Redundancy Notice (Hong Kong)

A Redundancy Notice in Hong Kong sets out the steps an employer and employee follow to resolve the matter it addresses. The Employment Ordinance (Cap. 57) defines redundancy in Section 31G as a situation where the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed; where the employer has ceased, or intends to cease, to carry on that business at the place where the employee was so employed; or where the requirement of the business for employees to carry out work of a particular kind, in the place where the employee was employed, has ceased or diminished or is expected to cease or diminish. These definitions reflect genuine business-driven organisational changes rather than dissatisfaction with individual employee performance — a critical legal distinction that the Redundancy Notice must clearly articulate to protect the employer from subsequent claims that the termination was a pretext for misconduct-based dismissal. The severance payment formula under Section 31G is: two-thirds of the employee's last full monthly wages multiplied by the number of years of reckonable service. Monthly wages for this calculation are capped at HKD 22,500 per month (giving a maximum of HKD 15,000 per year of service), and the total severance payment is capped at HKD 390,000. Part years of service count proportionately. An employee must have at least 24 months of continuous service to qualify for severance payment. The MPF offset mechanism — which formerly allowed employers to deduct mandatory MPF employer contributions from severance payment — was abolished with effect from 1 May 2025 under the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022. A properly drafted Redundancy Notice Hong Kong serves multiple purposes simultaneously. For the employee, it provides a clear and accurate statement of all financial entitlements, enabling them to plan their financial transition with confidence. For the employer, it demonstrates compliance with the detailed procedural requirements of Cap. 57, significantly reduces the risk of disputes before the Labour Tribunal, and creates a contemporaneous formal record that the redundancy was genuine, properly calculated, and procedurally conducted in accordance with Hong Kong employment law. The Minimum Wage Ordinance (Cap. 608) and its statutory minimum wage rate, reviewed periodically by the Minimum Wage Commission and effective from the date specified in each gazette, must be factored into severance payment calculations for employees whose earnings are at or near the minimum wage. The monthly equivalent of the statutory minimum wage determines the base calculation for part-time and hourly-paid employees subject to redundancy. Employers making redundancies that affect 10 or more employees at the same establishment within any period of three months are encouraged under Labour Department administrative guidance to notify the Labour Department proactively, even though Hong Kong law does not impose a mandatory collective consultation obligation equivalent to the UK Transfer of Undertakings or Collective Redundancies framework. The Labour Relations Division of the Labour Department provides a free conciliation service to assist parties in resolving disputes arising from redundancies before they escalate to Labour Tribunal proceedings.

A Redundancy Notice Hong Kong is required whenever an employer eliminates a position or reduces headcount for genuine business reasons that are unrelated to the individual employee's conduct, capability, or performance. Situations in Hong Kong that require a formal Redundancy Notice include: closure of a business unit or complete cessation of operations at a specific Hong Kong location — for example, closing a retail outlet in a shopping mall in Mongkok or Causeway Bay, shutting down a manufacturing facility in Kwun Tong or Tsuen Wan, or ceasing operations of a restaurant in Central; relocation of operations from Hong Kong to mainland China or another jurisdiction, which eliminates positions physically based at the Hong Kong entity; corporate restructuring that merges departments, consolidates functions, or eliminates layers of management, rendering specific roles duplicative or unnecessary; reduction in workforce driven by revenue decline in Hong Kong's financial services, hospitality, retail, tourism, or aviation sectors following periods of market contraction; cessation of a specific product line, service offering, or business division whose employees had specialised roles that no longer exist within the restructured organisation; and downsizing driven by technology adoption that reduces the requirement for certain categories of human labour.

The Redundancy Notice is legally and factually distinct from a dismissal letter issued for misconduct or poor performance. Using a redundancy notice when the genuine reason for termination is disciplinary is unlawful misrepresentation and exposes the employer to claims of wrongful dismissal and potential liability for the employee's legal costs if the Labour Tribunal finds the stated reason was false. The Labour Tribunal in Hong Kong scrutinises the genuineness of redundancy claims carefully, particularly where the affected employee has a long service record, where management has expressed dissatisfaction with the employee's performance shortly before the declared redundancy, or where the employer hires a replacement into a substantively identical role within a short period after the redundancy. Employers should maintain contemporaneous documentation — board resolutions, business plans, financial records, or restructuring plans — demonstrating the genuine organisational basis for the redundancy decision before issuing the notice.

