Qualifying Rules for Long Service Payment HK
The starting point for any long service payment calculation is eligibility. An employee must generally have been employed under a continuous contract for not less than five years, and the employment must end in one of the situations recognised by the Employment Ordinance. A five-year anniversary on its own does not create a payment obligation.
In 2026, the meaning of a continuous contract has also become more important for HR administration. An employee must have been employed continuously by the same employer for four weeks or more and meet the applicable working-hours test. The 2026 rule uses either at least 17 hours in each week or, where a week falls below 17 hours, at least 68 hours across the specified four-week period. This change affects the threshold for establishing a continuous contract, but it does not replace the separate five-year requirement for long service payment.
Continuous Employment and 5-Year Service Threshold
The five-year threshold is measured by reckonable service with the same employer. You therefore need to examine the employment record rather than rely only on the latest contract document. Where an employee has worked through several contracts with the same employer, the relevant issue is whether the employment has remained continuous under the statutory rules.
For most salaried employees, the practical mistake is to look at the start and end dates only and assume that five calendar years always equals five reckonable years. Payroll records, contract changes, periods of employment and the actual termination date should all be checked. Where there is an unusual break in service, a disputed working-hours pattern or another complication, the service period should be reviewed before the payment is calculated.
The 2026 continuous-contract test is especially relevant where an employee has irregular working hours. The lower weekly threshold and the four-week alternative can make an employment relationship fall within the definition of a continuous contract when the old weekly threshold would not have been met. However, the five-year LSP qualifying period remains a separate condition.
| Topic | Long Service Payment | Severance Payment | Practical distinction |
|---|---|---|---|
| Minimum service | At least 5 years under a continuous contract | At least 24 months under a continuous contract | The qualifying service period is different |
| Typical termination route | Dismissal for reasons other than redundancy or serious misconduct; or expiry of a fixed-term contract without renewal | Dismissal or fixed-term expiry because of redundancy; or qualifying lay-off | The reason for termination determines which payment applies |
| Other qualifying situations | Death in service; resignation after permanent unfitness is medically certified; resignation at age 65 or above | No equivalent LSP route | LSP includes certain retirement and medical-resignation situations |
| Both payments for the same service | No | No | An employee is entitled to either LSP or severance payment for the same employment period |
Legitimate Termination Scenarios for Claims
The recognised qualifying scenarios can be grouped into five practical categories:
- Dismissal that is not redundancy or summary dismissal for serious misconduct. If the employer terminates the employment and the statutory conditions are otherwise satisfied, LSP may be due.
- Expiry of a fixed-term contract without renewal. A contract reaching its stated end date can support an LSP claim when the other statutory conditions are met.
- Death during employment. The entitlement does not simply disappear because the employee has died. Special rules apply to payment to the relevant beneficiaries.
- Resignation because of permanent unfitness for the present job. The medical condition must be certified in the specified manner by a registered medical practitioner or registered Chinese medicine practitioner.
- Resignation at age 65 or above. The statutory rule recognises resignation on the ground of old age at this age threshold.
A further point matters when a fixed-term contract is about to expire. Where the employer makes a written offer to renew the employment or re-engage the employee under a new contract at least seven days before expiry, and the employee unreasonably refuses that offer, the employee may lose eligibility for LSP. The same principle applies to the relevant severance payment rules.
Ordinary voluntary resignation does not appear in the qualifying list. This is why a payroll team should never trigger an automatic long service payment simply because an employee has crossed the five-year mark. The final reason for termination needs to be documented and consistent with the actual circumstances.
Timing matters as well. Ordinary long service payment should generally be paid within seven days after termination of the employment contract. For a deceased employee, separate statutory arrangements apply to the payment process. Keeping the termination reason, notice, final payroll and service record together makes later checking much easier.
How to Calculate Long Service Payment Hong Kong: Core Formulas
Once eligibility is established, the long service payment calculation is relatively straightforward for a monthly-rated employee. The core formula is based on two-thirds of the applicable monthly wage figure multiplied by the reckonable years of service.
The question of how to calculate long service payment is therefore not simply a matter of taking the employee’s gross annual salary and dividing it by twelve. The statutory calculation uses a defined monthly wage base, applies a cap, and then multiplies that amount by reckonable service.
