Understanding Long Service Payment Under the Employment Ordinance 

What is Long Service Payment 

Long Service Payment (LSP) is a statutory payment that the employers in Hong Kong must provide the employees if they had worked for the company continuously for at least 5 years and are leaving their job due to specific circumstances accepted under the Employment Ordinance. The circumstances include reasons such as dismissal not related to serious misconduct, retirement, ill health, death, or expiry of a fixed-term contract without renewal. 

Eligibility Criteria for Long Service Payment 

Under the Employment Ordinance of Hong Kong, an employee is entitled, if following conditions are met: 

• Employed under a continuous contract: have worked for the same employer for at least 4 weeks and at least 18 hours per week. 

• Minimum service length: must have completed at least 5 years of continuous service with the company. 

• Qualifying circumstances for termination: is dismissed (not due to serious misconduct), resigns due to ill health, retires at age 65 or above, dies during employment or fixed-term contract expires and is not renewed. 

When Is Long Service Payment Not Applicable 

LSP is not payable when the employee: 

• is dismissed due to serious misconduct 

• receives a severance payment for the same period of service (both cannot be received simultaneously) 

• retires voluntarily without meeting qualifying requirements 

• has worked for less than 5 years under a continuous contract 

Note: Employers must assess the length of service and reason for termination to check if LSP applies. 

How to Calculate Long Service Payment 

LSP is calculated based on the years of service of the employee and the last monthly wages drawn. 

Formula: 

For employees paid on a monthly basis: 

LSP = 2/3 × Last monthly wages × Years of Service 

For employees paid daily or piece-based: 

LSP = 18 × Last daily wages × Years of Service 

 
Remember:  

• The maximum payable amount is HKD 390,000. 

• A part of a year of service is calculated on a proportional basis. 

• In certain cases, the employer can offset LSP using contributions made to MPF or occupational retirement schemes, subject to Hong Kong regulations. 

Employer Responsibilities and Compliance Requirements 

Compliance to Employment Ordinance while handling with long service payment is mandatory to be followed in Hong Kong. If not, the company would have to face legal penalties and disputes. Key responsibilities of the employer in context with the LSP includes:  

• Assessment of employee eligibility: Verify if the employee meets the eligibility criteria, as mentioned. 

• Calculation of the payment correctly: It is based on employee’s last wages and total years of service. Consider payment cap and offsets, if applicable. 

• Paying within the required time: Must pay the amount within seven days after the termination of employment, unless otherwise agreed by both parties. 

• Maintaining proper records: Accurate records of employment, wage details, service periods, and termination reasons are to be regularly maintained. 

Conclusion: How Long Service Payment Can Be Accurately Managed 

Managing LSP properly is essential for employers to not only stay compliant with the Employment Ordinance of Hong Kong but also to ensure that employees receive the benefits they are legally entitled to. By clearly understanding its eligibility requirements, qualifying termination scenarios, and the correct calculation method, employers can avoid legal disputes and maintain a transparent employment practice for their employees. 

Implementing a structured and automated payroll and HR process also helps businesses track employee service periods, calculate statutory payments accurately, and maintain proper records. Info-Tech’s automated payroll software or HRMS software can simplify the process by reducing manual mistakes and ensuring compliance with labour regulations. 

Contact us to know how simple it can be! 

Long Service Payment Frequently Asked Questions