Dismissals and Termination of Employment in Hong Kong

In Hong Kong, an employment contract can be terminated with notice or without notice. 

For termination with notice, there is no need to provide reasons for the termination/dismissal. 

For termination without notice (summary dismissal), reason is required. Various grounds are set out under the Employment Ordinance (“EO”) as valid reasons for summary dismissal by the employer:

1. The conduct of the employee (if an employee, in relation to his employment, willfully disobeys a lawful and reasonable order, misconducts himself in a manner inconsistent with the due and faithful discharge of his duties, is guilty of fraud or dishonesty, or is habitually neglectful in his duties); or
2. on any ground on which the employer would be entitled to terminate the employment contract without notice at common law.

For termination with notice, there is no statutory requirement on the form of notice.  The notice should, however, be unambiguous and clear as to the date of termination.

Although the EO provides that either party may terminate the employment upon serving the notice either orally or in writing, it would be prudent for either party to deliver notice in accordance with the form required under the contract to avoid unnecessary dispute.

In Hong Kong, unless an employer has sufficient grounds to justify summary dismissal (termination without notice), the employer must give notice to the employee for the termination of employment. Vice versa, if the employee wants to terminate the employment contract, the employee must also give notice to the employer. 

An employment contract would normally contain a term setting out a notice period as it is a requirement under the EO for an employer to inform the employee of the notice period before commencement of employment. 

The EO also prescribes minimum periods of notice, depending on the type of contract:

1. For “contract for one month renewable from month to month” defined under the EO, where there is no agreed notice period, the minimum length of notice is one month, but in case there is an agreed period for the length of notice, the notice period will be the agreed period, as long as this is not less than seven days.
2. For “continuous contract” defined under the EO, the agreed period must not be less than seven days.
3. In other cases, where the parties have agreed the notice period, the notice period will be for the agreed period. 

The EO also confers upon employers and employees the right to terminate the employment contract by way of payment in lieu of notice. This, in effect, means that it is possible to buy out the notice period whereby both employers and employees may terminate the employment by paying the other party a sum of wages instead of the required notice period.

 Wages will be calculated by reference to the daily average wage or monthly average wage (as applicable), according to the language of the notice period within the employment contract. 

For example, if the notice period is expressed in days or weeks, then the amount payable as wages in lieu will be the number of days in the notice multiplied by the daily average wage.  Conversely, if the notice period is expressed in months, then the amount payable in lieu will be the number of months in the notice multiplied by the monthly average. 

Generally, the EO applies equally to locals and international workers in Hong Kong and the contractual terms of employment cannot be less favorable than that which is granted by the EO.

There is no general legal requirement for the involvement of employee representatives in Hong Kong.

There is no general legal requirement for the involvement of a union in Hong Kong.

In Hong Kong, the EO provides that every employee has the rights to be a member/ officer of a trade union registered under the Trade Union Ordinance, and to associate with other persons for the purposes of forming or applying for the registration of a trade union. Trade union members and officers have the right to take part in activities of the trade union outside working hours or during working hours if the employer consents.

The EO provides that employer shall not prevent or deter an employee from exercising any of the above rights; or dismiss, penalise or discriminate against an employee for exercising the above rights.

Not required.

There is no concept of collective redundancies or collective dismissal under the EO.

As for the definition of redundancy under the EO, a redundancy situation may arise in three situations:

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

The statutory regulation of redundancies in Hong Kong is limited to an employee’s entitlement to receive a statutory severance payment. There is no obligation on the employer to give prior warning to or consult with the employee on the redundancy selection process.

Summary dismissal (i.e. dismissal without notice) is only lawful where the employee has committed a breach of contract that is sufficiently serious to entitle the employer to treat the employment contract as terminated with immediate effect.

The employer may summarily dismiss an employee without notice or payment in lieu of notice if the employee, in relation to his or her employment:

1. willfully disobeys a lawful and reasonable order;
2. displays misconduct in a manner inconsistent with the due and faithful discharge of his or her duties;
3. is guilty of fraud or dishonesty; or
4. is habitually neglectful in his or her duties.

