What is end of year payment?
End of year payment means any annual payment (including double pay, 13th month payment, end of year bonus) of a contractual nature. It does not include any payment which is of a gratuitous nature or which is payable at the discretion of the employer.*
*For every employment contract made after 27 June 1997, it is presumed that an annual payment or annual bonus is not of a gratuitous nature and is not payable only at the discretion of the employer unless a written term or condition in the contract expresses intention to the contrary.
Notice of end of year payment
The Employment Ordinance doesn’t regulate that the employer must pay end of year payment, including double pay and end of year bonus.
Whether the employee is entitled end of year payment should be based on the amount as specified in the employment contract. If the amount is included in the terms of employment, the employer must fulfil the terms of the contract to pay the end of year payment to eligible employees.
If it is not specified, a sum equivalent to the average monthly wages earned by an employee in the 12-month period preceding the day on which it becomes due. If an employee is employed for less than 12 months, the calculation shall be based on the shorter period.
If a pay day is not specified, payment should be made on the last day of the payment period or within seven days after that day. If the end of year payment is to be calculated by reference to any profits of the employer, payment should be made on the day the profits are ascertained or within seven days after that day.
| Does the employment contract specify the proportion for the end of year payment? | Yes | An employee is eligible for a pro rata end of year payment in accordance with a term of his contract |
| No | Average monthly wages × Employment period/payment period
Note: The period of employment in the payment period includes the probationary period (if any) |
Resigned/dismissed employees – End of year payment case
Kiki has stipulated the end of year payment in the employment contract, and complies with the continuous contract, but resigned after working for less than one pay period. In this case, according to the Employment Ordinance, it can be deemed that the employee has voluntarily waived the eligibility for the end of year payment, and the employer does not need to pay part of the payment.
Using the same example, if Kiki is dismissed due to no serious negligence, the employer needs to convert the end of year payment proportionally and pay on termination day or within seven days thereafter.
Workstem
The key of payroll is “accuracy”. But it’s more than difficult to ensure the basic payroll information, actual working hours, leave days and other basic data is correct. Before pay out, it should be considered that whether the commissions or allowances and other variable pay items meet the payroll policies, and check whether the MPF contributions are deducted, ect. The accurate payroll is more difficult than we imagined.
Workstem has a powerful AI engine to integrate onboarding, scheduling, attendance, leave with payroll. In addition to automatically calculating and tracking employees’ ADW, MPF deduction and other pay items in compliance with the ordinance, the AI engine will automatically extract the corresponding employee data in each module for payroll. The accuracy is further guaranteed.