You’ve just set up your company in Hong Kong, what’s next? If you’re looking to hire in Hong Kong, it’s important that you know the legal formalities and have a clear understanding of the local employment legislation.
This article is designed to give you a quick overview of Hong Kong’s legislation on employment contracts. We will be answering key questions for employers including the difference between “temporary”, “part-time” and “substituted” employees under the eyes of the Hong Kong Employment Ordinance to help you gain a better understanding of the local employment legislation.
In Hong Kong, employment contracts can be made verbally or in writing, on top of this, employment contracts in Hong Kong covers for both expressed and implied terms. Meanwhile, it is stated by the Employment Ordinance that an employer must inform the conditions clearly to each employee. Mandatory information includes:
- wages (including rate of wages, overtime rate and any allowance, whether calculated by the piece, job, hour, day, week or otherwise);
- wage period;
- length of notice required to terminate the contract; and
- if the employee is entitled to an end of year payment, the end of year payment or proportion and the payment period.
Such details within the employment agreement must be started before the employment begins. Now that you have an understanding of what a contract of employment in Hong Kong entails, here’s the top 5 things to note.
1. What is a continuous contract of employment?
According to the Employee Ordinance, in Hong Kong, a continuous employment is an employee who works at least 18 hours each week who has been employed continuously be the same employer for four weeks or more.
2. Are there any mandatory documents an employer needs to provide its employees?
There are two different scenarios that applies. In the case where the contract of employment is in writing, the employer is required to provide the employee a copy of the written contract for retention and reference.
As Hong Kong also allows for oral contracts, if in the case the contract of employment is not in writing, the employee may choose to make a request in writing before entering the employment to the employer. In this scenario, employers are required to provide such information in writing. Failure to comply with the above may result in prosecution and upon conviction, to a fine of $10,000.
One thing that’s important to note is that any terms in the employment contract that reduces or extinguishes any right, benefit or protection stated by the Employment Ordinance are deemed invalid and therefore voided.
3. How are “temporary”, “part-time” and “substituted” employees differentiated and covered under the Employment Ordinance?
There is no differentiation between “temporary”, “part-time”, “substituted”, “permanent” and “full-time” employees under the Hong Kong Employment Ordinance. Employees are covered and entitled to statutory rights and protection such as wage payment, restriction on deductions from wages and granting of statutory holidays and other rights. irrespective of their designated job titles or working hours.
Additional rights and benefits such as rest days and annual leave with pay and sickness allowance however are provided to employee who has been continuously employed by the same employer for four weeks or more, with at least 18 hours worked in each week.
4. Does “contractors” and/ or “self-employed persons” enjoy the same protection as an “employee” under the Employment Ordinance?
While there is no distinction between the types of employees, it’s important to note that the Employment Ordinance only applies to employers and employees who are connected through a contract of employment. As such, right and benefits stated under the Hong Kong Employment Ordinance only applies to parties engaged in a contract of employment.
Best practices to avoid disputes and misunderstandings is to make sure relevant parties understand clearly their mode of cooperation, including whether they are engaged as an employee or a contractor/ self-employed person.
5. What are the differences between an “employee” and a “contractor/ self-employed person”?
In the case where the mode of cooperation is not stated clearly resulting in a legal dispute, here are various factors to consider when differentiating between an “employee” and a”contractor or self-employed person”. There is not one single conclusive test, therefore the context and all relevant factors should be considered. Common factors include:
- control over work procedures, working time and method
- ownership and provision of work equipment, tools and materials
- whether the person is carrying on business on his own account with investment and management responsibilities
- whether the person is properly regarded as part of the employer’s organisation
- whether the person is free to hire helpers to assist in the work
- bearing of financial risk over business (e.g. any prospect of profit or risk of loss)
- responsibilities in insurance and tax
- traditional structure and practices of the trade or profession concerned
- other factors that the court considers as relevant
Your contract of employment should be clear
Bottom line, you want to protect your company by minimising the chance of dispute. As an employer, you can do so by making sure that your contract of employment clearly states the identity of the parties involved, including the form of engagement you share (full-time, part-time, temporary, contractor, self-employed person, etc.).
Stay educated on the latest labour legislation
Key way to avoid disputes is by versing yourself on the latest changes and updates to the Employment Ordinance. It’s worth it to be subscribed to platforms which offer to share the latest legal updates, this way you can stay on top of everything that’s happening in the area.
Sorting out your books
It is not unlikely for companies to rely on outdated policies. To ensure the rights and benefits of both parties and that you are abiding by the Employment Ordinance, employers should regularly review and update their policies, this includes whether or not they abide by the minimum wage policy.
The best payroll companies in the market will offer checks before taking on their client’s payroll. Links for example has payroll professionals who are trained in their knowledge of the Hong Kong legal law. By partnering, client may be assured that their internal policies abide by Hong Kong’s Employment Ordinance.
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Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcing, visa application, Employer of Record (EOR), recruitment and more! Contact us for more information on how we can help leverage your HR function.