A Concise Guide to the Employment Ordinance
Chapter 8: Termination of Contract of Employment
Termination of Employment Contract by Notice or Payment in lieu of Notice
A contract of employment may be terminated by due notice or wages in lieu of notice. In the case of a continuous contract of employment, the length of notice or the amount of wages in lieu of notice required are:
 
Definition
End of year payment means any annual payment (including double pay, 13th month payment, end of year bonus) of a contractual nature. It does not include any payment which is of a gratuitous nature or which is payable at the discretion of the employer.
 
Presumption
For every employment contract made after 27 June 1997, it is presumed that an annual payment or annual bonus is not of a gratuitous nature and is not payable only at the discretion of the employer unless a written term or condition in the contract expresses intention to the contrary.
 
Length of notice
 Wages in lieu of notice
During Probation Period During Probation Period within the first month of probation not required not required
after the first month of probation within the first month of probation as per agreement, but not less than 7 days an amount equivalent to the amount of wages for the notice period
without agreement to the length of notice not less than 7 days notice an amount not less than 7 days' wages
No/after probation period with agreement to the length of notice as per agreement, but not less than 7 days an amount equivalent to the amount of wages for the notice period
without agreement to the length of notice not less than 1 month an amount not less than 1 month's wages
NOTE: The notice period should not include maternity leave or annual leave.
Termination of Employment Contract Without Notice or Wages in lieu of Notice
An employer may summarily dismiss an employee without notice or payment in lieu of notice if the employee, in relation to his employment:
willfully disobeys a lawful and reasonable order;
misconducts himself;
is guilty of fraud or dishonesty; or
is habitually neglectful in his duties.
Taking part by an employee in a strike is not a lawful ground for an employer to terminate the employee's contract of employment without notice or payment in lieu.
NOTE : Summary dismissal is a serious disciplinary action. It only applies to cases where an employee has committed very serious misconduct or fails to improve himself after the employer's repeated warnings.
An employee may terminate his employment contract without notice or payment in lieu of notice if:
he reasonably fears physical danger by violence or disease;
he is subjected to ill-treatment by the employer; or
he has been employed for not less than five years and is certified as being permanently unfit for the type of work he is being engaged (see Chapter 10).
Statutory Restrictions on Termination of Employment Contract
An employer shall not dismiss an employee under the following circumstances:
Maternity Protection An employer shall not dismiss a female employee who has been confirmed pregnant and has served a notice of pregnancy.
Paid Sick Leave An employer shall not dismiss an employee whilst the employee is on paid sick leave.
Giving evidence or information to the authorities An employer shall not dismiss an employee by reason of his giving of evidence or information in any proceedings or inquiry in connection with the enforcement of labour legislation, industrial accidents or breach of work safety regulations.
Trade Union Activities An employer shall not dismiss an employee for trade union membership and activities.
Injury at Work An employer shall not dismiss an injured employee before having entered into an agreement with the employee for employee's compensation or before the issue of a certificate of assessment.
 
Offences and Penalties
An employer dismissing an employee under the above circumstances is liable to prosecution and, upon conviction, to a fine of $100,000.
Termination Payments
The items and amount of payments payable to an employee on termination of employment or expiry of the contract depend on a number of factors such as the length of service, the terms of employment contract and the reason for termination of contract. For quick reference, termination payments usually include :
outstanding wages;
wages in lieu of notice, if any;
payment in lieu of any untaken annual leave, and any pro rata annual leave pay for the current leave year;
any outstanding sum of end of year payment, and pro rata end of year payment for the current payment period;
where appropriate, long service payment or severance payment;
other payments under the employment contract, such as, gratuity, provident fund, etc.

Time of Making Termination Payments
An employer shall pay all the termination payments, except for severance payment, to the employee as soon as practicable and in any case not later than seven days after the date of termination or expiry of contract.
For severance payment, an employer shall make payment not later than two months from the receipt of a notice from an employee claiming for severance payment.
Offences and Penalties
An employer is required to pay interest on the outstanding wages and sum due to the employee if he fails to pay wages to the employee within seven days after the termination or expiry of contract.
An employer who fails to pay termination payments when they become due is liable to prosecution and, upon conviction, to a fine of $200,000 and to imprisonment for one year.