Long Service Payment VS Severance Payment: Calculation Methods and MPF Offsetting New System in 2025

Understanding labor laws and related rights is essential for every employer operating a business in Hong Kong. According to the Employment Ordinance, employees are entitled to Long Service Payment or Severance Payment as compensation under specific circumstances. This article will explain in detail the differences between Long Service Payment and Severance Payment, eligibility requirements, calculation methods, and the MPF offsetting cancellation mechanism to be implemented in 2025.

Basic Concepts of Long Service Payment and Severance Payment

According to Hong Kong's Employment Ordinance, Long Service Payment and Severance Payment are two compensation systems established to protect employee rights. These two types of compensation aim to provide certain financial protection for eligible employees when leaving their employment under specific circumstances.

Important Note: If an employee simultaneously meets the conditions for both Long Service Payment and Severance Payment, the employer only needs to pay the higher amount, not both.

Definition of Long Service Payment

Long Service Payment refers to a sum that employers must pay to employees who have worked continuously for five years or more and leave employment under specific conditions, as recognition and compensation for their long service.

Definition of Severance Payment

Severance Payment refers to compensation that employers must pay to employees who have worked continuously for not less than 24 months and are dismissed due to redundancy or lay-off.

[Content continues with detailed explanations of eligibility conditions, calculation methods, MPF offsetting mechanism changes in 2025, etc.]