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Tuesday, July 18, 2017

Hong Kong Domestic Workers: How to Compute Severance Payment or Long Service Payment

A large number of foreign workers in Hong Kong is working as domestic helpers. Household service workers comprise about 3% of the Hong Kong population alone. This is due to the fact that most of Hong Kong's citizens are working, leaving home and children in the care of household service workers. As of October 2016, newly hired foreign domestic helpers in Hong Kong are entitled to a minimum allowable wage of HK$4,310 per month.  But for any reason, what happens if the employer-employee relationship deteriorates and one or the other decide to end the terms of employment? What benefits can a household service worker get upon termination of employment contract?  Either the employer or the employee may terminate the contract by giving one month’s notice or one month’s payment in lieu of notice to the other party. The following are included in the Termination payment: Unpaid salary Payment in lieu of notice, if any; Payment in lieu of any annual leave not availed; Long service payment/severance payment, where appropriate; and Any other sum under the employment contract, e.g. free return passage, food and traveling allowance, etc.  Severance Payment A foreign domestic helper is entitled to severance payment if he/she: has served 24 months continuously with the same employer prior to the termination and is dismissed/laid off or the contract is not being renewed by reason of redundancy An employee who wishes to claim for severance payment should serve a written notice to his employer within three months after the dismissal/ lay off takes effect. The employer shall make the severance payment to the employee not later than two months from the receipt of such a notice.   Long Service Payment A foreign domestic helper is entitled to long service payment if he/she: has no less than 5 years of service with the same employer prior to the termination, AND is dismissed or the contract is not being renewed by reason other than serious misconduct or redundancy resigns on ground of ill health resigns on ground of old age, 65 years old and above or dies in service Long service payment should be paid to an employee within seven days after the date of termination of employment contract.  How to Calculate your Severance or LSP?  (Monthly wages) x 2/3 x (number of years of service)  Example: Assuming the domestic helper has received HK$4,310 monthly salary (minimum wage) for a total of 6 years after several contract renewals:  Long service = HK$4,310 x (2/3) x 6 years Long service = HK$17,240 – the amount employer should pay to helper.   Service of incomplete year should be calculated on a basis proportional to the number of months served.  A foreign domestic helper is only entitled to either severance payment or long service payment, based on the conditions stated above.   What is the meaning of redundancy? Redundancy means the dismissal is due to the fact that: the employer closes or intends to close his business; the employer has ceased, or intends to cease, the business in the place/branch where the employee was employed; or the type of job the employees do ceases or diminishes or is expected to cease or diminish - even if the business itself is not closing  What is the meaning of lay-off?  An employee shall be taken to be laid off if the total number of days on which no work is provided or no wages is paid exceeds: half of the total number of normal working days in any 4 consecutive weeks; or one-third of the total number of normal working days in any 26 consecutive weeks.  The days of lock-out, rest days, annual leave and statutory holidays should not be counted as normal working days during the above periods.



A large number of foreign workers in Hong Kong is working as domestic helpers. Household service workers comprise about 3% of the Hong Kong population alone. This is due to the fact that most of Hong Kong's citizens are working, leaving home and children in the care of household service workers. As of October 2016, newly hired foreign domestic helpers in Hong Kong are entitled to a minimum allowable wage of HK$4,310 per month.

But for any reason, what happens if the employer-employee relationship deteriorates and one or the other decide to end the terms of employment? What benefits can a household service worker get upon termination of employment contract?

Either the employer or the employee may terminate the contract by giving one month’s notice or one month’s payment in lieu of notice to the other party. The following are included in the Termination payment:
  • Unpaid salary
  • Payment in lieu of notice, if any;
  • Payment in lieu of any annual leave not availed;
  • Long service payment/severance payment, where appropriate; and
  • Any other sum under the employment contract, e.g. free return passage, food and traveling allowance, etc.


Severance Payment
A foreign domestic helper is entitled to severance payment if he/she:


  • has served 24 months continuously with the same employer prior to the termination
  • and is dismissed/laid off or the contract is not being renewed by reason of redundancy
An employee who wishes to claim for severance payment should serve a 
written notice to his employer within three months after the dismissal/ lay off takes effect. The employer shall make the severance payment to the employee not later than two months from the receipt of such a notice.




Long Service Payment
A foreign domestic helper is entitled to long service payment if he/she:
  • has no less than 5 years of service with the same employer prior to the termination, AND
  • is dismissed or the contract is not being renewed by reason other than serious misconduct or redundancy
  • resigns on ground of ill health
  • resigns on ground of old age, 65 years old and above
  • or dies in service
Long service payment should be paid to an employee within seven days after the date of termination of employment contract.


How to Calculate your Severance or LSP?

(Monthly wages) x 2/3 x (number of years of service)

Example:
Assuming the domestic helper has received HK$4,310 monthly salary (minimum wage) for a total of 6 years after several contract renewals:

Long service = HK$4,310 x (2/3) x 6 years
Long service = HK$17,240 – the amount employer should pay to helper.


Service of incomplete year should be calculated on a basis proportional to the number of months served.

A foreign domestic helper is only entitled to either severance payment or long service payment, based on the conditions stated above.


What is the meaning of redundancy?Redundancy means the dismissal is due to the fact that:

  • the employer closes or intends to close his business;
  • the employer has ceased, or intends to cease, the business in the place/branch where the employee was employed; or
  • the type of job the employees do ceases or diminishes or is expected to cease or diminish - even if the business itself is not closing

What is the meaning of lay-off?
An employee shall be taken to be laid off if the total number of days on which no work is provided or no wages is paid exceeds:

  • half of the total number of normal working days in any 4 consecutive weeks; or
  • one-third of the total number of normal working days in any 26 consecutive weeks.


The days of lock-out, rest days, annual leave and statutory holidays should not be counted as normal working days during the above periods.




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