Long Service Payment

When is Long Service Payment (LSP) Mandatory?

Many employers, whether they hire Filipino domestic helpers, Indonesian domestic helpers, or domestic workers in general, mistakenly believe that LSP is mandatory after a certain number of years of service. This is not true. LSP is only mandatory after five continuous years of service under the following specific circumstances:

• The employer terminates the contract (except for summary dismissal due to serious misconduct).
• The helper is willing to renew the contract under reasonable terms, but the employer refuses.
• The helper retires at age 65 or above.
• The helper resigns due to proven permanent unsuitability for the job.

How to Calculate LSP?

You can use the Labour Department's Long Service Payment Calculator for calculation.
The formula for calculating LSP is as follows:
LSP = (Last month's salary x 2/3) x Years of service
For example, if the Filipino domestic helper, Indonesian domestic helper, or domestic worker's last month's salary was $4,730 and they have served for 6 years, the LSP would be: ($4,730 x 2/3) x 6 = $18,920.

Advance or Partial Payment of LSP?

There is NO legal provision for advance or partial payment of LSP. Any payment made before the fulfillment of LSP requirements is considered a bonus or loan, not a partial LSP payment.
Agreeing to a helper’s request for advance LSP could backfire, as they might resign immediately after receiving the money.

Importance of Documentation

Keeping records of all communication regarding contract renewal and the helper's decision (especially for Filipino domestic helpers, Indonesian domestic helpers, and domestic workers in general) is crucial. This includes:

• Proof of offering a renewal contract with reasonable terms.
• A written record (with signatures and date) of the helper's refusal to renew.
• If possible, video or CCTV footage of the helper verbally confirming their decision not to renew.

Role of Agencies and Potential Conflicts

Some agencies might provide employers with misinformation about LSP regulations to encourage helper turnover (including Filipino domestic helpers, Indonesian domestic helpers, and domestic workers) and earn another placement fees.
Employers should be wary of agencies pushing for “advance” LSP payments or misrepresenting LSP rules.

How to Protect Your Rights?

• Consult directly with the Labour Department for the latest LSP regulations and practical guidelines.
• Pay LSP in cash and obtain a signed and dated receipt clearly stating the amount received as "Long Service Payment." If the helper has a Hong Kong bank account and you regularly use bank transfers for salary payments, you can transfer the LSP via bank transfer. This method provides a clear transaction record.
• Ensure a witness is present during the transaction.
• Keep all relevant documents for future reference.