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A contract of employment may be terminated by the employer or employee through giving the other party due notice or wages in lieu of notice. In the case of a continuous contract where there is an express agreement as to the length of notice, the period of notice must be not less than 7 days. However, in the case of a continuous contract with no provision for length of notice, the period of notice must be not less than one month.

Where it has been expressly agreed that the employment is on probation, a contract of employment may be terminated by either party during the first month of such employment without notice and thereafter, by not less than 7 day's notice.

Where a contract of employment is terminated by either party without due notice, a sum called "wages in lieu of notice" should be paid to the other party.

The method of calculating wages in lieu of notice is:

• If the period of notice agreed by the employer and the employee is expressed in terms of days or weeks, the wages in lieu of notice is calculated by multiplying the number of days in the notice period for which wages would normally be payable to the employee by the average daily wages earned by an employee in the 12-month period preceding the day when a notice of termination of contract is given.
• If the period of notice agreed by the employer and the employee is expressed in terms of months, the wages in lieu of notice is calculated by multiplying the number of months specified in the notice period by the average monthly wages earned by an employee in the 12-month period preceding the day when a notice of termination of contract is given.

Termination of Employment Contract Without Notice or Wages in lieu of Notice

An employer may summarily dismiss an employee without notice or payment in lieu of notice if the employee, in relation to his employment:

• willfully disobeys a lawful and reasonable order,
• misconducts himself,
• is guilty of fraud or dishonesty, or
• is habitually neglectful in his duties.

Taking part by an employee in a strike is not a lawful ground for an employer to terminate the employee's contract of employment without notice or payment in lieu.

It must be emphasized that summary dismissal is a serious disciplinary action. It only applies to cases where an employee has committed very serious misconduct or fails to improve himself after the employer's repeated warnings.

Under special circumstances, an employee may terminate his employment contract without notice or payment in lieu of notice. For example, if he reasonably fears physical danger by violence or disease, or he is subjected to ill-treatment by the employer.

If you have any further queries on the relevant provisions of the Employment Ordinance, please contact the telephone hotline 2717 1771 (handled by the 1823 Call Centre) or Offices of the Labour Relations Division of the Labour Department.

Date of amendment: 22nd February 2013