Skip to main content


3. I was laid off. I received from my employer (a) payment in lieu of notice and (b) severance/long service payment. Are these taxable?

Payment in lieu of notice, if paid under the Employment Ordinance (“EO”) or the terms of your employment contract, is not your earned income and hence non-taxable.


Severance/long service payment, if computed in accordance with the formula laid down in the EO, is also non-taxable. However, if the sum paid to you exceeds the amount so calculated, the excess is an extra award for your services and is part of your assessable income.




After working for 8 years, an employee left his employment. By applying the formula in the EO, his entitlement to severance payment was $80,000, but his employer paid him $100,000. His tax position is as follows:


Severance payment


(This part is exempt.)

Extra award


(This part is taxable.)

Total amount received



Note: For more information about the statutory calculations of payment in lieu of notice, severance payment and long service payment, please click here.

Last revision date: