Severance Pay & Long Service Payment Hong Kong 2027: How to Calculate
Kenji Farre, Director · Oct 7, 2026 · 5 min read
In Hong Kong, severance payment is due if you've worked at least 24 months under a continuous contract and are dismissed because of redundancy or laid off. Long service payment applies after at least 5 years in other situations, such as dismissal (not for serious misconduct), a fixed-term contract not being renewed, retirement at 65 or above, ill health or death. Both use the same formula for monthly-paid staff: two-thirds of your last full month's wages (capped at HK$22,500, so at most HK$15,000) for each year of service, up to a total of HK$390,000. Since 1 May 2025, employers can no longer use their mandatory MPF contributions to offset the part of the payment earned after that date.
This guide explains who qualifies, how to calculate the payment with worked examples, how the MPF offsetting abolition changes the numbers, and how and when to claim. For notice, final pay and unfair dismissal, see our guide to termination rights in Hong Kong.
Severance Payment vs Long Service Payment
| Severance payment (SP) | Long service payment (LSP) | |
|---|---|---|
| Minimum service | 24 months, continuous contract | 5 years, continuous contract |
| Main trigger | Dismissed for redundancy, or laid off | Dismissed for other reasons (not serious misconduct), fixed-term contract not renewed, resignation at 65+, resignation on ill health, death |
| Formula (monthly paid) | Last month's wages × 2/3 × years of service | Same |
| Wage cap | HK$22,500 a month | Same |
| Overall maximum | HK$390,000 | Same |
| Can you get both? | No, it's one or the other | No |
Source: Labour Department Concise Guide to the Employment Ordinance.
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Who Qualifies for Severance Pay in Hong Kong?
You're entitled to severance payment if you've been employed under a continuous contract for at least 24 months and you are:
- dismissed by reason of redundancy (your job is no longer needed), or
- laid off, which means you're given no work and no pay for more than half your normal working days in any four consecutive weeks, or more than one-third of them in any 26 consecutive weeks.
You lose the right to severance if, at least 7 days before the dismissal takes effect, your employer offers in writing to renew your contract or re-engage you on suitable terms and you unreasonably refuse.
Source: Labour Department Concise Guide.
The continuous contract test changed on 18 January 2026. You now qualify if you work at least 17 hours a week, or 68 hours over four weeks, for the same employer.
Who Qualifies for Long Service Payment?
You need at least 5 years under a continuous contract, and one of these situations:
- you're dismissed, but not for serious misconduct and not because of redundancy,
- your fixed-term contract expires and isn't renewed,
- you resign at age 65 or above,
- you resign on grounds of ill health, with a medical certificate of permanent unfitness for your job, or
- you die in employment (the payment goes to your family).
Resigning for a new job before 65 doesn't trigger long service pay. Neither does summary dismissal for serious misconduct.
Source: Labour Department Concise Guide.
How to Calculate Severance or Long Service Payment
For monthly-paid employees:
Last full month's wages × 2/3 × reckonable years of service
- The monthly wage used is capped at HK$22,500, so two-thirds of it can't exceed HK$15,000 per year of service.
- Incomplete years count pro rata.
- The total can't exceed HK$390,000.
For daily-rated or piece-rated employees, the amount per year of service is any 18 days' wages chosen by you from your last 30 normal working days, with the same caps.
| Last full month's wages | Payment per year of service |
|---|---|
| HK$15,000 | HK$10,000 |
| HK$18,000 | HK$12,000 |
| HK$22,500 or more | HK$15,000 (the maximum) |
At the maximum of HK$15,000 a year, you'd hit the HK$390,000 cap after 26 years.
Source: Labour Department Concise Guide.
What this means for expats: if you earn more than HK$22,500 a month, which most professionals on work visas do, your statutory payment is capped at HK$15,000 per year of service, however high your salary. Many employers pay more as a contractual or discretionary redundancy package, so check your contract and any staff handbook.
How the MPF Offsetting Abolition Changes Things
Before 1 May 2025, employers could reduce SP or LSP by using the MPF they had contributed for you. From that "transition date", the rules changed, according to the Labour Department's page on the abolition of MPF offsetting:
- Your service is split into a pre-transition portion (before 1 May 2025) and a post-transition portion (from 1 May 2025).
- The pre-transition portion is calculated on your last full month's wages before 1 May 2025.
- The post-transition portion is calculated on your last full month's wages before termination.
- Employers can still use MPF (mandatory and voluntary contributions) to offset the pre-transition portion only.
- The post-transition portion can't be offset by employer mandatory MPF contributions, but voluntary contributions and gratuities based on length of service still can be.
- The HK$22,500 wage cap and HK$390,000 total cap still apply. Any excess over HK$390,000 is taken off the post-transition portion.
In plain terms: for service from May 2025 onwards, you get your severance or long service pay and keep the MPF your employer paid in.
Worked Examples
All figures are our own calculations using the Labour Department formula.
