termination of employment contract

Termination of employment contract is a very delicate exercise and should be done legally and ethically. This is why it is important for employers to do this professionally to avoid legal issues. By doing so, it protects the employer and helps arise the company’s reputation and culture. Either sides should pursue the best practices for resignation or dismissal of a worker for the purpose of avoiding bad consequences. On top of that, it also supports to provide a good transition period for both the employer and the employee.

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    Understanding Legal Obligations

    In Hong Kong, there are actions that employers must observe when they are discharging employees as provided by the EO. This includes the issue of the correct notice period, payment of arrears if any, and of equal important ensuring compliance with the legal requirements of termination.

    Length of Notice for Termination of Employment Contract

    During probation period

    • If the situation happens within first month of probation, both sides do not need to do for notice or payment.
    • But if it happens after the first month of probation, there are 2 situations to consider. where contract makes provision for required length of notice, notice is required as per agreement, but not less than 7 days. For the case where contract does not make provision, the one who wish to terminate gives notice not less than 7 days.

    Continuous contract* With No / After Probation Period

    • where contract makes provision for the required length of notice, the notice is required as per agreement, but not less than 7 days.
    • However, where contract does not make provision for the required length of notice, terminator must provide one month notice.

    Payment in lieu of Notice for Termination of Employment Contract

    Notice Period Expressed in Days or Weeks

     

    Average daily wages earned by an employee in the 12-month period preceding the day when a notice of termination of contract is given*

    		 x

    Number of days in the notice period for which wages would normally be payable to the employee

    Payment in lieu of notice

    		  

    Notice Period Expressed in Months

     

    Average monthly wages earned by an employee in the 12-month period preceding the day when a notice of termination of contract is given**

    		 x

    Number of months specified in the notice period

    Payment in lieu of notice

    		  

    Termination of Employment Contract Payments

    For quick reference, termination payments usually include:

    • outstanding wages;
    • payment 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 based on the
    • length of service, provident fund, etc.

    Time of Payment

    Employer shall pay all the termination payments, except for severance payment,to the employee as soon as practicable. The final payment must not be later than seven days after the date of termination or expiry of contract.

    Termination of Employment Contract without Notice

    Nevertheless, employer can immediately terminate employee’s contract without giving notice or making a payment if employee:

    • Deliberately disobeys a lawful and reasonable order.
    • Engages in misconduct.
    • Commits fraud or acts dishonestly.
    • Regularly neglects their duties.

    Anyhow, an employee participating in a strike is not a valid reason for an employer to terminate the contract.

    Managing Legal Risks for termination of Employment Contract

    Avoiding Wrongful Termination Claims:

    To reduce chances of wrongful termination lawsuits, ensure that the process of termination is documenting appropriately and justifiably.

    Final and Severance Payments:

    There should be compliance with the legal and contractual provisions in relation to all the payments such as severance pay on the final day.

    Post-Termination Obligations:

    Ensure that each party is made aware of the expectations of the other party especially in regards to post termination responsibilities and expectations like the return of company property, restriction from practicing within the company’s region, and restricted from disclosing some information to a third party.

    Suggestion by Experts

    It is important to manage terminations appropriately to avoid any legal complications while being considerate to the affected employees and the working culture. By acting in compliance with the legal and ethical requirements and engaging in proper communication with the employee, it is possible to conduct the terminations effectively and with respect.

    If you need professional HR advice related to employment ordinance in Hong Kong, then you can reach out to FastLane HR. Our services help to conform state of termination processes as well as facilitate the termination processes professionally.

    You can also read the summaries of termination of employment contract on government website.