Hong Kong Ordinances

EMPLOYMENT ORDINANCE - SECT 7

Termination of contract by payment in lieu of notice

(Past version on 12/04/2001).
(Past version on 30/06/1997).

(1) For the purposes of subsections (1A), (1B) and (1C), "wages" (工 資)
includes any sum paid by an employer in respect of—

   (a)  a day of maternity leave, a rest day, a sickness day, a holiday or a
        day of annual leave taken by the employee;

   (b)  a day of leave taken by the employee with the agreement of his
        employer;

   (c)  a normal working day on which the employee is not provided with work;

   (d)  a day of absence from work of the employee due to temporary incapacity
        for which compensation is payable under section 10 of the Employees’
        Compensation Ordinance ( Cap 282). (Replaced 7 of 2007 s. 3)

(1A) Subject to sections 15 and 33, either party to a contract of  employment
may at any time terminate the contract without notice by agreeing to pay to
the other party—

   (a)  where the length of notice required to terminate the contract under
        section 6 is a period expressed in days or weeks, a sum calculated by
        multiplying the number of days in the period for which wages would
        normally be payable to the employee by the daily average of the wages
        earned by the employee during—

        (i)    the period of 12 months immediately before the date on which
               the party terminating the contract gives notice of the
               termination to the other party (“date of notification”); or

        (ii)   if the employee has been employed by the employer concerned for
               a period shorter than 12 months immediately before the date of
               notification, the shorter period; or

   (b)  where the length of notice required to terminate the contract under
        section 6 is a period expressed in months, a sum calculated by
        multiplying the number of months required by the monthly average of
        the wages earned by the employee during—

        (i)    the period of 12 months immediately before the date of
               notification; or

        (ii)   if the employee has been employed by the employer concerned for
               a period shorter than 12 months immediately before the date of
               notification, the shorter period. (Added 7 of 2007 s. 3)

(1B) In calculating the daily average or monthly average of the wages earned
by an employee during the period of 12 months or the shorter period—

   (a)  any period therein for which the employee was not paid his wages or
        full wages by reason of—

        (i)    any maternity leave, rest day, sickness day, holiday or annual 
               leave taken by the employee;

        (ii)   any leave taken by the employee with the agreement of his
               employer;

        (iii)  his not being provided by his employer with work on any normal
               working day; or

        (iv)   his absence from work due to temporary incapacity for which
               compensation is payable under section 10 of the Employees’
               Compensation Ordinance ( Cap 282); and

   (b)  any wages paid to him for the period referred to in paragraph

   (a)  , are to be disregarded. (Added 7 of 2007 s. 3)

(1C) For the avoidance of doubt, if the amount of the wages paid to an
employee in respect of a day specified in subsection (1) is only a fraction of
the amount earned by the employee on a normal working day, the wages and the
day are to be disregarded in accordance with subsection

(1B). (Added 7 of 2007 s. 3)

(1D) Despite subsection (1A), if for any reason it is impracticable to
calculate the daily average or monthly average of the wages earned by an
employee in the manner provided in that subsection, the amount may be
calculated by reference to the wages earned by a person who was employed at
the same work by the same employer during the period of 12 months immediately
before the date of notification, or, if there is no such person, by a person
who was employed in the same trade or occupation and at the same work in the
same district during the period of 12 months immediately before the date of
notification. (Added 7 of 2007 s. 3)

(2) Either party to a contract of employment, having given proper notice in
accordance with section 6, may at any time thereafter terminate the contract
by agreeing to pay to the other party such proportion of the sum referred to
in subsection (1) as is proportionate to the period between the termination of
the contract and the time when the notice given would have expired. (Amended
44 of 1971 s. 3)

(3) (Repealed 7 of 2007 s. 3)

(4) For the purposes of this section, and notwithstanding any other
provision of this Ordinance, the term "wages" (工資)—

   (a)  includes overtime pay of a constant character or the monthly average
        of which over a period of 12 months (or if not applicable, such
        shorter period of employment) immediately preceding the date on which
        the termination takes effect is equivalent to or exceeds 20% of his
        monthly average wages during the same period;

   (b)  except as provided in paragraph (a), shall be deemed not to include
        overtime pay. (Replaced 74 of 1997 s. 4)

"wages" (工資)