Redundancy Letter (Hong Kong)

A Redundancy Letter in Hong Kong records the request or process it concerns and the response the employer must give. Redundancy in Hong Kong law arises in four situations defined under section 31F of Cap. 57: the employer ceases or intends to cease carrying on business in Hong Kong; the employer ceases operations at the specific workplace where the employee works; the employer's requirements for employees to carry out work of a particular kind have ceased or diminished; or the requirements for that work in the particular place have ceased or diminished. A genuine redundancy must be attributable wholly or mainly to one of these four statutory triggers — dismissal for performance, misconduct, or other personal reasons does not constitute redundancy and does not attract statutory severance payment. The Labour Department is the government department in Hong Kong responsible for administering the Employment Ordinance, investigating complaints of non-payment of statutory entitlements, and referring unresolved disputes to the Labour Tribunal. The Labour Tribunal hears employment disputes, including redundancy severance payment claims, without requiring legal representation and without charging filing fees for employees, making it an accessible forum for recovery of unpaid entitlements. The Mandatory Provident Fund (MPF) scheme, administered by the Mandatory Provident Fund Schemes Authority (MPFA), provides for retirement savings contributions of 5% of relevant income from both employer and employee (subject to minimum and maximum relevant income levels). Under the current statutory framework, employer MPF contributions standing to the employee's credit are permitted to be offset against the severance payment obligation, reducing the net cash payment required from the employer — though the Mandatory Provident Fund Schemes (Amendment) Ordinance 2022 introduces a phased abolition of this offset for future years of service. A well-drafted Redundancy Letter reduces the risk of Labour Tribunal proceedings, demonstrates compliance with Cap. 57, and provides a clear record of the statutory payments made. Employers should also prepare a Settlement Agreement or Termination Letter alongside the Redundancy Letter to address any additional ex gratia payments, confidentiality obligations, and post-employment restrictions. Hong Kong's Protection of Wages on Insolvency Fund (PWIF), administered by the Labour Department under the Protection of Wages on Insolvency Ordinance (Cap. 380), provides a safety net for employees whose employers become insolvent before paying statutory entitlements including wages in arrears, notice pay, annual leave pay, and severance payment up to prescribed limits. The Employees Retraining Board (ERB) operates under the Employees Retraining Ordinance (Cap. 423) and provides funded retraining programmes to assist displaced workers in acquiring new skills across industries — a resource that responsible employers proactively reference in redundancy communications as part of their outplacement support commitment, demonstrating good faith to both the affected employee and the Labour Department.

A Redundancy Letter in Hong Kong is required whenever an employer terminates employment by reason of redundancy as defined under Section 31F of the Employment Ordinance (Cap. 57), and the affected employee has completed 24 or more months of continuous employment qualifying them for statutory severance payment.

Business restructuring or reorganisation that eliminates specific positions requires a Redundancy Letter for each affected employee. Employers carrying out strategic restructuring — merging departments, eliminating management layers, outsourcing functions, or automating roles — must formally notify affected employees of their redundancy by a written letter that explains the business rationale and sets out the statutory entitlements.

Office closure or relocation outside commuting distance requires a Redundancy Letter where affected employees do not accept the relocation. Under section 31F(1)(b) of Cap. 57, closure of the specific workplace constitutes a redundancy trigger, and employees who are unwilling or unable to relocate to the new location are entitled to severance payment.

Downsizing due to reduced business volume — including fall in orders, loss of a major client, or contraction of a business unit — qualifies as redundancy where the reduction in business translates directly into reduced requirements for employees performing the relevant work. The employer should document the business volume reduction to support the redundancy rationale if challenged.

Complete business cessation requires Redundancy Letters for all employees. Where an employer winds up a company voluntarily or a company enters liquidation, all employees are made redundant and their statutory entitlements crystallise. Where the employer is insolvent, employees may apply to the Protection of Wages on Insolvency Fund (Cap. 380) administered by the Labour Department for payment of wages in arrears, notice pay, and severance payment up to prescribed limits.

