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Last updated at June 14, 2022
skyline view of Hong Kong

Currency

Hong Kong Dollar (HKD)

Capital

Hong Kong

Time Zone

GMT+8

Key Country Facts

History

Hong Kong, a small trading port in 19th century, is now Asia’s financial hub. Hong Kong returned to Chinese sovereignty on 1 July 1997 as a Special Administrative Region, now known as the HKSAR, after more than a century and a half of British rule.

Official Language

Chinese (Cantonese) and English are the official languages of Hong Kong. English is widely used in the Government and by the legal, professional and business sectors. Trilingual professionals who speak English, Cantonese and Putonghua play a vital role in the numerous enterprises trading in Hong Kong or doing business with mainland China and Taiwan.

Legal system

The legal system of the HKSAR is based on the rule of law and the independence of the judiciary. The constitutional framework for the legal system is provided by the Basic Law enacted by the National People’s Congress of the People’s Republic of China. Under the principle of “one country, two system”, Hong Kong is a part of China but retained its own systems and way of life. The legal system of the HKSAR, which is different from that of Mainland China, is based on the common law, supplemented by statutes.

Economy

Hong Kong’s economy is characterized by free trade, low taxation and minimum government intervention. It is the world’s 7th largest trading economy, with the mainland of China as its most significant trading partner. Hong Kong focuses on tertiary production and is also a major service economy, with particularly strong links to mainland China and the rest of the Asia-Pacific region.

Cultural Observations

Hong Kong culture was born in a sophisticated fusion of East and West. Hong Kong has an eclectic culture rich in Chinese customs and sprinkled with influences from southeast Asia and the West. This situation led to the diversity of its culture and the people there are open-minded to accept variety.

Hong Kong HR at a Glance

Employment Law

The Employment Ordinance (EO) is the key legislation that spells out the basic terms and conditions that govern employment laws in Hong Kong. It guarantees certain minimum benefits, including (among other things):

  • Paid annual leave,
  • Paid sick leave,
  • Paid maternity and paternity leave, and
  • Minimum notice of termination and a right to make a payment in lieu of notice.

Subject to limited exceptions, the EO applies to all employees working in Hong Kong, regardless of their nationality. Observing the terms of the EO is generally considered to be mandatory, although it is not specifically expressed to be an overriding statute.

If the EO covers your employee, the employment contract terms must satisfy the minimum requirements of the EO.

If the EO does not cover your employee, the contractual terms will depend on mutual agreement between you and the employee.

Employees engaged under a continuous contract are further entitled to such benefits as rest days, paid annual leave, sickness allowance, severance payment, and long service payment, etc.

Continuous contract: An employee who has been employed continuously by the same employer for four weeks or more, working at least 18 hours each week is regarded as being employed under a continuous contract.

Employment Contract

The employment contract specifies the agreed upon terms and conditions of employment between the employer and employee. The contract includes both explicit and implied terms. Please note that if your employee is covered under the EO, the contract terms should abide by the minimum requirements. Employment contracts can be oral or written. According to the EO, verbal employment agreements are legal. If contracts are in the written form, it is mandatory for employers to provide employees with a copy of the written employment contract. In addition, employers must obtain their employees’ consent before making any subsequent changes to the terms of the employment contract.

Employment contracts can be bespeaking if they contain the minimum requirements. The Labor Department offers standard templates.

Blue-collar workers contracts are normally in Chinese. White-collar or professional jobs are usually in English.

The EO does not formally define part-time or contractual employees. However, in common practice, part-time staff works for a lesser number of hours compared to that of full-time employees. Contract workers are generally referred to as employees on a fixed-term employment contract. Under the EO, part-timer staff and contract workers enjoy the same protection as permanent full-time employees.

Retirement age is normally 60 to 65. Minimum terms are to be included in the contract.

Probation

Defined in the contract. Can be 1-6 months. Common practice is three months.

The services of an employee on probation may be terminated by the employer or the employee without notice during the first month and by at least seven days thereafter (although generally at least 30 days for a continuous month-to-month contract).

Severance Payment

Eligible only if:

  • Employed for at least 24 months, AND
  • Is dismissed due to redundancy or laid-off.

The amount of severance pay is two-thirds of one month’s pay for each year of employment, or two-thirds of HK$ 22,500, whichever is less, and is subject to a maximum payment of HK$ 390,000. The amount of contractual gratuity based on length of service is deductible from the amount of severance pay entitlement. In addition, a part of a retirement scheme payment, which is due to the employer’s contributions, may be deducted from the amount of the severance pay.

Long Service Payment

Eligible only if:

  • Employed for at least five years and subject to certain conditions.
  • Intended to reward employees who are dismissed in a non-redundancy situation for their long service.