For a monthly-rated employee, the statutory formula is generally:
Long Service Payment = Applicable Monthly Wage Base × 2/3 × Reckonable Years of Service
An employee may also elect to use the relevant average wages over the preceding 12 months in circumstances covered by the Employment Ordinance. For HR processing, this means you should not assume that the last payslip is always the only figure that can be used. The wage definition can also extend beyond simple basic salary. Certain payments, including commission, good attendance bonus and travelling allowance, may form part of wages for statutory calculations.
This is the core long service payment calculation used for the 2026 framework, subject to the statutory wage cap and the overall payment ceiling.
Standard Formula for Monthly-Rated Employees
Suppose an employee has a monthly wage of HK$12,000 and five reckonable years of service. The first step is to calculate two-thirds of the monthly wage:
HK$12,000 × 2/3 = HK$8,000
The next step is to multiply that amount by five years:
HK$8,000 × 5 = HK$40,000
The resulting illustrative long service payment is therefore HK$40,000, assuming the employee is eligible and there are no other statutory adjustments affecting the case.
Partial years are dealt with on a pro-rata basis. For example, five years and six months can be expressed as 5.5 reckonable years for an illustrative calculation. With monthly wages of HK$18,000:
HK$18,000 × 2/3 × 5.5 = HK$66,000
This method is useful for payroll checking because it prevents the common mistake of rounding six months down to a completed year or treating it as a full additional year. The service period needs to be reflected proportionately.
| Scenario | Monthly wage input | Wage used after statutory cap | Illustrative LSP |
|---|---|---|---|
| Five years at HK$12,000 | HK$12,000 | HK$12,000 | HK$40,000 |
| Five years six months at HK$18,000 | HK$18,000 | HK$18,000 | HK$66,000 |
| Ten years at HK$30,000 | HK$30,000 | HK$22,500 | HK$150,000 |
| Twenty-six years at HK$50,000 | HK$50,000 | HK$22,500 | HK$390,000 |
Statutory Wage Cap and HK$390,000 Maximum Limit
The statutory calculation does not continue increasing without limit as salary rises. For monthly-rated employees, the wage figure used for the calculation is subject to a ceiling of HK$22,500. Two-thirds of that amount is HK$15,000, which is effectively the maximum statutory amount attributable to each reckonable year before the overall payment ceiling is applied.
The total long service payment is subject to a maximum of HK$390,000. At the capped annual amount of HK$15,000, the mathematical point at which that total ceiling is reached is 26 reckonable years.
This creates an important distinction between the employee’s actual remuneration and the statutory calculation base. An employee earning HK$30,000 a month does not generate an LSP calculation based on HK$30,000. The wage base is reduced to HK$22,500 for this statutory purpose, so the maximum annual calculation becomes HK$15,000.
The ceiling is particularly important when you are reviewing senior employees with long tenure. A payroll system can easily calculate the percentage correctly while still overpaying if the wage cap is not applied before the multiplication step.
The Labour Department’s reference calculator is useful for an initial check, but it expressly warns that its output is a reference calculation based on user input and assumptions. A final payroll decision should therefore be checked against the employment contract and actual facts of the case rather than treated as an automated legal determination.
Pro-Rata Calculations for Partial Service Years
Incomplete service years must be calculated on a pro-rata basis. A simple way to structure the working paper is to convert the incomplete period into a fraction of a year.
For example:
- 5 years and 3 months = 5.25 years
- 5 years and 6 months = 5.50 years
- 5 years and 9 months = 5.75 years
Suppose the applicable monthly wage is HK$15,000 and the employee has completed five years and three months. The working would be:
HK$15,000 × 2/3 = HK$10,000
HK$10,000 × 5.25 = HK$52,500
The same principle continues after the employee crosses the five-year eligibility threshold. The fact that five years is the qualifying threshold does not mean later partial periods are ignored. Conversely, an employee with four years and eleven months does not become eligible simply because the period is close to five years. Eligibility and pro-rata calculation are two different steps.
For HR records, keep the employment commencement date, relevant termination date, recognised service period and wage base in separate fields. This makes the calculation auditable and helps you explain differences between payroll records, HR records and employee expectations.
