Make a role redundant in Hong Kong, the right way.
Answer a few questions and the toolkit builds your evidence pack — the eligibility check, the two-thirds severance formula with its caps, notice and the post-2025 no-MPF-offset rule. In the Employment Ordinance it is a severance payment.
Hong Kong — the Employment Ordinance (Cap. 57) severance payment and long service payment, with the MPF-offset abolition from 1 May 2025.
The exact numbers and rules that apply — worked out for your situation and jurisdiction.
The letters, records and decision — drafted for your situation, ready to send. Not a checklist.
Save your plan, tick off each step with dates and evidence — proof you ran a proper process.
AI is reshaping who works — we track it daily
Severance payment, done right — for Hong Kong employers
In Hong Kong, an employee dismissed by reason of redundancy (or laid off) after at least 24 months’ continuous service is entitled to a severance payment under the Employment Ordinance (Cap. 57). It is a defined formula — two-thirds of a month’s wages per year of service, subject to caps — and since 1 May 2025 employers can no longer offset it against their MPF contributions. This free AI toolkit walks you through a valid redundancy for your exact situation and builds the evidence pack.
The severance process, step by step
- Business case — record the genuine reason the role is redundant; redundancy or genuine operational requirements is one of the five valid reasons for dismissal under the EO.
- Check eligibility — a severance payment is due where the employee has at least 24 months’ continuous service and is dismissed by reason of redundancy or laid off.
- Notice — give at least one month’s notice (a continuous contract with no agreed notice term), or pay wages in lieu.
- Calculate the payment — two-thirds of the last month’s wages per reckonable year, with the wage input capped at HK$22,500 a month and the total capped at HK$390,000.
- Pay & record — make the severance payment (no MPF offset for terminations on or after 1 May 2025) and settle final wages and accrued entitlements.
Severance payment
The severance payment is two-thirds of the last month’s wages for each reckonable year of service, for an employee with at least 24 months’ continuous service dismissed by reason of redundancy. The monthly wage input is capped at HK$22,500 (a maximum of HK$15,000 per year), and the total payment is capped at HK$390,000. A daily-rated or piece-rated employee uses 18 chosen working days’ wages per year on the same basis.
| Rate | ⅔ (two-thirds) of the last month’s wages per reckonable year |
| Monthly wage cap | HK$22,500 (maximum HK$15,000 per year) |
| Total cap | HK$390,000 |
| Minimum service | 24 months continuous |
Employment Ordinance ss.31B–31I. Since 1 May 2025 employers can no longer offset the severance payment against employer MPF mandatory contributions.
Notice
| Continuous contract, no agreed notice term | At least 1 month |
| Continuous contract with an agreed term | As agreed, but not less than 7 days |
Employment Ordinance notice provisions. Notice may be paid in lieu.
Long service payment & no collective route
Hong Kong sets no headcount threshold and no authority notification for redundancies — the severance payment is worked out per employee. Note the parallel long service payment: an employee with at least five years’ service dismissed for a reason other than redundancy is entitled to a long service payment on the same two-thirds formula and the same HK$390,000 cap. An employee never receives both — it is severance payment or long service payment, not the two together.
Common questions
How much severance payment is due?
Two-thirds of the last month’s wages for each reckonable year of service, for an employee with at least 24 months’ continuous service dismissed by reason of redundancy. The monthly wage input is capped at HK$22,500 (a maximum of HK$15,000 a year) and the total at HK$390,000.
Can I offset the payment against MPF contributions?
No. The MPF offsetting arrangement was abolished on 1 May 2025 — for terminations on or after that date, employers can no longer offset the severance payment against their MPF mandatory contributions.
What is the difference from long service payment?
Long service payment uses the same two-thirds formula and HK$390,000 cap but applies where an employee with at least five years’ service is dismissed for a reason other than redundancy. An employee receives either severance payment or long service payment, never both.
Is the severance payment taxable?
No. A severance payment or long service payment made strictly in accordance with the Employment Ordinance is not assessable to salaries tax. Any amount paid over the EO entitlement may be a taxable gratuity.
Reference: Employment Ordinance (Cap. 57), ss.31B–31I (severance) & ss.31R–31Y (long service payment); labour.gov.hk; IRD. General information for employers, not legal advice.