Sickness Allowance Calculation in Hong Kong: The 4/5 Rule Explained

Every payroll clerk in Hong Kong eventually runs into the same question: an employee hands in a medical certificate, and now someone has to work out exactly how much they're owed. The answer sits in Part III of the Employment Ordinance (Cap. 57), and it's more mechanical than it looks once you separate the three things that are actually being asked: has the employee banked enough sickness days, does the absence qualify for payment at all, and how is the daily rate calculated. Get any one of those wrong and the number that lands in the payslip is wrong too.

This post walks through all three, using the Labour Department's own figures, and ends with a full numerical example you can adapt to your own payroll.

Who qualifies in the first place

Sickness allowance is only available to employees engaged under a continuous contract — in practice, someone employed by the same employer for four or more consecutive weeks, working at least 18 hours in each of those weeks.¹ This is the same continuity test that unlocks paid annual leave, rest days, and statutory holiday pay, so if an employee already qualifies for those, they qualify here too. Casual staff working fewer than 18 hours a week, or someone only a few days into a new job, generally fall outside the sickness allowance provisions entirely — though nothing stops an employer from paying sick pay voluntarily under a more generous contract term.

Being on a continuous contract is necessary but not sufficient. Two further conditions have to be met before a sick day actually turns into paid sickness allowance: the employee needs enough accumulated paid sickness days in their bank, and the absence needs to be long enough (or otherwise qualifying) to trigger payment. Both are covered below.

How paid sickness days accrue

Paid sickness days aren't a fixed annual allowance the way annual leave is — they accrue month by month and carry over indefinitely, up to a cap. Under the Employment Ordinance, an employee accumulates:²

• 2 paid sickness days for each completed month of employment during the first 12 months of service, and
• 4 paid sickness days for each completed month of employment after the first 12 months.

There's no reset at year-end. A new hire builds up their bank slowly in year one (2 days a month, so 24 days by month 12), then accrues twice as fast from month 13 onward. The days keep accumulating for as long as the employee stays employed, capped at a maximum of 120 days at any one time.²

The Labour Department splits that 120-day cap into two internal categories that matter for medical certification (covered in the next section), but the split doesn't change the total ceiling:²³

When an employee takes a paid sickness day, it's deducted from Category 1 first, then Category 2 once Category 1 runs out.³ Unused days simply stay in the bank — an employee who never gets sick keeps accumulating up to the 120-day ceiling and it just sits there as a buffer for a future illness or hospitalisation.

The four-day rule and medical certificates

Accumulating enough days doesn't automatically mean an absence gets paid. The Employment Ordinance sets a minimum-duration test: sickness allowance is only payable where the sick leave taken is not less than four consecutive days, unless the absence is for a pregnancy-related medical examination, or for a miscarriage or confinement in specified circumstances, in which case the four-day minimum doesn't apply.¹²

Practically, this means a one- or two-day sick day — even with a valid medical certificate — is not paid sickness allowance under the Ordinance by default, though the days still come off the employee's accumulated bank if the employer treats them as paid sick leave under a more generous internal policy. Once an absence reaches four consecutive days, the whole period becomes payable (subject to having enough banked days to cover it), not just the days from the fourth onward.

Medical certification requirements track the two categories above:³

• Category 1 (first 36 accumulated days): a certificate from a registered medical practitioner, a registered Chinese medicine practitioner, or a registered dentist is sufficient.
• Category 2 (the next 84 accumulated days): if the employer requires it, the certificate must come from a practitioner who has actually attended to the employee as an out-patient or in-patient at a hospital — a stricter bar than Category 1, reflecting that longer absences are more likely to involve genuinely serious conditions.

An ordinary clinic attendance slip that merely confirms a visit, without a diagnosis or a recommendation for rest, generally doesn't satisfy the certificate requirement on its own — employers are entitled to ask for a proper sick leave certificate before treating the absence as qualifying.

The sickness allowance rate: four-fifths of average daily wages

Once an absence qualifies, the daily rate is set by law: sickness allowance equals four-fifths (80%) of the employee's average daily wages (ADW), calculated over the 12-month period immediately preceding the first day of the sickness period.¹² If the employee has been with the employer for less than 12 months, the calculation simply uses the shorter actual period of employment instead.

This is the same 4/5 formula used for maternity leave pay and paternity leave pay, and payroll teams in Hong Kong often refer to it informally as "4/5 pay" or, on the wage-calculation side, the "713" shorthand (a reference to the average-wage rules under sections 7 and 13 of the Fourth Schedule to the Ordinance).