Transfer of undertaking — where a business is sold as a going concern — does not automatically trigger redundancy if the purchasing employer offers comparable employment on the same or no less favourable terms. However, where the transfer involves a genuine change in work requirements or the new employer does not offer re-engagement, a Redundancy Letter from the transferring employer is appropriate.

Reorganisation following merger and acquisition activity frequently generates redundancies as overlapping roles are consolidated. Hong Kong employers in post-M&A integration should carefully document which positions are genuinely redundant and issue Redundancy Letters to affected employees with accurate statutory calculations before making offers to the remaining workforce.

Group redundancies affecting a significant number of employees at one time should be supported by early notification to the Labour Department and engagement of outplacement service providers, both to demonstrate good faith and to assist employees in securing alternative employment through the Employees Retraining Board and job matching services.

A legally compliant and professionally drafted Redundancy Letter for Hong Kong must include nine essential elements to satisfy the Employment Ordinance (Cap. 57) and minimise the risk of Labour Tribunal proceedings.

Employer and employee identification must be precise. The letter must state the employer's full registered company name, Companies Registry number, and registered address, and the employee's full name, HKID number, job title, department, and date of commencement of continuous employment. Accurate commencement date is critical because statutory severance payment calculations depend on total years of continuous service.

Redundancy reason must be specific. A clear statement of the business reason for the redundancy — citing the applicable section 31F trigger — demonstrates that the dismissal is genuinely attributable to redundancy and not to a personal reason that would disentitle the employer from avoiding severance payment. Generic references to "restructuring" without specifics invite challenge.

Effective termination date must be stated precisely. Where the employee is working through the notice period, the date notice commences and the termination date must both be stated. Where payment in lieu of notice under section 7 of Cap. 57 is being offered, the termination date and the PILON amount must be confirmed.

Notice period or PILON calculation must show the basis of calculation — last monthly wages including the 12-month average of variable remuneration under section 7A of Cap. 57 — and the total amount payable.

Severance payment calculation must be transparently set out: years of service (including fractional years), the monthly wage figure used (capped at HKD 22,500 representing two-thirds of HKD 33,750 where applicable), total statutory severance before offset, MPF employer contribution offset amount with the MPF account name and balance, and net severance cash payment. The cap of HKD 390,000 should be noted where applicable.

Final salary and accrued entitlements must itemise all amounts payable upon termination: outstanding wages for days worked in the final month, prorated annual leave pay for unused leave accrued under the Employment Ordinance (Cap. 57), any contractual bonus or commission entitlements, and any other contractual termination payments.

Return of company property must list all items to be returned — electronic devices, access cards, company credit cards, vehicle keys, confidential documents — with a stated return deadline and confirmation of the deduction procedure if items are not returned.

Outplacement support details should specify the services offered — career coaching sessions, CV preparation, job placement assistance through specialist outplacement firms, or referral to the Employees Retraining Board programmes — and the period during which the support is available.

Confidentiality and post-employment obligations reminder must reference the employee's continuing duties under the employment contract and common law, particularly where the employee has access to trade secrets, client lists, or commercially sensitive information. A Settlement Agreement addressing these matters thoroughly should be prepared alongside the Redundancy Letter. Use this template with the Termination Letter and Employment Contract templates available on forms-legal.com.

Document retention after redundancy is important for both parties. Employers should retain copies of the Redundancy Letter, severance payment calculations, MPF offset records, and signed acknowledgments from each redundant employee for at least 7 years under the Inland Revenue Ordinance (Cap. 112) and 6 years under the Limitation Ordinance (Cap. 347). Former employees should retain their copies of the Redundancy Letter, severance payment records, and MPF statements to support any future claims or income verification requirements — including mortgage applications, immigration submissions to the Immigration Department, and new employment background checks.