Guide to Hiring in Hong Kong

Labour Law – Basics

What are the basic requirements for employers in Hong Kong?

• Statutory Requirement
  • Compensation Insurance
    • It is mandatory for employer to purchase compensation insurance upon employment of employees covering liabilities for work-related injuries.
    • The Statutory coverage is dependent on the total number of employees a company has.

What to note for existing employees?

• Benefits In Kind
  • Employers are not obligated to provide employees with medical insurance. However, in Hong Kong, it is common practice for companies to provide medical or private health insurance as a part of their employee package.

• Share Options
  • Employees must pay salaries tax on any benefits associated with stock-based awards arising from your office or employment.
  • Both employees and their employer must observe the reporting requirements in the returns. Failure to do so may result in heavy penalties.

What to remember when hiring new employees?

Upon hiring new employee(s), the employer must report the personal details of the new employee(s), date of commencement and the terms of employment to the Inland Revenue Department (IRD) by filing form I.R.56E “Notice of Employee Commencement Form” within 3 months of the commencement date.

What are the different discrimination laws in Hong Kong?

The Hong Kong Bill of Rights Ordinance generally stipulates that all persons are equal before the law and the law shall prohibit any discrimination on any ground. This principle is materialized through the enactment of the following four ordinances:

• • • Sex Discrimination Ordinance
    • Disability Discrimination Ordinance
    • Family Status Discrimination Ordinance
    • Race Discrimination Ordinance

What are the working hours in Hong Kong?

There are no legislative requirements on maximum working hours except in the case of a young person (over 15 but under 18 years of age) in industrial undertakings. Common practice involves 8 hours per day.

As highlighted in the Hong Kong Policy Address 2023, the Labour Advisory Board (LAB) intends to update the Continuous Contract (or “418”) requirement by shifting the calculation basis to the aggregate working hours over a four-week period, and this adjustment will subsequently be reflected in the Employment Ordinance.

What is the legal probation period in Hong Kong?

No provision in Hong Kong specifies a probation period, however, standard practice is to have a 1-3 month period.

What are the minimum wage requirements in Hong Kong?

Effective 1 May 2023, minimum wages in Hong Kong stand at HK$40 per hour. If an employee earns HK$16,300 or less per month, employers will need to keep records of the total number of hours worked by employees.

• • Record Keeping Required Includes:
    • Name and identity card number of the employee
    • Wage period and working hours
    • Wage paid in respect of each wage period
    • Periods of annual leave, sick leave, maternity leave, paternity leave and holidays entitled and taken, together with details of payments made in respect of such periods

• Average Daily Wage:
  • The employment (Amendment) Ordinance 2007 – The purpose of this ordinance requires employer to calculate statutory entitlements below based on their 12-month Average Daily Wage (ADW).

• • • The relevant statutory entitlements include payments for:
      • Statutory Holiday Pay
      • Annual Leave Pay
      • Sickness Allowance
      • Maternity Leave Pay
      • Paternity Leave Pay
      • End of Year Payment
      • Payment in Lieu of Notice

• • Average Daily Wage and Daily Wage Formula:

Example:

Total Annual Wages = HK$300,000*

Total Annual No Pay Deduction = HK$5,000

Total Annual of No Pay Leave = 4 days

Average Daily Wage = HK$300,000 – HK$5,000

365 days – 4 days

Average Daily Wage = HK$817.17

Read More: Top 5 Questions to Calculating Minimum Wage in Hong Kong

Termination of Employment – MPF, Tax, Severance Payment & Long Service Payment

Employment law in Hong Kong is employer friendly and termination of employment contracts is relatively straight forward.  During probation, no notice is required for termination of employment contract within the first month, and at least seven days’ notice thereafter unless the contract specifies more than this. If the employer contract does not specify notice, either party must give at least one month’s notice for termination.

Upon the termination of employment, the employer must report the personal particulars of the employee, expected date of termination and remuneration paid/deemed paid in the termination year to the IRD by filing form I.R.56F one month before the date of termination of employment.

In the case of an employee terminating employment to depart from Hong Kong,  employers have to file two copies of IR56G or via Electronic Filing of Employer’s Return one month before the expected date of departure.

From the date of filing IR56G and until such time the employee has made tax clearance and can produce to you a ”letter of release” issued by the IRD, you should withhold all amounts due to be paid to him (including salaries, commission, bonus, reimbursement of rent/expense, money or money’s worth included).

• Departure of employee whether resignation or termination:
  • Record for Government:
    • MPF termination form
    • Inland Revenue (56F or 56G) form

• Every employee’s Final Payment Calculation should include:
  • Salaries and applicable pay/deduction items
  • Unused Leave balance
  • Notice in Lieu if required
  • If company do not require employee to serve notice, notice payment is required
  • If employees do not serve their notice, notice deduction is required.

• Market Practice:
  • Companies usually set their notice period from 1 – 3 months of notice period depending on seniority and position.

• If the employee has worked for the company for over 2 years or 5 years, the employee is required to receive either payment:
  • 2 years but less than 5 years = Severance Payment (SP)
    • Redundancy/Lay Off
  • 5-year employment or more = Long Service Payment (LSP)
    • Completion of fixed term employment contract
    • Resigned due to ill health.
    • The employee, aged 65 or above, resigns on ground of old age.
  • Misconduct or Summary Dismissal will not be applicable to SP or LSP (Exclude Vaccination Dismissal)
  • Severance and Long severance Calculation
    • Last month wage x 2/3 (Capped at 15,000) x Years of Service
    • Maximum payment of SS and LSP is HK$390,000.
    • Either amount are non-taxable to the employee
  • MPF Offset
    • Employer can offset the payment from MPF Employer portion (Mandatory and Voluntary)
    • Can only offset the amount calculated by HK employment ordinance formula.

• Market Practice:
  • Some employers may choose not to offset the severance amount from employees.

What is the retirement age in Hong Kong?

In Hong Kong, it is common practice to retire at the age of 65 years old. Since 2000, Hong Kong made it compulsory for employers and employees to contribute to the Mandatory Provident Fund (MPD) which applies to all jobs, including part-time. The MPF allows for full withdrawal upon reaching the retirement age of 65.

Employment dispute channels

Labour Relations Division offices.

Is employment insurance compulsory in Hong Kong?

Yes, the minimum insurance coverage should be no less than HKD$100 million for a company with less than 200 employees. Companies with more than 200 employees should have an insurance coverage with no less than HKD$200 million.