Calculating average daily wages (ADW)

The formula itself is straightforward once you know what to exclude:

ADW = (wages earned in the relevant 12-month period) ÷ (number of days in that period)

The catch is in the denominator and the numerator both being reduced by the same exclusions. Under the Ordinance, any day the employee was not paid full wages is stripped out of both sides of the equation — so the calculation isn't diluted by periods where the employee earned less than a normal day's pay. Excluded days include:¹²

• Rest days
• Statutory (general) holidays
• Annual leave
• Sickness days
• Maternity leave and paternity leave
• Leave taken with the employer's agreement
• Any day on which the employee was not provided with work

And correspondingly, wages paid for those excluded days are also stripped out of the total-wages figure in the numerator. The Labour Department publishes a "12-Month Average Wages Calculator" for employers who want to run this mechanically rather than by hand.²

A full worked example

Take an employee earning a fixed HKD 18,000 monthly salary, employed for over two years, who falls sick and is certified unfit for work for 6 consecutive days.

Step 1 — confirm eligibility. The employee has a continuous contract (well past the four-week/18-hour threshold) and, at 4 days a month accrued after year one, has far more than 120 days banked already were they never sick — so the accumulated-days test is comfortably met.

Step 2 — confirm the absence qualifies for payment. 6 consecutive days is more than the 4-day minimum, so the full 6 days are payable, not just days 4–6.

Step 3 — calculate average daily wages. Assume the employee took no unpaid leave, no extra leave, and worked every rest day/holiday as normal wage days in the preceding 12 months (a simplified case for illustration):

• Total wages over 12 months: HKD 18,000 × 12 = HKD 216,000
• Calendar days in the 12-month period: 365
• ADW = 216,000 ÷ 365 = HKD 591.78 per day (rounded to 2 decimal places)

Step 4 — apply the 4/5 rate.

• Daily sickness allowance = HKD 591.78 × 4/5 = HKD 473.42 per day

Step 5 — total payable for the 6-day absence.

• HKD 473.42 × 6 = HKD 2,840.55 total sickness allowance

If, in a more realistic scenario, the employee had taken 10 rest days and 3 statutory holidays as paid days off during that 12-month window (all paid at full wages, so no reduction to the numerator, but each excluded from the day count), the denominator would drop to 365 − 13 = 352 days, giving:

• ADW = 216,000 ÷ 352 = HKD 613.64 per day
• Daily sickness allowance = HKD 613.64 × 4/5 = HKD 490.91 per day
• Total for 6 days = HKD 2,945.46

The exclusion mechanism matters precisely because it prevents rest days and holidays — which don't represent a "working day" of wage-earning capacity — from artificially dragging down the average.

When sickness allowance can be withheld

Employers aren't required to pay sickness allowance in every case where a certificate is presented. The main situations where it doesn't apply are:¹

• The employee hasn't accumulated enough paid sickness days to cover the absence.
• The sick leave taken is fewer than four consecutive days (outside the pregnancy-related exceptions).
• No valid medical certificate is produced, or the certificate doesn't meet the category requirement for the number of accumulated days being drawn on.
• Compensation for the same period is already payable under the Employees' Compensation Ordinance (i.e., it's a work injury, not general sickness), or the employee unreasonably refuses medical treatment arranged by the employer.

An employer who fails to pay sickness allowance without a reasonable excuse commits an offence, and on conviction faces a fine.² Getting the calculation right isn't just good practice — it's a compliance obligation with real penalties attached.

Why this matters beyond payroll

For businesses in labour-intensive sectors — retail floors, restaurant kitchens, construction sites — sickness allowance calculations aren't a rare edge case; they're a routine, recurring payroll task, and disputes over the arithmetic are one of the more common sources of friction between staff and employers in Hong Kong. If you're researching companies in the retail & e-commerce, food & beverage, or construction & engineering sectors on this directory — industries where shift work and hourly staffing make sick leave administration especially frequent — the underlying compliance mechanics are the same ones covered here, regardless of company size.

None of this replaces a proper HR or legal opinion for a specific dispute, and the Labour Department is the authoritative source if the figures in your own payroll software ever look off. But the underlying arithmetic — accrual rate, the four-day threshold, and the 4/5-of-ADW formula — is fixed by statute and doesn't vary company to company, which makes it one of the more checkable line items on a Hong Kong payslip.

Citations

1. Labour Department — A Concise Guide to the Employment Ordinance (frequently asked questions, sickness allowance), accessed 2026-09-10

2. Community Legal Information Centre (CLIC) — How is sickness allowance calculated? When will I be entitled to sickness allowance?, accessed 2026-09-10

3. Community Legal Information Centre (CLIC) — The two categories of paid sick leave, accessed 2026-09-10