Can I terminate an employment contract without notice or payment in lieu of notice?

An employer can terminate an employee without notice by paying in lieu of notice, if they want the employee to be dismissed immediately.

An employer can summarily dismiss an employee without notice or payment in lieu of notice if the employee had engage in the following circumstances:

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

An employee can constructively dismiss their employment contract without notice or payment in lieu of notice in the following circumstances:

• he reasonably fears physical danger by violence or disease;
• he is subjected to ill-treatment by the employer; or
• he has been employed for not less than 5 years and he is certified by a registered medical practitioner as being permanently unfit for the type of work he is engaged in.

Payment in lieu of notice

An employer may offer payment in lieu of the notice.  The length of notice period will affect the amount an employer has to pay, and the payments can be calculated as follows:

The payment in lieu of notice must be done as soon as possible and within 7 days after the contract expires.

Summary dismissal

An employer can summarily dismiss an employee without notice and payment in lieu of notice, but only in very exceptional circumstances.

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

(a) willfully disobeys a lawful and reasonable order;

(b) misconducts himself;

(c) is guilty of fraud or dishonesty; or

(d) is habitually neglectful in his duties.

An example of an employee’s (b) misconduct or (c) dishonest conduct would be sharing confidential information with your competitor. If you have evidence that your employee had done so, you can summarily dismiss them without giving them advance notice or payment in lieu of notice.

However, summary dismissal is a serious disciplinary action. It only applies if an employee has committed very serious misconduct or fails to improve after the employer’s repeated warnings.

Constructive dismissal

An employee may terminate his employment contract without notice or payment in lieu of notice if –

(a) he reasonably fears physical danger by violence or disease;

(b) he is subjected to ill-treatment by the employer; or

(c) he has been employed for not less than 5 years and he is certified by a registered medical practitioner as being permanently unfit for the type of work he is engaged in.

Key Takeaways

• An employee can be terminated without notice by payment in lieu of notice if the employer wishes to terminate their employment immediately
• Payments will be calculated based on the amount of wages equivalent to the length of the notice period
• An employee can be terminated without notice or payment in lieu of notice if they are constructively dismissed or summarily dismissed by the employer.

Bibliography

1. Labour Department “Chapter 9: Termination of Contract of Employment”: https://www.labour.gov.hk/eng/public/wcp/ConciseGuide/09.pdf
2. Labour Department “Frequently Asked Questions about The Employment Ordinance, Cap. 57”: https://www.labour.gov.hk/eng/faq/cap57d_whole.htm

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