How to Compute Long Service for Domestic Helpers in Hong Kong?
Foreign domestic helpers are covered by the Employment Ordinance and also work under the government-prescribed Standard Employment Contract, ID 407. The statutory formula for long service payment is still based on monthly wages multiplied by two-thirds and then by reckonable years of service. However, the employment structure of FDHs creates several practical issues, especially because each Standard Employment Contract is effective for two years and the helper’s wage is subject to the Minimum Allowable Wage.
The practical question of how to compute long service for domestic helper cases is therefore slightly different from a standard office employee case. You need to separate three things: continuity with the same employer, the actual contractual wage, and the other termination payments due under the Standard Employment Contract.
For 2026, the current Minimum Allowable Wage for a foreign domestic helper is HK$5,100 per month. Where the employer does not provide food, the current food allowance is HK$1,236 per month. These figures are important for payroll compliance, but the MAW should not be treated as an automatic long service payment calculation base when the helper’s actual contractual wage is higher. The LSP formula uses the applicable wage figure, subject to the statutory wage cap.
For example, a helper earning HK$7,500 per month is not normally calculated on HK$5,100 merely because HK$5,100 is the MAW. Subject to the statutory rules, the calculation starts from the applicable monthly wages, not simply the minimum allowable figure.
Multi-Contract Continuity and 5-Year Qualification
An FDH Standard Employment Contract is effective for two years. This means a helper who reaches five years with the same employer will normally have employment records covering more than one contract period. The five-year LSP condition should therefore be checked across the employment relationship rather than by looking for one contract document containing a five-year term.
Keep the original Standard Employment Contracts, renewal documents, wage records and termination documents together. This is especially useful where the helper has completed several contracts with the same employer, because the payroll team may otherwise mistake the latest contract commencement date for the start of the employee’s entire service history.
There is another important distinction. An ordinary contract renewal does not automatically turn a long service claim into a new five-year clock merely because the employee has signed a new ID 407. The statutory test focuses on continuous service with the same employer. At the same time, where there is a disputed interruption, a premature termination followed by a later re-hire, or uncertainty about whether the employment has remained continuous, you should not assume continuity without reviewing the facts.
The termination reason still controls eligibility. An FDH employed continuously for at least five years can qualify where the helper is dismissed or the contract is not renewed for a reason other than redundancy or serious misconduct. If the employer dismisses the helper because of redundancy, the relevant statutory payment is severance payment rather than long service payment.
There is also a specific renewal point. If the employer has offered in writing to renew the contract or re-engage the helper under a new contract at least seven days before expiry, but the helper unreasonably refuses the offer, the LSP entitlement may not arise. This makes written renewal records particularly important for employers approaching the end of a two-year contract.
Minimum Allowable Wage (MAW) Calculation Baseline
The MAW is a wage floor for the employment contract. It is not a special five-year compensation rate.
For an FDH whose contractual monthly wage is exactly the current MAW of HK$5,100, five years of reckonable service produces the following illustrative calculation:
HK$5,100 × 2/3 × 5 = HK$17,000
If the same helper has five years and six months of reckonable service:
HK$5,100 × 2/3 × 5.5 = HK$18,700
Now compare that with an FDH whose contractual monthly wage is HK$7,500 and who has seven reckonable years:
HK$7,500 × 2/3 × 7 = HK$35,000
These examples show why the MAW should be treated as the compliance floor rather than the default LSP base. Where the actual wage is above the MAW, the actual applicable wage is the starting point, subject to the statutory ceiling.
| Scenario | Monthly contractual wage | Reckonable service | Illustrative LSP |
|---|---|---|---|
| FDH at current MAW | HK$5,100 | 5 years | HK$17,000 |
| FDH at current MAW with partial year | HK$5,100 | 5 years 6 months | HK$18,700 |
| FDH paid above MAW | HK$7,500 | 7 years | HK$35,000 |
| FDH paid above MAW with partial year | HK$9,500 | 5 years 3 months | HK$33,250 |
Food allowance should also be kept separately in the final settlement schedule. The government calculator lists monthly food allowance for FDHs as a separate termination item, alongside the LSP entry. This is useful for payroll control because the helper’s final statement can contain outstanding wages, long service payment, unused annual leave pay, food allowance where applicable, return passage and other contractual sums at the same time.
