance (Cap. 57) provides a relatively straightforward framework for employment termination. Key statutory costs include severance payments, long service payments, notice period pay, and payment for accrued leave. While Hong Kong is generally considered an employer-friendly jurisdiction, the costs can be significant for long-tenured employees.
From 2025, following the abolition of the MPF offsetting mechanism for new contracts, employers can no longer use their MPF contributions to offset severance or long service payments -- a significant change that increases the direct cost of termination for employers.
Severance and Long Service Payments
Employees with at least 24 months of continuous employment who are dismissed by reason of redundancy are entitled to severance pay. The formula is two-thirds of the last month's wages multiplied by years of service, subject to a statutory cap of HKD 390,000. Long service payment applies to employees with 5+ years of service terminated for reasons other than redundancy (or who resign due to ill health).
An employee cannot receive both severance and long service payment -- they are mutually exclusive. With the removal of MPF offsetting for post-2025 contracts, the full severance amount must come from the employer's own funds.
Notice Period and Accrued Entitlements
The statutory minimum notice period is one month during a probationary period, and as specified in the employment contract thereafter (minimum 7 days notice). Employers can provide payment in lieu of notice. On termination, employers must also pay out any accrued but unused annual leave, pro-rata end-of-year payment (if applicable), and any outstanding wages.
For employees with 3+ months of continuous service, payment of a proportionate annual bonus (if one is contractually due) is also required. These payments must be made within 7 days of termination.
Common Additional Benefits
Hong Kong employers, particularly multinational companies, commonly offer supplementary benefits during layoffs. Outplacement assistance (HKD 10,000-30,000) is the most common benefit. Extended medical insurance (HKD 5,000-20,000 for 3-12 months) provides continued coverage during the job search. Mental health support through counseling services is increasingly common.
For senior employees, career transition support (HKD 20,000-50,000) and financial counseling are frequently offered. Job placement services and resume preparation workshops round out the typical package for departing employees.
Summary of Termination Costs
For a typical Hong Kong employee with 8 years of service earning HKD 40,000/month: severance pay = (HKD 40,000 x 2/3) x 8 = HKD 213,333. Adding one month's notice (HKD 40,000), accrued annual leave, and common supplementary benefits (HKD 20,000-50,000), total costs can reach HKD 280,000-310,000.
The removal of MPF offsetting from 2025 means employers should reassess their termination cost models. The Msure Layoff Calculator accounts for this legislative change and helps model costs accurately for Hong Kong-based employees.
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Model the full cost of terminating employees in Hong Kong, including severance pay, long service payments, and outplacement services.
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