Collective dismissals in Hong Kong

A high level outline of the obligations that apply in relation to a collective dismissal procedure in Hong Kong.

Details of the procedure that should be followed where these obligations do not apply are available here.

Definition of redundancy

For the purpose of determining whether an employee is entitled to a severance payment on termination, the employee must prove that the termination was “wholly or mainly” by reason of redundancy.

The Employment Ordinance recognises that a redundancy may arise in three situations:

  • where the employer has ceased, or intends to cease, to carry on business (or part of such business)
  • where the employer has ceased, or intends to cease, to carry on business (or part of such business) in the location at which the person was employed, or where the employee was required to work under the contract of employment, or
  • where the employer’s business’ requirements that employees carry out work of a particular kind have ceased or diminished, or are expected to cease or diminish.

Definition of a collective dismissal

There is no concept of collective dismissal.

Procedure

There are no legal rules which determine the manner in which employees should be dismissed in either a redundancy or collective dismissal situation.

Obligations to inform, consult and notify

There is no obligation to inform and consult works councils, other representatives of employees or the individual employees.

There is also no obligation to notify public authorities, other than the usual notifications required on termination to the trustee of any Mandatory Provident Fund, the Inland Revenue Department, and the Immigration Department (if the person holds an employment visa).

Selection criteria

There are no obligations which govern the manner in which employers must determine the positions which are to be made redundant. An employer, however, must not discriminate on any of the prohibited grounds (sex, pregnancy, marital status, disability, family status and race) as a dismissal on one of those grounds is illegal.

Employers should also be mindful that the law prohibits dismissal of an employee who:

  • has served notice of pregnancy (or does so on receipt of the notice of termination) 
  • is on statutory sick leave or statutory maternity leave 
  • has a pending claim under the Employees Compensation Ordinance (unless the prior consent of the Commissioner for Labour is obtained),

or by reason that the employee:

  • is involved in trade union activities 
  • is on jury duty, or 
  • has given evidence or information in relation to proceedings to enforce the Employment Ordinance, the Factories and Industrial Undertakings Ordinance or in respect of any accident at work.

Obligations to search for alternative employment

There is no statutory obligation for employers to search for alternative employment for employees who are to be made redundant.

Notice periods

Employees who are dismissed by reason of redundancy are subject to the usual minimum notice periods under the employment contract and/or Employment Ordinance.

Compensation/termination payments due to employees

Statutory severance will be due to an employee who has been continuously employed for a period of not less than 24 months and whose employment is terminated by his/her employer by reason of redundancy. It is subject to a maximum of HK$390,000.

An employee will not, however, be entitled to a severance payment for termination if the employer offers to renew the employment or re-engage the employee (such that the terms as to capacity, place and other terms and conditions do not differ or are no less favourable from the previous contract), and the employee unreasonably refuses such offer.

An employer is entitled to deduct from any severance payment, any gratuity based upon length of service or any retirement scheme benefit representing the then current value of the employer's contributions which have been paid in respect of the employee.

Redundancy costs

The likely costs involved in carrying out a redundancy dismissal include (1) salary and related costs until notice is given and during the notice periods (or payment in lieu); and (2) severance payments.
Costs arising in connection with any termination must also be taken into account including (1) contractual/statutory obligations; (2) costs relating to retirement scheme benefits; and (3) miscellaneous costs (termination of housing leases, etc).

Settlement/waivers of claims

Employers will often require employees to enter into an agreement whereby the employee agrees to settle or waive any future claims (particularly for executives/senior employees).

Further information on collective dismissals in Hong Kong is available from our International Employment Issues microsite here.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.