The amount of long service pay is calculated by reference to the same formula as the severance pay. The maximum entitlement shall not exceed HK$ 390,000. The amount of any contractual gratuity based on length of service is deductible from the amount of long service entitlement. In addition, a part of a retirement scheme payment, which is due to the employer’s contributions, may be deducted from the amount of long service payment.

Working Hours

Common Practice: 40-50 hours/week, 5 days/ week. This should be defined in the contract.

Hong Kong labor law does not set specific requirements on overtime work, including any requirements to pay for overtime work. However, the law states that if the employment contract provides payment for overtime work, the employer is legally obligated to provide such wages and will be subjected to a fine for withholding wages. Overtime payment is treated the same as regular wages and is protected from defaults. Additionally, when determining entitlements, any overtime pay offered should be included in the calculation.

Before the contract begins, employers and employees must negotiate working hours and overtime conditions of the position and write them clearly into the contract. Employers are obligated to obey the terms of the contract or will be subjected to a fine issued by the Labor Department.

Notice Period

30 days notice (could be longer for higher level positions).

Termination

As per contract, but at least seven days.

Common Practice: one month.

In the absence of a contract: one month.

Employees Entitlements on Termination:

  • Accrued wages and unused annual leave:
    All outstanding wages and payments in respect of accrued but unused annual leave (only statutory leave, unless contract specifies otherwise) up to the time of termination are payable.
  • End of year payments:
    Where the employees are contractually entitled to an annual bonus, they will be entitled to a proportional payment thereof in respect of the year in which they are dismissed, unless the bonus is payable solely at the discretion of the company or they have not been employed for a continuous period of three months or more in the payment period. If an end of year payment is not specified in the employment contract, a sum equaling to the monthly average wage of the employee will be awarded.
  • Severance pay: Any employee who has been employed under a continuous contract for at least 24 months is entitled to severance payment if dismissed by reason of redundancy or if the employee is laid off.
  • Long service pay: Any employee with at least five years of service (other than an employee who retires) will be entitled to a long service payment if he/she is dismissed and his/her employer is not liable to pay them a severance payment. “Dismissal” has the same meaning as that under the provisions relating to severance payments described above.

The EO enables any employee who has been employed under a continuous contract for a period of at least 24 months and who is dismissed or whose contract is varied without his or her consent to make a claim for “unreasonable dismissal” to the Labour Tribunal. Once such a claim is made, the employer is required to produce a valid reason for the dismissal or variation. Valid reasons include:

  • The conduct of the employee,
  • The capability or qualifications of the employee to perform the kind of work he was employed for by the employer, and
  • Redundancy of the employee or other genuine operational requirements.

Bonus

Many employers in Hong Kong pay a 13th month bonus before Chinese New Year, although the trend is to replace this with a performance related bonus. MNCs will normally pay discretionary bonus as well.

When a bonus is an annual payment or annual bonus and is not discretionary in nature, the bonus will be subjected to the end-of-year payment regime set out in the EO. Whether a bonus is truly “discretionary” will not only depend on the terms used in the bonus provision, but on how the bonus scheme operates in practice. If, in fact, bonuses are granted each year automatically by reference to a pre-determined formula and no discretion is exercised, a court may take the view that the bonus is subjected to the end-of-year payment regime in the EO.

The main consequence of a bonus being classified as an end-of-year payment is that, on termination of employment, an employee will be entitled to:

1. A bonus for the previous bonus year, if that bonus has not been paid at the date of termination.

2. A proportion of the bonus for the year in which his/her employment ended, provided that the employee:

  • was employed for at least three months of that bonus year,
  • did not resign, and
  • was not dismissed summarily.

Allowances

Housing allowance for top executive is common (similar to legal rent scheme in Japan).

Tax and Social Security

Tax Rules

As an employer, you are required to prepare tax forms for your employees to report their remuneration every year under the Income Tax Ordinance. Employers are also required to keep payroll records for at least seven years.

Tax calculation will be done by the Inland Revenue Department (IRD). Employers only need to report the annual salary.

Find out more about tax calculation here: https://www.gov.hk/en/residents/taxes/etax/services/tax_computation.htm

The taxes imposed on salaries in Hong Kong is not taken at the source. It is the responsibility of employees to complete their own tax declaration and remit the appropriate taxes at the end of the fiscal year.

The Hong Kong fiscal year usually ends every March 31st. This declaration is provided by the employer, but filling it is the responsibility of the employee. The employer is required to provide the IRD with details of new employees within three months after recruitment. This will allow the IRD to send out tax returns. However, it is the responsibility of the employee to send a notification if he/she does not get his/her tax returns.

