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Chapter 11: Severance Payment and Long Service Payment

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12 views6 pages

Chapter 11: Severance Payment and Long Service Payment

Uploaded by

Crista Mae Cajes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter 11: Severance Payment and Long Service Payment

Eligibility for Severance Payment / Long Service Payment

An employee is eligible for severance payment or long service payment subject to


the following conditions:

Entitlement Severance Payment Long Service Payment

Not less than 24 months Not less than 5 years


Qualifying period
under a continuous contract under a continuous contract
of employment

 The employee is  The employee is


dismissed by reason of dismissed but:
redundancy* - he is not summarily
dismissed due to his
serious misconduct
- his dismissal is not by
reason of redundancy
 Employment contract of  Employment contract of a
Conditions / a fixed term expires fixed term expires without
Requirements without being renewed being renewed*
by reason of
redundancy*

 The employee is laid off  The employee dies

 The employee resigns on


ground of ill health

 The employee, aged 65


or above, resigns

* If not less than 7 days before the date of dismissal / expiry of the fixed term
contract in case of severance payment, and not less than 7 days before the expiry
of the fixed term contract in case of long service payment, the employer has
offered in writing to renew the contract of employment or re-engage him under a
new contract but the employee has unreasonably refused the offer, the employee
is not eligible for the entitlements.
NOTE: An employee will not be simultaneously entitled to both long service
payment and severance payment.

Meaning of Redundancy
An employee is taken to be dismissed by reason of redundancy if the dismissal
is due to the fact that:

• the employer closes or intends to close his business;


• the employer has ceased, or intends to cease, the business in the place
where the employee was employed; or
• the requirement of the business for employees to carry out work of a particular
kind, or for the employee to carry out work of a particular kind in the place
where the employee was employed, ceases or diminishes or is expected to
cease or diminish.

Meaning of Lay-off
If an employee is employed on such terms and conditions that his remuneration
depends on his being provided by the employer with work of the kind he is
employed to do, he shall be taken to be laid off if the total number of days on
which no work is provided and no wages is paid exceeds:

• half of the total number of normal working days in any four consecutive
weeks; or
• one-third of the total number of normal working days in any 26 consecutive
weeks.

The days of lock-out, rest days, annual leave and statutory holidays should not
be counted as normal working days during the above periods.
Amount of Severance Payment / Long Service Payment
The following formula applies to the calculation of both severance payment and
long service payment:

reckonable
Monthly-paid #
(last full month’s wages* X 2/3) X years of
employee
service

(any 18 days' wages* chosen reckonable


Daily-rated /
piece-rated by the employee out of his X years of
#
employee last 30 normal working days) service

Service of an incomplete year should be calculated on a pro rata basis.

* An employee may also elect to use his average wages in the 12 months
immediately preceding the termination of employment contract for the calculation.
(Where the employee's employment contract is terminated by payment in lieu of
notice, the employee may elect to use his average wages in the 12 months
immediately preceding the date up to which the payment in lieu of notice is
calculated.)
# The sum should not exceed 2/3 of $22,500 (i.e. $15,000).

Reckonable Years of Service


For all manual employees and non-manual employees whose average monthly
wages did not exceed $15,000 for the 12 months preceding 8 June 1990, if the
relevant date of termination of employment occurs on or after 1 October 2004, the
years of service should be reckoned in full.

For non-manual employees whose average monthly wages exceeded $15,000 for
the 12 months preceding 8 June 1990, their years of service can be reckoned up
to 1980.

Maximum Amount
If the relevant date of termination of employment occurs on or after 1 October 2003,
the maximum amount of severance payment or long service payment is $390,000.

Payment of Severance Payment


An employee who wishes to claim for severance payment should serve a written
notice to his employer within three months after the dismissal / lay off takes effect.
The deadline for serving such notice may be extended if approved by the
Commissioner for Labour.

The employer shall make the severance payment to the employee not later than
two months from the receipt of such a notice.

Offences and Penalties


An employer who without reasonable excuse fails to pay severance payment to
an employee is liable to prosecution and, upon conviction, to a fine of $50,000.

Payment of Long Service Payment


Long service payment should be paid to an employee within seven days after the
date of termination of employment contract.

Offences and Penalties


An employer who wilfully and without reasonable excuse fails to pay long service
payment to an employee is liable to prosecution and, upon conviction, to a fine of
$350,000 and to imprisonment for three years.

Offsetting of Severance Payment / Long Service Payment against


Mandatory Provident Fund Scheme benefit, Occupational Retirement
Scheme benefit or Gratuity based on length of service
If an employee becomes entitled to severance payment or long service payment
and:

• gratuities based on length of service or occupational retirement scheme


benefits (excluding any part attributable to employee's contributions) have
been paid to the employee; or
• accrued benefit (excluding any part attributable to employee's contributions)
is being held in a mandatory provident fund scheme in respect of the
employee, or has been paid to the employee,

the severance payment / long service payment is to be offset against the


aforementioned amount of gratuities and benefits to the extent that they relate to
the employees' years of service for which the severance payment / long service
payment is payable.

(For enquiries on application for payment of an amount from the occupational


retirement scheme benefits or accrued benefit in the mandatory provident fund
scheme due to severance payment / long service payment paid / payable to an
employee, please contact the trustees concerned for details.)
Claiming Long Service Payment on the ground of Ill Health
An employee claiming for long service payment on ground of ill health should
forward to the employer a certificate in a specified form issued by a registered
medical practitioner or a registered Chinese medicine practitioner, certifying that
he is permanently unfit for his present job.

Regardless of whether the certificate produced by the employee was issued by a


registered medical practitioner or registered Chinese medicine practitioner, an
employer may, within 14 days after receiving such certificate, at the employer’s
own expense, arrange for the employee to attend another medical examination
conducted by a registered medical practitioner or registered Chinese medicine
practitioner named by the employer to obtain a second opinion as to the
employee’s permanent unfitness to undertake the work at issue. The employer
should notify the employee in writing details of the appointment not later than
48 hours before the examination is to take place.

Claiming Long Service Payment in the event of the Death of an Employee

Priority in claiming long service payment

1st the spouse of the deceased employee


children of the deceased employee (if two or more persons apply, the long
2nd
service payment should be divided equally between them)

parents of the deceased employee (if two or more persons apply, the long
3rd
service payment should be divided equally between them)

4th the personal representative of the deceased employee

Application Procedures
The person who wishes to claim for long service payment must serve an
application in a specified form to the employer within 30 days after the death of the
employee. Where necessary, the Commissioner for Labour may extend the
deadline. The form can be obtained at any branch office of the Labour Relations
Division of the Labour Department or downloaded from the web page of the Labour
Department.
The employer shall make the payment of Long Service Payment to:

The spouse of the employee within 7 days after receiving the application

Other applicants within 7 days after the application period expires

Offences and Penalties


An employer who without reasonable excuse fails to pay long service payment to
the beneficiaries of a deceased employee is liable to prosecution and, upon
conviction, to a fine of $50,000.

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