For companies operating under the oversight of the Mandatory Provident Fund Schemes Authority (MPFA) and the Inland Revenue Department, redundancy also triggers specific MPF and payroll obligations. Under the Mandatory Provident Fund Schemes Ordinance (Cap. 485), MPF contributions must continue until and including the last day of employment, with both employee and employer mandatory contributions due for the final contribution period. The employer must not withhold MPF employer contributions for the notice period as any form of use or penalty — such withholding constitutes a breach of Cap. 485. The final payroll run for redundant employees must account precisely for all outstanding wages, PILON amounts, and accrued leave pay, and the employer must issue a final payslip documenting all deductions and payments made. The Inland Revenue Department's employer return (IR56F) must also be filed promptly following the termination to notify the IRD of the employee's cessation of employment.

A thorough Redundancy Notice Hong Kong must contain the following elements to comply with the Employment Ordinance (Cap. 57) and protect the employer from subsequent legal challenge before the Labour Tribunal or Labour Relations Division of the Labour Department.

Employer and employee identification: the full legal name of the employer (including the company registration number under Cap. 622 and the business address), and the employee's full name, job title, and department. Private and confidential marking is standard and protects both parties.

Legal basis: a clear statement that the notice is issued under the Employment Ordinance (Cap. 57) and that the termination constitutes a redundancy within the meaning of Section 31G, not dismissal for performance or conduct reasons. This statement is critical to establishing the employee's entitlement to severance payment and to prevent later recharacterisation of the termination.

Redundancy grounds: a specific, factual description of the business reason for the redundancy — closure, relocation, restructuring, workforce reduction, or cessation of a specific function — with sufficient detail to demonstrate the genuineness of the decision. A vague statement that 'the company is restructuring' is substantially weaker than a specific explanation identifying the business unit, the market or financial reason, and the positions affected.

Notice period: the contractual or statutory notice period under Section 6 of Cap. 57, the notice start date, and the last day of employment stated with precision. Any ambiguity about the notice period can affect the calculation of severance payment and final wages.

Working arrangements during notice: whether the employee will work through the notice period, receive payment in lieu of notice (PILON) under Section 7 of Cap. 57, or be placed on garden leave pursuant to an express contractual power. Each option has different implications for the employee's final payment calculation.

Severance payment calculation: the number of years of continuous service verified from employment records, the last full monthly wage, the capped monthly wage figure for calculation purposes (HKD 22,500), the computed severance payment amount using the two-thirds formula under Section 31G, and the MPF offset position post-1 May 2025 under the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022.

Accrued annual leave: the number of unused annual leave days accrued at the termination date and the leave pay amount due under Section 41G of Cap. 57, calculated at the average daily wage rate.

Final payment summary: all amounts payable itemised separately — wages to the termination date, PILON if applicable, severance payment, accrued leave pay, and any other contractual entitlements — with the proposed payment date stated. All payments must be made on or before the termination date or within seven days of it under Section 23 of Cap. 57.

Return of company property and post-termination obligations: a request to return all employer property and a reminder that confidentiality obligations under the employment contract remain in force after termination.

Acknowledgment and closing: a professional acknowledgment of the employee's contribution, an offer of a reference letter upon request, and contact details for any queries about the process. Forms-legal.com provides this template in PDF and Word format.

Compliance with the Minimum Wage Ordinance (Cap. 608): for employees paid at or near the statutory minimum wage, confirmation that the severance payment and final wages calculations use the correct minimum wage rate applicable at the date of termination, and that no deductions are made that would bring the net pay below the statutory floor.

Governing law and forum: Hong Kong law, Employment Ordinance (Cap. 57) and Mandatory Provident Fund Schemes Ordinance (Cap. 485) as the applicable statutes, with the Labour Tribunal as the primary dispute resolution forum for claims up to HKD 500,000 and the District Court or Court of First Instance for larger claims. Forms-legal.com provides this template in PDF and Word format for use by all Hong Kong employers managing workforce reductions across any industry or sector.