FDHs are also outside the MPF System for this statutory calculation. The Labour Department’s calculation guidance specifically identifies domestic helpers as employees for whom the special MPF offsetting treatment does not apply. In 2026, this means the standard whole-period LSP formula is the practical starting point for an FDH instead of constructing a pre-transition and post-transition calculation split.
That point is easy to miss if you use a general payroll checklist designed for office employees. When processing an FDH case, select the appropriate non-MPF route in the Labour Department calculator and check the result against the Standard Employment Contract and actual payroll records.
End-of-Contract Settlement and Medical Retirement Protocols
Long service payment is only one part of an FDH termination settlement. The employer may also need to settle outstanding wages, payment in lieu of notice where applicable, untaken annual leave pay, pro-rata annual leave pay for the current leave year, and other contractual items such as return passage and relevant allowances.
Under the Standard Employment Contract, either party can generally terminate the contract early by giving one month’s written notice or one month’s wages in lieu of notice, subject to the special rules for termination without notice. The employer and helper also have notification obligations towards the Immigration Department after termination.
The return passage is particularly relevant to FDH cases. It is not part of the LSP formula, but it can form part of the employer’s overall financial settlement at the end of employment. The Immigration Department also identifies free return passage, food and travelling allowances, where applicable, as other sums that may be due when the contract ends.
Medical retirement should also be handled carefully. For LSP purposes, the statutory route is not simply “the employee is unwell”. The helper must have been employed continuously for at least five years, be certified as permanently unfit for the present type of work by a registered medical practitioner or registered Chinese medicine practitioner, and resign on that ground. A separate route exists for resignation at age 65 or above on the ground of old age.
This is different from an employer choosing to terminate the helper because of a medical condition. The facts and legal basis of the termination need to be examined carefully because different statutory protections and payments can apply.
At the end of the employment, keep a signed settlement record showing each payment separately. A useful payroll schedule will normally distinguish the LSP amount from outstanding wages, annual leave pay, food allowance, travelling allowance and return passage. Keeping each item visible reduces the risk of treating a contractual reimbursement or allowance as though it were part of the statutory LSP formula.
For FDHs, payment timing should also be controlled closely. The Labour Department states that long service payment is generally due within seven days after termination, while the FDH guidance also requires employers to settle outstanding wages and other contractual payments and keep clear payment records.
If a case is disputed, the Labour Department’s Labour Relations Division provides consultation and conciliation services. The government guidance also points parties towards the Minor Employment Claims Adjudication Board or the Labour Tribunal where appropriate. For an employer, this is another reason not to rely solely on a calculator output. The calculation should sit on top of a documented employment history and a clear legal reason for termination.
- Government guidance: Hong Kong Labour Department, Employment Ordinance, Severance Payment and Long Service Payment. [Labour Department Employment Ordinance guidance]
- Government online calculator: Hong Kong Labour Department, Statutory Employment Entitlements Reference Calculator. [Statutory Employment Entitlements Reference Calculator]
- Foreign domestic helper government guidance: Hong Kong Labour Department, Foreign Domestic Helpers Frequently Asked Questions. [Foreign Domestic Helpers FAQ]
- Immigration guidance: Hong Kong Immigration Department, Foreign Domestic Helpers FAQ. [Immigration Department Foreign Domestic Helpers FAQ]
- Independent online calculator: PennyCompass, Hong Kong Long Service Payment Calculator. This is a supplementary calculation tool, not a substitute for official legal guidance. [PennyCompass Hong Kong Long Service Payment Calculator]
- Background reference: Wikipedia, Foreign domestic helpers in Hong Kong. Useful for general background only, not for determining statutory entitlement. [Wikipedia: Foreign domestic helpers in Hong Kong]
- Community discussion: Reddit, Hong Kong discussion on helper termination and employment arrangements. Community reports are anecdotal and should not be used as legal evidence. [Reddit discussion on helper termination and agency arrangements]
- App resource: HelperPlace on the Apple App Store, a platform for families and domestic workers. It can be used as a practical community or recruitment resource, but it is not an authority on long service payment law. [HelperPlace on the Apple App Store]
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