📖 Definition
Severance pay (Chinese: 资遣费 / 資遣費, "zīqiǎn fèi") is compensation an employer must legally pay a worker when it ends the employment contract for reasons unrelated to the worker's fault - such as business contraction, reorganisation or losses. Unlike dismissal, redundancy is based on business needs, not employee performance. Under Article 17 of Taiwan's Labour Standards Act, an employer terminating the contract must pay severance based on years of service; Hong Kong has a long service payment and severance payment system.
🔍 3 Core Signs
- Not the worker's fault: redundancy stems from the company's business problems, not employee misconduct
- Based on years of service: the longer you served, the higher the severance, usually with a statutory minimum
- Notice period required: except in specific cases, the employer must give advance notice (20-30 days in Taiwan, no less than 7 days in Hong Kong)
⚠️ Legal Risks and Cautions
If an employer fails to pay severance as required by law, workers can file a complaint with the Labour Department (Hong Kong) or the Ministry of Labour (Taiwan). In Hong Kong, an employer's unpaid wages can draw a maximum fine of HK$350,000 and 3 years' imprisonment; in Taiwan, violating the Labour Standards Act can be fined NT$20,000 to NT$1 million. Also, if a company uses "redundancy" as a cover for what is really a dismissal (e.g. forcing someone out for being pregnant or for whistleblowing), it may constitute unfair dismissal, and the worker can apply for reinstatement or additional compensation.
✅ How to Respond: Practical Steps
Step 1: Confirm the reason for termination and ask the company for a written certificate (certificate of involuntary departure). Step 2: Verify your years of service and calculate the amount - Taiwan Labour Standards Act Article 17: one half month's average wage per full year of service, up to 12 months (service before 2003 calculated separately); Hong Kong severance payment: 2/3 of final monthly salary x years of service (capped at HK$390,000). Step 3: If the company refuses to pay, complain to the Labour Department / Ministry of Labour, or seek legal aid. Step 4: Apply for unemployment benefits (Taiwan) or Comprehensive Social Security Assistance (Hong Kong, if eligible).
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Explore now →❓ FAQ
Q: What is the difference between severance pay in Taiwan and severance payment in Hong Kong?
A: Taiwan calls it "zīqiǎn fèi" (severance), Hong Kong calls it "severance payment" or "long service payment". Both are compensation when an employer ends the contract, but the calculation and legal basis differ. Hong Kong severance payment applies to employees continuously employed for 24 months or more who are dismissed due to redundancy.
Q: Do I get severance pay if I resign voluntarily?
A: No. Voluntary resignation (quitting yourself) does not qualify for severance. Only involuntary departure (being made redundant or laid off) qualifies. However, if you are forced to resign because the company breached the labour contract (e.g. unpaid wages, no work provided), it may be treated as involuntary departure.
Q: Is severance pay taxable?
A: Taiwan: severance is tax-exempt up to average annual salary x 0.5 x years of service (capped at NT$125,000 x years of service); the excess is taxable. Hong Kong: severance payment and long service payment are generally tax-free, but amounts above the statutory limit may be treated as taxable remuneration. Consult a tax professional.