For a company, it is more complicated to dismiss an employee than to hire an employee if the contract does not expire. If you want to reasonably dismiss an employee, the first step is to accurately calculate the notice period.
“The notice period” is the period between the notice given day and the day when the contract is terminated. Usually, both parties will agree on it when signing the contract. If the two parties have not agreed on the relevant notice, the required notice period should be determined according to the Employment Ordinance(EO). Let’s see how to calculate the notice period.
How to calculate the notice period during probation period?
If an employee is within the first month of probation, then the length of notice is not required.
If an employee is after the first month of probation:
- where contract makes provision for the required length of notice, as per agreement, but not less than 7 days
- where contract does not make provision for the required length of notice, it should not less than 7 days notice
[For a continuous contract with no / after probation period]
- where contract makes provision for the required length of notice, as per agreement, but not less than 7 days
- where contract does not make provision for the required length of notice, it should not less than 1 month
[For a non-continuous contract with no / after probation period]
The length of notice shall be the agreed period.
When to notify employees about termination?
If notice period expressed in days or weeks, to avoid any disputes, the day when notice of termination of employment contract is given may be excluded from the notice period.
If notice period expressed in months, the EO has stipulated that the day when notice of termination of employment contract is given should be included in the notice period.
A “month” means a period of time commencing on the day when notice of termination of employment contract is given, and ending –
- at the end of the day before the corresponding date in the following month (e.g. 13 th February to 12 th March);
- where there is no corresponding date in the following month, at the end of the last day of the following month (e.g. 30 th January to the last day of February); or
- where the commencing day is the last day of a month, at the end of the last day of the following month (e.g. the last day of February to 31 st March).
For example:
You hired a designer and the notice period on the employment contract is 2 months. He has passed the probation period, but his performance is very poor recently. If you want to fire him, how long should you inform him? When is his last day?
According to the employment contract signed by both parties, you need to inform the employee 2 months in advance. The termination date is calculated from the day you give the notice, and the day before the same day of the next month. For example, if you give the notice on July 6, then his last day should fall on September 5.
If the notice period is not provided, the employer needs to give the payment in lieu of notice!
“Payment in lieu of notice” refers to the payment of wages equal to the number of days in the notice period when the company dismisses an employee without giving a notice.
How to calculate payment in lieu of notice?
The formula for calculating payment in lieu of notice is average daily wages(ADW) earned by an employee in the 12-month period X Notice period expressed in days or weeks or months:
- Notice period expressed in days or weeks, ADW X Number of days in the notice period for which wages would normally be payable to the employee
- Notice period expressed in months, ADW X Number of months specified in the notice period
The calculation of ADW is complicated, painful, and easy to get wrong, but Workstem, a one-stop human resource management system, can accurately calculate the ADW, notice period, and payment in lieu of notice according to the employee’s join date and historical salary records.
Read More:
How to Calculate Annual Leave Payment on Termination of Employment Contract?
How Paid Annual Leave Should Be Calculated?