Example 1: Redundancy on a professional salary
- Joined 1 November 2019, made redundant 31 October 2026 (7 years)
- Salary HK$45,000 a month throughout (above the HK$22,500 cap)
- Service before 1 May 2025: 5.5 years. After: 1.5 years.
| Portion | Calculation | Amount |
|---|---|---|
| Pre-transition | HK$22,500 × 2/3 × 5.5 | HK$82,500 |
| Post-transition | HK$22,500 × 2/3 × 1.5 | HK$22,500 |
| Total severance payment | HK$105,000 |
Your employer can offset the HK$82,500 pre-transition portion with MPF from its contributions, but not the HK$22,500 post-transition portion.
Example 2: Long service payment on a lower salary
- Joined 1 May 2020, dismissed (not for misconduct or redundancy) 30 April 2026 (6 years)
- Last full month's wages before 1 May 2025: HK$18,000. Last full month's wages before dismissal: HK$19,500.
| Portion | Calculation | Amount |
|---|---|---|
| Pre-transition (5 years) | HK$18,000 × 2/3 × 5 | HK$60,000 |
| Post-transition (1 year) | HK$19,500 × 2/3 × 1 | HK$13,000 |
| Total long service payment | HK$73,000 |
Example 3: Joined after 1 May 2025
If you joined on or after 1 May 2025, there's no split: your whole payment is calculated on your final wages and can't be offset by employer mandatory MPF contributions. You'll need 24 months for severance, so the first such payments arise from May 2027.
When Must Severance or Long Service Pay Be Paid?
- Severance payment: you must claim it in writing within 3 months of the dismissal or lay-off taking effect. Your employer must pay within two months of receiving the claim.
- Long service payment and other termination payments: due as soon as practicable and no later than 7 days after employment ends.
Source: Labour Department Concise Guide.
Late payment without reasonable excuse is an offence, and you can claim interest.
Is Severance Pay Taxable in Hong Kong?
Statutory severance and long service payments made under the Employment Ordinance are not taxable as income. Contractual extras on top of the statutory amount, payment in lieu of notice and leave pay generally are. If you receive a larger redundancy package, ask your employer how it splits between statutory and contractual amounts.
Our Hong Kong salaries tax guide covers how termination payments fit into your tax return, and our MPF guide explains what happens to your MPF.
What to Check in a Redundancy Package
- Is it at least the statutory amount? Use the formula above.
- Does it include payment in lieu of notice if you aren't working your notice?
- Are untaken and pro rata annual leave and pro rata double pay included?
- Is your MPF untouched for post-transition service?
- What are you giving up? If the agreement asks you to waive claims, make sure the extra money is worth it.
- What happens to your visa? A GEP work visa is tied to your employer. See our work visa guide.
If you think the numbers are wrong, the Labour Department's Labour Relations Division offers free conciliation, and the Labour Tribunal handles claims.
FAQs: Severance and Long Service Payment in Hong Kong
How is severance pay calculated in Hong Kong?
Last full month's wages × 2/3 × years of service, with the monthly wage capped at HK$22,500 (so at most HK$15,000 a year) and a total cap of HK$390,000.
How many years do you need for severance pay in Hong Kong?
At least 24 months under a continuous contract, and you must be dismissed for redundancy or laid off.
How many years do you need for long service payment?
At least 5 years under a continuous contract, in a qualifying situation such as dismissal not for serious misconduct, non-renewal of a fixed-term contract, retirement at 65 or above, ill health or death.
Can I get long service payment if I resign?
Only if you resign at 65 or above, or on grounds of ill health with a medical certificate, after at least 5 years. Resigning for another job doesn't qualify.
What is the maximum severance pay in Hong Kong?
HK$390,000. With the HK$15,000 per year ceiling, that's reached after 26 years of service.
Can my employer use MPF to offset severance pay?
Only for the portion of service before 1 May 2025. Employer mandatory MPF contributions can't be used to offset the portion of service from 1 May 2025 onwards.
Can I get both severance and long service payment?
No. If you qualify for both, you get one or the other, not both.
When must severance pay be paid?
Claim in writing within 3 months of the dismissal. The employer must pay within two months of receiving your claim.
Is long service payment taxable in Hong Kong?
Statutory severance and long service payments aren't taxed as income. Contractual amounts paid on top, notice pay and leave pay usually are.
Do part-time workers get severance pay?
Yes, if they're on a continuous contract (at least 17 hours a week or 68 hours over four weeks since 18 January 2026) for the qualifying period.
Key Takeaways
- Severance pay needs 24 months' service and redundancy or lay-off; long service pay needs 5 years in other qualifying situations.
- Both are 2/3 of your last month's wages per year of service, with wages capped at HK$22,500 (HK$15,000 a year).
- The total is capped at HK$390,000; you can't receive both payments.
- From 1 May 2025, employer mandatory MPF can't offset the post-transition portion of your payment.
- Claim severance in writing within 3 months; it's due within two months of the claim.
- Most professionals hit the HK$22,500 wage cap, so statutory amounts are modest; check for contractual top-ups.
Line Up Your Next Role
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