Summary dismissal is an extreme measure, which is to be justified in exceptional situations, a single act is rarely sufficient to justify summary dismissal unless such misconduct is extremely serious.

If the requirements are not met, then it would considered a wrongful termination and a breach of the employment contract by the employer. 

The Labour Tribunal has the discretion to determine whether a termination is reasonable. In the case where it is found that the termination does not fit into one of the  categories provided above, or that the termination was not based on any ground on which the employer would be entitled to terminate the employment contract without notice at common law, or an employer terminating a contract without serving requisite notice or payment in lieu of notice, such termination without a valid reason will enable the employee to make a claim for wrongful dismissal.

 Under common law, the employer’s liability is generally limited to a sum of money covering what the employee would have received for the period between the date on which the contract was wrongfully terminated and the date on which the contract could lawfully have been terminated upon proper notice. 

Under the EO,  employees are entitled to statutory compensation for wrongful termination, for example, the party terminating the contract without giving notice or a payment in lieu of notice must pay to the other party a sum equal to that which would have been payable had the contract been terminated by payment in lieu of notice.

Under the EO,  employees who  have been continuously employed for not less than 24 months will be entitled to a severance payment in the event of either being laid off or being dismissed by reason of redundancy, noting that where an employee is eligible for a severance payment, he will not be eligible for long service payment and vice versa.

An employee will be regarded as being laid off in the situation where an employer fails to provide work to the employee and the period during which no work is provided exceeds one-half of the total number of normal working days in any period of four consecutive weeks, or one-third of the total number of normal working days in any period of 26 consecutive weeks.

Further to the eligibility of severance payment on dismissal by reason of redundancy, there are three types of termination that are capable of giving rise to a severance payment: 

1. When an employment contract is terminated by reason of redundancy by an employer, whether by notice or payment in lieu, other than for a reason justifying summary dismissal, an employee will be entitled to a severance payment;
2. Where a fixed-term contract expires without being renewed by reason of redundancy, a severance award will be payable;
3. Where an employee terminates a contract by reason of redundancy as a result of an employer’s repudiatory conduct, it may give rise to a claim for a severance payment. 

Nevertheless, there are situations where employee is not entitled to severance payment by reason of dismissal, for example: 

1. Where an existing contract is renewed, or the employee whose contract has terminated is re-engaged by the same employer under a new contract;
2. Where offer of re-employment on the same terms are unreasonably refused by the employee;
3. Where offer of re-employment on different terms are unreasonably refused by the employee. 

When an employee is dismissed due to redundancy, his employer should pay the severance payment as soon as practicable. The EO also requires an employer to make severance payment to his employee not later than 2 months from the receipt of a written notice for claiming such payment from the employee.

On 1 May 2025, the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (the Amendment Ordinance) comes into operation. This will abolish the use of accrued benefits derived from employers’ mandatory contributions under the Mandatory Provident Fund (MPF) System to offset severance payment or long service payment.

Non-competition clauses (which are restrictive covenants or restraint of trade clauses) are prima facie void and unenforceable at law. In Hong Kong, a clause in a contract of employment or settlement agreement which purports to restrain the activities of an employee after the termination of employment will be void for it is being in restraint of trade and contrary to public policy. Hence, it is unenforceable unless the employer can prove that it is reasonable as between the parties. 

The restrictive covenant must serve the purpose of protecting a legitimate business interest of the employer. The employer has the onus to show that the covenant is necessary to protect the legitimate interests of the employer and is no more than reasonably necessary for that purpose. It is to be determined as at the time of the making of the contract.

As for what amounts to “legitimate business interests of the employer”, Hong Kong courts have upheld restrictive covenants seeking to protect either (a) trade secrets and confidential information; (b) trade connections and goodwill; or (c) maintaining the stability of the workforce. 

Further restrictive covenants may include non-disclosure of confidential information, non-solicitation of employees, clients and customers and non-dealing.

