Termination involves the separation of the employee from the employer.  It is commonly categorised as “voluntary termination” (initiated by employees) or “involuntary termination” (initiated by employers).  This section will cover the issues dealing with involuntary termination, which can be classified as:

n          Discipline and termination for cause

n          Termination – other than for cause

Discipline and termination for cause

Disciplinary action

n            Employers should establish fair and open written procedures for the times when disciplinary action may be necessary. Employers should state clearly the companies’ policies, rules and regulations, where applicable, so that employees are fully aware of the requirements and will not violate the regulations unknowingly.

n            Disciplinary action should be commensurate with the offence committed ranging from verbal warning, written warning, suspension from duty to summary dismissal.

n            At each stage in the process employees should have the opportunity to appeal to a higher level of management (where available).

n            Employers should be consistent in their approach to discipline and treat all cases of the same offence in the same way. Not doing so will give mixed messages to employees and may also affect how, for example, a Labour Tribunal may view an employee’s appeal.

Termination for cause

n            Termination for cause occurs when an employer wants to cease an employment relationship due to an employee’s unsatisfactory performance or behaviour.  Except in cases of serious misconduct justifying summary dismissal as described under the Employment Ordinance, employees with poor performance or misconduct of any kind should have sufficient opportunity and reasonable time to remedy their shortcomings prior to any dismissal.

Summary dismissal

n            The Employment Ordinance describes the cases where an employer may summarily dismiss, without notice or benefits, any employee who has committed very serious misconduct or fails to improve after the employer’s repeated warnings.  It is important to note that summary dismissal is the most serious disciplinary action that should not be used hastily.  Hence, employers should handle these issues extremely carefully.

n            Summary dismissal requires thorough investigation, taking full consideration of the extent of the consequences to all concerned.  The manager to whom the employee’s supervisor reports - i.e. at least two levels up - should approve it.  Where appropriate, employers should make use of their statutory right to suspend an employee from duty during the investigation.  Benefits that have accumulated under pension or provident funds should be handled in accordance with the legal requirements and the agreed terms of employment. 

Termination – other than for cause

There are cases where an organisation needs to reduce its staff size for various reasons (for example, economic downturn, change of the organisation’s strategy, or that the skill sets of employees no longer meet the organisation’s development and job requirements).  Terminations other than for cause can seriously affect the morale of remaining employees.  Hence, employers must handle this very carefully.  It is also easily associated with the social responsibility of the employer and its image with the public.

Recommendations for employers

An employee who loses his or her employment not only suffers wage loss, but also the loss of a secure future.  If redundancy is unavoidable, employers should make extra effort to assist the terminated staff.  Hence, employers should:

n            conduct sufficient communication with employees, including explaining the reasons for termination, how the compensation is calculated, etc.

n            provide the employees with reference letters to certify that the termination of their employment was due to reasons other than job performance.

n            pay ex-gratia payments to employees in addition to statutory compensation if possible (e.g. do not offset employers’ contributions to the MPF or retirement schemes against long service payments).

n            provide counselling service and help employees find alternative jobs or introduce to them the employment services offered by the Employment Services Division of the Labour Department.

n            seek assistance from other organisations, such as the Employees Retraining Board in dealing with employees’ current plight.

n            consider re-employing the terminated employees as far as practicable when the employer re-opens the same positions.

Practical notes for termination

n            Length of notice

-          Length of notice should be given to employees in accordance with the employment terms.

n            Termination payment

-          Termination payments should be in accordance with employment terms and the Employment Ordinance.  Employers should settle the payments including outstanding wages, wages-in-lieu of notice (if any), payment-in-lieu of any untaken annual leave, any outstanding sum of end of year payment, severance payment (if applicable), and any other payments under the employment contract (e.g. gratuity, provident fund)

-          Employers should pay the termination payments as soon as possible and in any case no later than:

²           seven days after the date of termination (for termination payments other than severance payment);

²           two months from the receipt of a notice of an employee’s claim (for severance payments).