Termination of Employment

Case 6

Adopt Positive Measures to Help Retrenched Employees

Owing to the unfavourable economic climate, a company had to retrench some employees and approached the Labour Department’s Labour Relations Division for advice and consultation.

Apart from the termination compensation according to the legal provisions, the company also paid ex gratia payments to the employees. In a letter to staff, it set out the reasons for the whole retrenchment exercise certifying that the retrenchment was a result of circumstances beyond the company’s control and it had nothing to do with the employee’s performance. The retrenchment was conducted in a fair manner. A reference letter was prepared for each retrenched employee.

 To assist retrenched employees find alternative employment or enter retraining, briefings were given to retrenched employees on employment services, retraining programmes and hotline services available in the market. As a result of such efforts, the retrenchment exercise was conducted smoothly.

Termination of Employment

24. Employers should treat employees equally when their employment is terminated. In situations of dismissal and redundancy, employers should :

· comply with the provisions of the Employment Ordinance relating to termination and compensation packages and be as generous as possible with ex gratia payments as support to the affected employees;

· set out clear and objective criteria and procedures in the process;

· ensure that the compensation packages are applied on equal terms to all employees in the same or similar circumstances; and

· ensure that any decision made is on the basis of the need for the job to be eliminated and the performance of an individual employee rather than for reasons of the employee’s sex, marital status, pregnancy, disability, age or family status.

25. An important reminder is that summary dismissal is the most serious disciplinary action which should not be used hastily. Hence, it should only apply to cases where an employee has committed very serious misconduct or fails to improve after the employer’s repeated warnings.

Assistance to Employees

26. The stress felt by a dismissed or retrenched employee is notable. An employee who is dismissed / retrenched not only suffers wage loss, but also the loss of a secure future. Hence, in cases of termination, employers should explore alternatives to dismissal or retrenchment. If retrenchments are unavoidable, consider these measures :

· encourage employees to join voluntary exit plan;

· ensure that the retrenchment criteria are objective, fair, open, non-punitive and non-discriminatory;

· explain to the affected employees how the termination compensation is calculated;

· provide the retrenched employees with reference letters to certify that the termination of their employment was due to the company’s economic adversity rather than their job performance;

· provide counselling and assistance to retrenched employees. Help them find alternative jobs or introduce to them the employment services offered by the job centres of the Employment Services Division of the Labour Department. Seek assistance from other organizations, such as the Employees Retraining Board, to assist employees in dealing with their current plight; and

· consider re-employing retrenched employees as far as practicable and affordable when the company’s financial position improves.