Calculating Absence and Termination Earnings

The ANN LIEU is a payment in lieu of annual leave entitlement. This earning element is used to pay terminated employees for unused annual leave or for part of their annual leave entitlement before the leave is forfeited.

The calculation rule is Unit × Rate:

• Unit is set by the formula TER FM ALV BAL.

• Rate is set by the formula CM FM DAILY RATE.

ANN LIEU is a taxable earning element, which means that it contributes to the annual taxable accumulator. ANN LIEU is also used to pay employees when they accept the payment from their employer to offset part of their annual leave. This is a positive input and the unit of ANN LIEU is overridden by the number of adjusted days from the annual leave balance.

The DY WAGE 80 earning element is 80 percent of average earnings paid to statutory employees when taking maternity leave or sick leave. Employees are eligible for maternity leave payments after 40 weeks of continuous service. The entitlement is granted when the leave occurs and the paid maternity period is 70 days from the maternity commencement date. The absence period can be shorter but not longer than 70 days. Unpaid maternity is treated as LWOP.

The calculation rule is Unit × Rate × Percent:

• Unit is set at the payee level.

• Rate is set by the formula CM FM DAILY WAGE.

• Percent is 80.

The total LWOP (Units × Daily Rate) is subtracted from the basic salary of the employee if the employee takes leave without pay.

The calculation rule is Unit × Rate:

• Unit is set at the payee level.

• Rate is the system variable DAILY RT.

• Percent is 80.

The LWOP2 earning element is used for leave without pay for hourly rates (for weekly employees— as it uses an hourly rate).

The calculation rule is Unit × Rate:

• Unit is set at the payee level.

• Rate is the system variable HOURLY RATE.

Terminated employees might have severance (SEV) or long service payments (LSP), but not both. The SEV/LSP earning element is processed in the TER SE MAIN section and is a nontaxable payment. An employer should pay severance when an employee who has been employed under a continuous contract for no fewer than 24 months is dismissed by reason of redundancy. An employer should pay long service payments when an employee has been employed no fewer than five years under a continuous contract.

The calculation rule is Amount:

Amount is set by the formula TER FM LSP PAYMT.

The variable TER VR LSP CEILING stores the maximum ceiling of average wages which is currently 15000 HKD.

The variable TER VR MAX LSP stores the maximum LSP amount used in the bracket.

The formula TER FM LSP PERIOD is used as the search key of the bracket TER BR LSP ENT.

The bracket TER BR LSP ENT stores the list of years of service and maximum claimable LSP amounts.

If an employee is eligible for 13th month pay and is terminated after three months of continuous service, prorated 13th month pay is paid when the employee is terminated. The TER 13TH PAY earning element is used to pay the 13th month payment for terminated employees.

The calculation rule is Base × Percent:

• Base is set by the formula TER FM 13TH PAY.

• Percent is 100.

The prorated 13th month payment calculation is:

(Duration between service date and termination date) / 365 × (monthly rate)

If the employee received current year 13th month pay before Chinese New Year, (terminated on June 2000) and received 13th month pay in February 2000, the prorated 13th month payment is calculated as:

(Duration between January 1, 2000 and termination date) / 365 × (monthly rate)

Factor 365 is used even in a leap year.