Employment Insurance

Employers are required to maintain insurance coverage pursuant to the Employees Compensation Ordinance (ECO) in respect of work-related injuries. Besides that, there is no statutory requirement to provide medical benefits. The ECO obliges every employer to obtain a policy of insurance for a specified minimum amount in respect of its liability to compensate employees for injury by accident or death arising out of and in the course of employment.

The amount of the liability which must be insured is determined by reference to the total number of the employer’s employees:

  • If less than 200 employees, the employer must take out a policy of insurance which provides a minimum coverage of HK$ 100 million per event.
  • If more than 200 employees, the minimum coverage required is HK$ 200 million per event.

Once insured, the employer will be able to claim against its insurer in respect of any liability on its part to compensate employees for work-related injuries.

Health Insurance

Employer may provide or employee may arrange himself/herself.

Supplemental insurances: Accident/Medical/Dental/Life insurance.

Common additional benefits depend on the company.

Mandatory Provident Fund (MPF) Scheme (Pension Fund)

Provident fund contributions are mandatory for employees (including full-time, part-time and casual or temporary staff) aged 18-65 years.

(Note: Foreigners who enter Hong Kong for employment for less than 13 months or are covered by overseas retirement schemes are excluded).

Employers & employees are each required to contribute 5% of the employee’s monthly cash income to a retirement scheme registered as an MPF scheme.

The maximum level of monthly income for contribution purposes is HK$ 30,000.

Mandatory contributions are capped at HK$ 1,500 for employees earning more than HK$ 30,000/month.

Employee contributions are not mandatory if an employee’s monthly income is below HK$ 7,000. However, the employer contribution is required.

A separate scale of contribution applies to casual employees who are remunerated daily.

Employers must provide monthly pay-records to each employee within seven working days after the mandatory contributions are made. Information in the pay-record should include the employee’s relevant income, the amount of contributions made and the date the contributions were paid to the scheme.

The fundamental structure of an MPF scheme is that it is constituted under a Hong Kong trust and provides defined contribution benefits.

The vast majority of MPF schemes offer a choice of investment products, and employees are given the option to elect how their money is invested (similar to 401K plans in the US). One of the investment options offered must always be a very conservative “capital preservation fund.”

Assets invested in a “capital preservation fund” must be invested in a particular manner set out in section 37(2) of the General Regulation (basically just bank deposits and government backed debt securities). Administrative expenses can only be taken from the capital preservation fund if the returns on such fund in any month exceed the returns that would have been earned AND the assets in the fund have been “placed on deposit in a Hong Kong Dollar savings account at the prescribed savings rate” (as determined by the MPF Authority). This is somewhat softened by the ability to roll over outstanding administrative expenses for a period of up to 12 months.

Social Security System Monthly Salary Cap (HKD) Employer Contribution Employee Contribution
Mandatory Provident Fund (MPF) 30,000 5.00% 5.00%
Employment Insurance   Depends on industry Up to 2.00% compensation 0.00%

*The above rates serve as a broad guideline. Actual rates charged will differ.

Employees

Salary Payment

  • Salaries are paid by the end of every month through bank transfer.
  • Salaries are paid for current month.

Payslip

Available monthly on website, PDF or hardcopy.

Timesheets

As per the Minimum Wage Ordinance, it is required for employers to keep records of the total number of working hours by employees with monthly salary of less than HK$ 15,300/month.

Annual Leave

Entitlement to annual leave for the first year is seven days and is accumulated at the rate of one day for each completed year, up to a maximum of 14 days:

  • 1st year: seven days
  • 2nd year: eight days
  • 3rd year: nine days and so on, up to a maximum of 14 days

Employers are entitled to determine when annual leave is to be taken and must give a 14-day notice in writing to the employee of the time that they have selected. Annual leave must, however, be granted within 12 months of the end of the leave year, although in practice, most employers allow annual leave to be taken as it accrues. A leave year may either be the anniversary of the employee’s commencement of employment, or a date that the employer selects in order to have a common leave year for all employees, such as a calendar year.

The EO also permits employees to carry forward all untaken annual leave for 12 months after the preceding leave year.

The payment received by employees by way of holiday pay is a sum equals to the average wage of the employee over the preceding 12-month period.

Employees are entitled to take a payment in lieu of any accrued and untaken statutory annual leave from the previous leave year and are also entitled to payment in respect of any outstanding annual leave due upon cessation of employment.

Sick Leave

Employees are entitled to paid sick leave at the rate of 4/5ths of the employee’s average wage over the preceding 12-month period. An employee who has been employed under a continuous contract for a period of at least one month immediately preceding a sickness day is entitled to paid sickness allowance in accordance with the EO.

