10. When is an employer required to pay a long service payment to an employee?

An employer should pay a long service payment to an employee who has been employed under a continuous contract for not less than 5 years if the employee: -

- is dismissed for a reason other than serious misconduct or redundancy;
- is certified by a registered medical practitioner as permanently unfit for the present job and has resigned on such grounds;
- is aged 65 or above and has resigned on such grounds; or
- dies during service.

A long service payment should be paid to an employee within seven days after the date of termination of the employment contract.

Amount of payment

The following formula applies to the calculation of both severance payments and long service payments:

Monthly-paid employee:	(Last month of wages x 2/3)* X Reckonable years of service
Daily-rated/piece-rated employee	(Any 18 days' wages* chosen by the employee out of the last 30 normal working days) X Reckonable years of service

Service for an incomplete year should be calculated on a pro rata basis.

* The sum should not exceed 2/3 of $22,500. Employees may also elect to use their average wages in the last 12 months for the calculation.

Reckonable Years of Services

For (i) all manual employees and (ii) those non-manual employees whose average monthly wages did not exceed $15,000 for the 12 months preceding 8 June 1990, the years of service should be reckoned in accordance with Table 1. If the years of service exceed the fully reckonable years of service, 50% of such years of service should be reckoned.

For non-manual employees whose average monthly wages exceeded $15,000 for the 12 months preceding 8 June 1990, their years of service can be reckoned up to 1980.

Table 1

Relevant Date of Termination of Employment	Fully Reckonable Years of Service	Maximum Amount
20.1.1995 to 30.9.1995	25	$210,000
1.10.1995 to 30.9.1996	27	$230,000
1.10.1996 to 30.9.1997	29	$250,000
1.10.1997 to 30.9.1998	31	$270,000
1.10.1998 to 30.9.1999	33	$290,000
1.10.1999 to 30.9.2000	35	$310,000
1.10.2000 to 30.9.2001	37	$330,000
1.10.2001 to 30.9.2002	39	$350,000
1.10.2002 to 30.9.2003	41	$370,000
1.10.2003 to 30.9.2004	43	$390,000
1.10.2004 and after	All	$390,000

Example:

Date of termination of employment: 1.10.2002
Monthly wages before termination: $15,000
Years of service: 43 years

Amount of Severance Payment/ Long Service Payment :

$15,000 x 2/3 x [41 +( 43 - 41)/2 )]* = $420,000 (=$370,000)**

*	The reckonable years of service for an employee whose employment terminated on 1.10.2002 are 41 years plus 50% of the years of service exceeding 41 years.
**	As the maximum amount of severance payment/ long service payment for an employee whose employment terminated on 1.10.2002 is $370,000, the subject employee is only entitled to $370,000.

NOTE : An employee will not be simultaneously entitled to both long service payment and severance payment.

For details of the calculation, please visit the Labour Department’s webpage at http://www.labour.gov.hk/eng/public/wcp/EOConciseGuide/chapter10.htm or call the Labour Department’s hotline at 27171771.

Offences and Penalties

Employers who fail to pay long service payment to employees are liable to prosecution and, upon conviction, to a fine of $200,000 and to imprisonment for one year.