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How is the year-end payment calculated? When is the year-end payment due?

At the end of the year, with the holidays approaching, many companies will offer their employees long-awaited year-end bonuses, including double pay and bonuses, which may vary depending on the business and personal circumstances. However, the definition and protection of end-of-year payment in the Employment Ordinance are the same. However, many employers or employees may only have a vague understanding of the end-of-year payment. For example, how much should the year-end payment be? When should it be distributed? This article will give a detailed answer and explanation of the year-end remuneration.

What is the year-end payment?

According to the law of the Hong Kong Labor Department – “Employment Ordinance”, the definition of “end of year payment” is as follows:

“The annual remuneration stipulated in the employment contract includes double pay, 13th monthly pay, year-end bonus, etc., but does not include gratuity or pay at the discretion of the employer.”

Among them, “double pay” and “13th monthly pay” can be understood as “an extra month’s salary in addition to the monthly salary”, which is generally paid on or before the Chinese New Year.

As for the “year-end bonus”, it refers to the “one-time bonus” paid by the employer to the employee. There is no fixed amount, and most of them are determined according to the company’s performance and the individual performance of the employee. Because it is usually paid at the end of the year, it is called an “annual bonus”. Tail Flower Red”.

Who is eligible for the end-of-year payment?

According to the Employment Ordinance, the provisions on end-of-year payment are applicable to employees who are employed under a continuous contract as stipulated in the employment contract, including oral or written, express or implied agreements.

Moreover, if an employee has been employed under a continuous contract for the entire payment period, he or she is eligible for year-end payment. The payment period is generally paid according to the period specified in the contract, or, if not specified, the lunar year.

For all employment contracts entered after June 27, 1997, unless there are written terms or conditions to the contrary in the employment contract, it is presumed that the annual remuneration or bonus paid to the employee is not gratuitous and not paid at the discretion of the employer.

What should be the amount of end of year payment?

In the employment contract, the amount of year-end payment will be established between the employer and the employee, and this shall prevail.

However, if the amount of end-of-year pay is not stipulated in the contract, it shall be calculated based on the employee’s average monthly salary for the 12 months before the “payment due date” (for monthly salary employees, the employer must exclude the unpaid wages or period of full wages, including statutory holidays, etc.).

When should year-end compensation be paid?

In the same way, the time for payment of the year-end payment is generally based on the date specified in the employment contract. If not stipulated in the employment contract, payment shall be made on the last day of the gratuity period, or within seven days of that day.

If the relevant employment contract has been terminated before this payment date, the employee will be entitled to a pro-rata year-end payment, or it will be processed on the day when the employer completes the calculation of the relevant profit or within seven days of that day.

Violators will be punished

End-of-year payment is also protected by law. If an employer is found to have failed to pay the corresponding end-of-year payment to an eligible employee, he or she may be prosecuted, and upon conviction, the employer will be fined a maximum of HK$50,000.

The above information is for reference only. If you have any questions about year-end compensation, labor laws, the Employment Ordinance, or accounting, we welcome your inquiries.

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