Termination payments are paid usually when an employee’s employment contract is terminated.
An employer may need to pay a termination payment, which may 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, provident fund, etc.
Calculations on the precise amount of termination payment can be found on the Labour Department’s website.
When should it be paid
An employer must make any termination payment as soon as possible and may need to consider whether severance or long service payment should be paid too.
An employer is required to pay interest on the outstanding wages due to the employee if he fails to pay wages to the employee within seven days after the termination or expiry of the contract.
An employer who willfully and without reasonable excuse fails to pay termination payments when they become due may be liable to a fine of $350,000 and to imprisonment for three years.
Bibliography
- 1823.gov.hk, “ Upon termination of employment, what are the obligations and entitlements of employer and employee?”: https://www.1823.gov.hk/en/faq/upon-termination-of-employment-what-are-the-obligations-and-entitlements-of-employer-and-employee-ans-01