As an international finance and business hub, Hong Kong has a significant expat employee population: In a 2019 survey, HSBC reported that Hong Kong was ranked by expats as the number one location in the world for career progression.
Whether hiring expats or local employees, it is crucial that businesses in Hong Kong understand the laws and regulations that apply to hiring employees. This is the only way to avoid fines and other potential penalties but is also an important part of protecting the business’ brand (a bad reputation as an employer gets around). Here we look at the key things every business needs to know when hiring employees in Hong Kong, covering:
- Hong Kong labor law (including the Employment Ordinance, the Contracts for Employment Outside Hong Kong Ordinance, and the Apprenticeship Ordinance). Especially important here is understanding the minimum requirements in employment contracts in Hong Kong
- Government-administered recruitment guidelines, and
- Employer tax obligations.
In addition, anyone hiring international employees should keep in mind their obligations concerning immigration and visas.
Which labor law applies when hiring employees in Hong Kong?
The most important law here is the Employment Ordinance. Where this ordinance applies, a contract must comply with the minimum requirements set out in the ordinance. Where that ordinance does not apply (and no other ordinance which provides otherwise applies), contractual terms are by agreement of both parties.
The Employment Ordinance covers all employees, whether part or full-time, temporary or permanent, except:
- Where the employee is a family member, living in the same dwelling as their employer
- Where the individual is an employee under the Contracts for Employment Outside Hong Kong Ordinance. This generally applies where a contract is entered into in Hong Kong but is for a foreign employer, and the contract is to be performed outside Hong Kong. There are some exceptions to coverage for workers who would otherwise be covered under this ordinance, including where an individual is a member of an aircraft or ship crew, and where they are a non-manual employee earning more than $20,000 per month
- An individual serving under a crew agreement under the Merchant Shipping (Seafarers) Ordinance, or onboard a ship that is not registered in Hong Kong
- An apprentice whose contract of apprenticeship is registered under the Apprenticeship Ordinance.
How do employment contracts work when hiring in Hong Kong?
In general, employers and employees are free to agree on the terms of employment as they see fit, as long as they do not violate the requirements of the Employment Ordinance. The contract may be made orally, or in writing.
The employer must provide to the employee (in the case of written contracts), or offer to employees on request (in the case of oral contracts), written information setting out:
- Wages/salary. This information should include the regular rates, any applicable overtime rate, and any allowances. All amounts must be above the minimum wage in Hong Kong
- The wage/salary period
- Length of notice for termination
- The amount of any ‘end of year’ payment.
In the case of ‘continuous contracts’ (ones in which an employee works continuously for the same employer for at least 4 weeks, with a minimum of 18 hours per week), the contract is deemed to be a contract of one month, and renewable from month-to-month.
Every employer must keep a record of employees under an employment contract which covers:
- The name of the employee, and their Hong Kong identity card number
- The date of employment commencing
- The job title
- Wages paid for every wage period
- Total number of hours worked for each wage period, if applicable
- Annual leave, sick leave, maternity leave, paternity leave, and holidays that the employees were entitled to, and were taken
- The amount of any end of year payment, and the period which it was for
- The period of notice required for contract termination
- The date of employment termination (where applicable).
The Hong Kong Labour Department can inspect these records at any time. A failure to keep records is liable for a conviction, and a fine of up to $10,000. Obstructing a labor inspector may be liable for a fine of up to $100,000 and/or a term of imprisonment of 1 year.
What are the minimum entitlements for employees in Hong Kong?
The minimum entitlements for employees in Hong Kong, which no contract can deprive them of, include:
- 12 paid public holidays
- A minimum of sevens days' notice for termination of the contract
- Mandatory Provident Fund (MPF) contributions: This fund is Hong Kong’s compulsory retirement savings scheme. Generally speaking, the requirement is for a 5 percent employee contribution, capped at HKD 1500 per month for those earning more than $30,000.
In addition to those minimum entitlements, there is a range of entitlements that apply only to those on continuous contracts. This covers:
- Mandatory annual leave of 7-14 days, depending on the number of years employed
- Sick leave of 2 days for each completed month of employment during the first 12 months, then 4 days each completed month thereafter. While sick leave can accumulate, it cannot exceed 120 days at any time
- Paid maternity leave of 10 weeks
- Severance payments in the case of redundancy or being laid off, if employed for more than two years.
Tax reporting obligations when hiring employees in Hong Kong
All employers must prepare forms for their employees to report their taxable income under the Income Tax Ordinance. The employer must also keep payroll records for a minimum of seven years.
If an employee is departing Hong Kong permanently, the employer must notify the Inland Revenue Department at least one month before departure, and withhold all payments to the employee from that point on. This is to give the Inland Revenue Department the chance to assess whether any tax is owed and deduct that from the remaining earnings before the employee leaves.
What Are the Recruitment Guidelines?
The Guidelines are compulsory for employers and are designed to avoid unfair discrimination in recruiting and hiring practices. These Guidelines include the Code of Practice against Discrimination in Employment on the Ground of Sexual Orientation and require that:
- Employers use consistent selection criteria for recruitment, hiring, and promotion decisions
- Employees involved in recruitment receive anti-discrimination training
- All employment advertising is non-discriminatory
- Application forms and interviews avoid questions that could lead to discrimination relating to age, gender, race, religion, language, or marital status.
Hiring employees in Hong Kong in full compliance with the law
All those hiring employees in Hong Kong must understand the laws that regulate recruitment and hiring in that location: The most important of these laws is the Employment Ordinance. A failure to comply can result in significant penalties, as well as make it more difficult to recruit and retain top talent.