Long Service Payment 2027 Calculator Hong Kong
After 5+ years of continuous service, Hong Kong employees terminated (other than for misconduct) are entitled to a Long Service Payment (LSP) or Severance Payment (SP). From 1 May 2025 the MPF offset mechanism was abolished — employers can no longer use employer-portion MPF contributions to offset LSP. This 2027 calculator works out your full LSP entitlement under the new rules.
Average of 12 months before cessation.
≥5 yrs for LSP, ≥2 yrs for SP.
Pre-transition service — MPF offset still applies.
Only used to offset pre-2025 portion.
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.
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.