An employee employed under a continuous contract for not less than five years is eligible for long service payment if the individual:

1. is dismissed (except by reasons of redundancy or summary dismissal due to the employee’s serious misconduct);
2. has a fixed term employment contract that expires without being renewed (if not less than seven days before the date of dismissal/expiry of the fixed term contract in case of severance payment, and not less than seven days before the expiry of the fixed term contract in case of long service payment, the employer has offered in writing to renew the contract of employment or re-engage him under a new contract but the employee has unreasonably refused the offer, the employee is not eligible for the entitlements);
3. dies during employment;
4. has been issued a certificate in a specified form by a registered medical practitioner or a registered Chinese medicine practitioner, certifying that the employee is permanently unfit for his or her present job and resigns; or
5. is aged 65 or above and resigns on grounds of old age.

A long service payment should be paid to an employee within seven days after the date of termination of the employment contract, except as otherwise specified in the case of payment to the beneficiaries of a deceased employee.

Note that an employee who is dismissed by reason of redundancy is eligible for severance payment but not a long service payment.

In Hong Kong, the rights and obligations of a “director” are the same whether they are for a “managing director” or any other type of director. However, not all directors are employees. “Managing directors”, for example, are employees of the company, but “non-executive directors” are not employees.

Normal practice is for a managing director to have a service agreement supplementing his or her statutory and common law obligations as a director. Often a managing director’s employment contract will require the individual to resign any directorships when his or her employment terminates, so that his or her directorship and employment terminate simultaneously. It is therefore often simpler (and preferable) to remove a managing director by dismissing him or her from employment, and then requiring the individual to resign the directorship.

This guide only covers removal of a director from office as a director of a company, and does not cover termination of any employment contract or other employment issues.

Subject to the requirements under the Companies Ordinance (“CO”), the members of a Hong Kong private company may remove a director without cause.

CO s.462 and s.463 set out the procedural requirements for removal of directors in Hong Kong, including:

1. A director may be removed in a general meeting by an ordinary resolution of members prior to the expiration of his or her term of office.
2. Special notice is required of a resolution to remove a director or to appoint somebody in place of a director so removed at the meeting at which the director is removed.
3. The board of directors should call a general meeting by giving the members at least 14 days of notice.
4. On the receipt of notice of a resolution to remove a director, the company must forthwith send a copy of the notice to the director concerned.
5. The director concerned is entitled to be heard on the resolutions at the meeting at which the resolutions is voted on. He or she may make written representations in relation to the proposed removal and require them to be circulated to members of the company or read out at the general meeting itself.

Generally, for dismissal of a director of a private company under the CO, although it is not a legal requirement to provide the director with reason for removal, there are some specific procedural requirements under the CO before the resolutions for director removal can be presented in the general meeting. It is also important to note that, the removal of a director is not to be taken as depriving the director concerned of any compensation or damages that may be payable to the director in respect of the person’s appointment as a director or any appointment also terminating.

CO s.578 sets out the requirement regarding special notice. The special notice must be given by the members of the company at least 28 days before the relevant general meeting to notify the company of the proposed resolution to remove a director.

Removal as a director is immediate unless otherwise specified in the articles of association of the company.

No involvement.

No involvement.

Not necessary.

Not applicable.

No special rules apply.

The removal of the director is void.

The director may be entitled to a payment under the terms of any service contract (e.g. a payment in lieu of notice), or as an employee under statue (e.g. a statutory redundancy payment).

Restrictive covenants may be included in a service contract. However, they will be void unless it can be proven that they protect the legitimate business interests of the company and go no further than necessary to provide that protection in terms of the activities covered, duration and geographical area. 

Similar to that of a standard employee the clauses may include non-compete, confidentiality and non-solicitation of clients, customers and employees. 

The director may also be subject to post-termination restrictions contained in other agreements, such as a shareholder agreement (if applicable).

Regulated and listed companies should also be mindful of any obligations they may have under their regulatory rules and/or the rules applicable to their market listing. These rules are likely to limit the terms on which such companies can reimburse a director in connection with his or her removal from office or employment, and can also subject a company to reporting obligations.