Long Service Payment 2027 Calculator Hong Kong

How LSP and SP Work in Hong Kong Post-2025 Abolition

The Employment Ordinance provides two parallel termination payments: Long Service Payment (LSP) for employees with 5+ years of continuous service dismissed for reasons other than serious misconduct, retirement, or death; and Severance Payment (SP) for employees with 2+ years made redundant. The formula is identical: 2/3 of last month's wages × years of service, capped at HKD 22,500 monthly wage base (so per-year max = HKD 15,000), with overall ceiling HKD 390,000. From 1 May 2025 the MPF Offset Mechanism was abolished — employer-portion MPF can no longer offset LSP/SP for post-transition service. Pre-transition years still allow the offset. Last updated: 2026-05-18. Source: Labour Department LSP/SP factsheet.

Worked Example — HKD 40,000/Month Employee with 12 Years Service

An employee earning HKD 40,000/month with 12 years of continuous service is dismissed in 2027 for redundancy. Wage cap kicks in at HKD 22,500. 2/3 of cap = HKD 15,000. Pre-transition years (assume 10): entitlement = HKD 15,000 × 10 = HKD 150,000. MPF employer offset = HKD 80,000. Net pre-transition: HKD 70,000. Post-transition years (2): HKD 15,000 × 2 = HKD 30,000, no offset allowed. Total LSP: HKD 100,000. Statutory ceiling not yet hit. Payable within 7 days of dismissal (LSP) or end of notice period (SP).

What Counts as Continuous Service

Continuous service means working at least 18 hours per week for the same employer (or any associated company under common control). Breaks of less than 2 weeks generally don't break continuity. Time on statutory leave (maternity, sick, annual) counts. Casual or zero-hour contracts and probation periods all count. If you switched between subsidiaries of the same group, the years stack. Service breaks of 4+ weeks reset the clock unless the contract preserves continuity. Genuine retirement (age 65+), permanent incapacity, and death qualify for LSP after 5 years even where there is no employer-initiated dismissal.

Long Service Payment or Severance Payment — You Get One, Never Both

Before the arithmetic matters, check which payment you are actually owed, because the Employment Ordinance gives you either severance payment or long service payment for the same period of service — never both. Which one applies turns on length of service and on the reason the employment ended.

Severance payment needs a continuous contract of at least 24 months and a dismissal by reason of redundancy, or a lay-off. Long service payment needs at least 5 years of continuous service and applies where employment ends in the specified circumstances that are not redundancy and not summary dismissal for serious misconduct — including a contract that expires without renewal, resignation on certified medical grounds, resignation at age 65 or over, and death in service.

The practical consequence: a redundancy at four years pays SP, not LSP; the same redundancy at six years still pays SP rather than LSP, because redundancy routes you to severance regardless of length of service. The calculator above applies the same 2/3 monthly-wage formula, the HKD 22,500 wage ceiling and the HKD 390,000 cap to both, so the figure holds either way — but the entitlement question decides whether you are owed anything at all. If your employer disputes which applies, the Labour Department enquiry hotline is 2717 1771. Source: Labour Department — Concise Guide to the Employment Ordinance, Chapter 11.

Tax Treatment and Employer Tips

LSP and SP are tax-exempt to the employee under section 8(1)(a) of the Inland Revenue Ordinance — no salaries tax payable. For employers, LSP is fully deductible against profits tax in the year of payment. Employers preparing for 2027 dismissals should: (1) Calculate pre and post-transition splits carefully — incorrect calculation triggers Labour Department dispute. (2) Reserve cash flow for the new no-offset post-transition portion. (3) Consider voluntary redundancy packages that can be tax-advantaged for the employer. (4) Document the wage history for the 12 months before cessation. (5) Pay within statutory deadline — late payment carries 200% penalty.