What Severance Pay Rules Must Employers Follow in Hong Kong?

Which Employees Qualify for Severance Pay?

• Employees employed under a continuous contract (at least 24 months) who are dismissed by reason of redundancy.
• Employees whose fixed-term contracts are not renewed due to redundancy after at least 24 months of continuous service.
• Employees laid off as defined under the Employment Ordinance, with sufficient reduction in work or wages and at least 24 months of service.
• Employees who are not dismissed for serious misconduct or other grounds that disqualify them from statutory severance.
• Employees who have not already received a statutory long service payment for the same period of service.
• Employees who make a valid claim for severance within the statutory time limits after termination or layoff.

What Are the Legal Timelines for Paying Severance?

In Hong Kong, severance pay must generally be settled within seven days after the date of termination or the employee’s last day of employment, in line with the Employment Ordinance rules on final wages. Your company should calculate the statutory amount as soon as notice is given or payment in lieu is made, so there is no delay on the final day. If you are offsetting severance with accrued MPF or ORSO benefits, you should confirm the offset amount and keep clear records for the employee. Always provide a written breakdown of how you calculated severance, including years of service, relevant wages, and any offsets. Paying late or underpaying can expose your business and responsible officers to criminal liability and civil claims.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay statutory severance correctly or on time in Hong Kong, you risk both criminal and civil consequences. The Labour Department can investigate complaints, and the courts can order you to pay outstanding sums plus potential fines. Directors and responsible managers may also face personal liability if non-compliance is willful or persistent. Poor severance practices can further damage your reputation and complicate future terminations.

• Failure to pay statutory severance can lead to criminal prosecution and substantial fines.
• The court can order payment of outstanding severance plus possible interest or surcharges.
• Employees may file claims at the Labour Tribunal, increasing legal and administrative costs.
• Repeated breaches can affect your standing with regulators and future inspections.
• Disputes over severance can escalate into broader wrongful termination or discrimination claims.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (EOR) such as a provider offering services via https://www.playroll.com/employer-of-record does not remove the need to comply with Hong Kong’s severance rules. In most EOR arrangements, the EOR is the legal employer on paper and is responsible for administering statutory severance, but your company typically bears the economic and contractual risk. You should ensure your EOR contract clearly allocates who calculates severance, who funds it, and how disputes are handled. If the EOR mismanages severance, employees may still look to your business as the de facto employer, especially from a reputational perspective. Align your internal policies with the EOR’s processes so every Hong Kong termination follows the Employment Ordinance precisely.

Be 100 Percent Compliant in Offering Severance with Playroll

Managing severance in Hong Kong means getting the details right: confirming redundancy grounds, checking continuous service, applying the statutory formula, and documenting any MPF offsets. With Playroll, your team can rely on local expertise to interpret the Employment Ordinance, calculate the correct statutory entitlement, and align severance with your internal policies and budgets. That reduces the risk of disputes, surprise costs, or missed deadlines when you restructure or close roles.

Playroll’s global platform helps you standardize termination workflows while staying fully compliant in Hong Kong. You get clear breakdowns of severance calculations, automated reminders for payment timelines, and support in coordinating with any Employer of Record setup. That way, your managers can focus on fair, respectful exits while Playroll handles the statutory details and documentation.