APAC: Dismissal for Poor Performance

This month we consider some common questions when considering the dismissal of poor performing employees. First off we look at the position in key jurisdictions in North Asia.

Is poor performance recognised as a ground for unilateral termination of employment?Is there a process that must be followed prior to dismissing an employee for poor performance?Is there any severance payment that must be made for termination for poor performance
China 

Dismissal is permitted in circumstances where the employee is not competent for the job and has been provided with training or adjustments to the position have been made. There is a two-limb test that must be satisfied.

 

There are strict procedural requirements that must be completed prior to dismissal including providing training to adjusting the employee’s position. Consultation with a labour union may also be required in addition to notice (or pay in lieu) being given to the relevant employee.

 

An employer will generally be required to pay statutory severance calculated by reference to the employee’s salary and years of service subject to the prescribed cap.

Hong Kong 

An employee’s ‘capability for performing work of the kind which he was employed to do’ is expressly recognised as a valid ground for termination under the Employment Ordinance.

 

The Employment Ordinance does not prescribe any process requirements or thresholds to be met before relying on that ground. However, if challenged, the employer would need to satisfy the court that the performance concerns were genuine.

 

If the employee has more than 5 years of service he/she will be entitled to a long service payment.

Japan 

The threshold for dismissing an employee due to poor performance is very high such that the poor performance must be so serious that it constitutes a material breach of the terms of the employment contract and/or the Work Rules.

 

Employers must show they did everything possible to avoid the unilateral termination including, for example, performance improvement programs and considering adjusting the employee’s position.

 

As establishing the threshold for unilateral termination is generally unattainable, many employers enter into a mutual separation agreement with the employee and pay a negotiated amount.

South KoreaPoor performance may fall within a recognised ‘justifiable cause’ (upon which dismissal is permitted), but only in exceptional cases where the employee’s performance is significantly below the required standard.Employers must first attempt to improve an employee’s performance, usually by means of vocational training or assigning the employee to different responsibilities.Statutory separation pay will be payable upon termination to any employee who has at least one year service, regardless of the circumstances under which the departure occurs.

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