Long service payment after MPF offsetting was abolished.
Long service payment
—
Capped wage used
—
Overall maximum
—
Your breakdown
Updates live as you type| Step | Amount |
|---|
What long service payment rewards, and when it is due
Long service payment is a statutory lump sum the Employment Ordinance gives to employees who leave after a long stretch with one employer in defined circumstances, for example being dismissed for reasons other than serious misconduct, or where a fixed-term contract is not renewed, after at least five years of continuous service. It is not a discretionary bonus and it is not severance, though it uses the same formula. Severance is for redundancy; long service payment covers the other qualifying exits. This calculator works out the entitlement from your last monthly wage and your years of service, applying the statutory wage cap and the overall maximum.
It is built for employees nearing a departure who want to know what they are owed, and for employers and HR teams budgeting an exit. The single biggest recent change it reflects is the end of MPF offsetting, which used to let employers shrink the payment, and no longer does.
The two-thirds formula and its ceilings
The core formula is two-thirds of your last month's wages for each year of service, with part-years counted proportionally. Two ceilings then apply. The monthly wage that feeds the formula is capped, at $22,500 in the figure this calculator uses, so earnings above that do not increase the payment. And the total is subject to an overall maximum, $390,000 in the figure modelled here. Both of these are the calculator's working assumptions drawn from the Labour Department's framework, and you should confirm the current cap and maximum with the Labour Department, since the wage cap in particular has been revised over time.
Eight years of service on a $25,000 wage
Using the defaults, the last monthly wage is $25,000, but it is capped at $22,500 for the formula. Two-thirds of $22,500 is $15,000, and across eight years of service that is $120,000. This sits well below the $390,000 overall maximum, so the full $120,000 is payable.
At a capped wage of $22,500, the payment grows by $15,000 a year until it hits the overall maximum at around 26 years of service. Beyond that point extra years add nothing, because the $390,000 ceiling binds.
The abolition of MPF offsetting changes the real cost
For decades, an employer could use the accrued benefits derived from its own mandatory MPF contributions to offset, and often wipe out, the long service or severance payment it owed. From 1 May 2025 that offsetting arrangement was abolished for the portion of service after the transition date. In practice this means employees keep both their MPF accruals and their statutory payment, and employers can no longer net one against the other for service from that point. The calculator shows the gross statutory entitlement and does not deduct any offset, which matches the post-abolition position. If part of your service predates the change, the transitional rules are intricate, so check the exact split with the Labour Department or the MPFA.
One more point worth flagging: you cannot receive both severance and long service payment for the same period of employment. They are mutually exclusive, so a redundancy that triggers severance rules out a long service payment on the same service.
Is a long service payment taxed as salaries income?
A genuine statutory long service or severance payment, calculated under the Employment Ordinance formula, is generally not chargeable to salaries tax, because it is compensation for loss of employment rather than a reward for services. Any amount paid above the statutory entitlement can be treated differently. Hong Kong has no separate capital gains tax that would catch it either, but the line between a tax-free statutory payment and a taxable gratuity can be fine, so confirm the treatment of your specific payout with the Inland Revenue Department.
How are part-years of service counted?
Proportionally. The formula does not round down to whole years, so eight and a half years of service earns the half-year too. The calculator accepts fractional years for exactly this reason. If your service includes incomplete months, the Labour Department's method pro-rates them, so enter your service as a decimal, such as 8.5, to reflect a half-year.