Entitlement to sick leave may be accumulated at the rate of two paid sickness days for each completed month of employment during the first 12 months of employment and at the rate of four paid sickness days for each month thereafter, up to a maximum of 120 paid sickness days. The entitlement to sickness pay only applies, however, to periods of absence due to sickness of no less than four consecutive days. This is separate from annual leave.

An employee must produce a medical certificate issued by a medical practitioner or registered dentist in respect of any sickness day for which he/she is claiming statutory sickness allowance for and if he/she fails to do so, the employer is not liable to make any payment for that particular day.

Note: In light of the rather restrictive entitlement to statutory sickness allowance, it is not unusual for employers to provide a contractual sickness benefit which is more beneficial than statutory sick allowance (e.g. by providing that sick leave is paid at full pay or by allowing employees an upfront entitlement to a certain number of days rather than accruing sick leave days on a month-by-month basis).

Maternity Leave

1. A female employee who is employed under a continuous contract of employment (i.e. she has been employed for four or more weeks and has worked at least 18 hours in each week) immediately before the expected date of her commencement of Maternity Leave (“ML”), is entitled to take maternity leave in accordance with the EO (or as provided by the terms agreed with by the employer, whichever is more favorable).

2. Effective from December 11, 2020, the Amendment Ordinance increases ML under the Employment Ordinance (EO) (Cap. 57) by four weeks, which should be taken by the employee continuously after the 10 weeks’ ML, if so entitled. Employers, after payment of 14 weeks’ ML Pay on the normal pay day, may apply for reimbursement of the 11th to 14th weeks’ ML Pay payable and paid under EO, subject to a cap of $80,000 per employee.

3. To qualify for paid maternity leave, the employee must:

  • Has been employed for a period of at least 40 weeks immediately before the expected date of commencement of ML.
  • Has given the required notice, and
  • Has complied with the requirements for the provision of medical certificates referred to above.

4. Maternity leave pay is paid at the rate of 4/5ths of the employee’s average wage over the preceding 12-month period. The additional four weeks’ statutory ML pay will subject to a cap of $80,000 per employee.

Paternity Leave

Male government employees employed under a continuous employment contract are eligible to take a 5-day paternity leave on full pay on the birth of each child.

Male employees in the private sector who are employed under a continuous contract are entitled to a three-day paternity leave in connection with the birth of a child. Leave can be taken at any time (on single or consecutive days) during the period commencing four weeks before the expected date of birth and ending ten weeks after the actual date of birth.

If the employee has more than 40 weeks of service at the time of taking paternity leave, he will be entitled to a payment for each day of paternity leave, calculated at 80% of the employee’s average daily wages over the previous 12 months.

Other Leaves

Marriage, death of relative, etc. There is no standard rules from EO. It should be decided by the company.

Trade Unions

Depends on the industry. Not a major issue.

There are a number of labour organizations/trade unions in Hong Kong but no closed shops. These are principally established on a trade-by-trade basis, although some of the larger corporations with substantial numbers of employees have labour unions particular to that corporation. Membership of trade unions in Hong Kong on a percentage basis is relatively low compared to its European or American counterparts.

Visas and Foreign Workers

General Information

For new companies, it will take longer to apply for foreign employees’ work visas.

The Hong Kong government strongly advocates that employers must give first preference to the local workforce for job vacancies. Foreigners who possess special skills, knowledge or experience of value to and not readily available in Hong Kong can enter and stay in Hong Kong for employment as professionals.

Common Work Visa Type

A foreigner must have a valid work visa to be able to work in Hong Kong. If you wish to hire a foreigner, you will have to apply for a valid work visa on your employee’s behalf before he/she can commence employment with you.

The foreign work force can be categorized in two main groups:

  • Skilled professionals, such as software engineers, doctors and R&D specialists who are issued an Employment Visa, and
  • Semi-skilled professionals such as technicians who are issued a visa under the Supplementary Labor Scheme.

Visas are usually issued for one year initially. Employment Visas are renewable and eligible for dependents, Supplementary Labor Scheme Visas are not.

The general process takes about 6-10 weeks.

Public Holidays in 2022

S.No Occasion Date
1. New Year’s Day January 1st
2. Lunar New Year February 1st
3. 2nd day of Lunar New Year February 2nd
4. 3rd day of Lunar New Year February 3rd
5. Ching Ming Festival April 5th
6. Good Friday April 15th
7. The day following Good Friday April 16th
8. Easter Monday April 18th
9. The day following Labour Day May 2nd
10. The day following Birthday of the Buddha May 9th
11. Tuen Ng Festival June 3rd
12. HKSAR Establishment Day July 1st
13. The 2nd day following Mid-Autumn Festival September 12th
14. National Day October 1st
15. Chung Yeung Festival October 4th
16. The 1st weekday after Christmas Day December 26th
17. The 2nd weekday after Christmas Day December 27th

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