Employment Law

Fixed Term

Indefinite

Types of Employment Contracts in Hong Kong

Although employment contracts in Hong Kong can be oral or written, it is best for employers and employees to have written contracts in all work arrangements. Written contracts should be drafted in English or Mandarin and clearly state the terms of employment. These terms should include the employee's job description, responsibilities, and compensation and benefits incidental to the position.

In Hong Kong, offer letters and employment contracts should always list compensation amounts in Hong Kong dollars (HKD). Remoly can assist you with drafting employment contracts through our Hong Kong PEO or your own local entity.

When you adopt our Hong Kong PEO solution, Remoly will hire and train your employees in Hong Kong and facilitate all employment contracts in compliance with Hong Kong legislation.

Hong Kong Working Hours

In Hong Kong, there are no fixed laws governing weekly working hours. However, there is a requirement that employees must take one day off every seven days.

Monthly Mandatory Provident Fund (MPF)

By law, employers and employees working in Hong Kong are required to make monthly contributions to the employees' Mandatory Provident Fund ( MPF ). The Hong Kong government requires a minimum contribution of 5% and additional supplementary benefits will be negotiated during the initial employment contract agreement.

Annual Tax

In Hong Kong, there are two modes of tax calculation: standard tax rate and progressive tax rate. Annual taxes are calculated at one of these two rates, and the employee pays the smaller of the two amounts. In fact, there are different deductible allowances (not just MPF) as well as tax refunds.

Hong Kong Labor Law

Any clause (confidentiality clause, training fee clause, etc.) can be included in the employment agreement. However, any fixed commission structures, bonus incentives or KPI-driven terms will need to be provided in a separate addendum.

Hong Kong employment contracts must set out the employee's responsibilities, remuneration details, benefits, grievance procedures and termination requirements. All offer letters, salary details and documents relating to employee income should be stated in Hong Kong dollars.

Remoly's Hong Kong Employer of Record will ensure your operations comply with local labor laws.

Health Insurance

Hong Kong has both public and private healthcare systems. All Hong Kong residents have access to the public healthcare system, and insurance is not compulsory. Likewise, insurance is not part of any payroll deductions. While public systems provide effective coverage at low cost, there are often long wait times. Therefore, many employers offer supplemental benefits as well as life insurance.

Holiday Policy

Take a Vacation

In Hong Kong, employees are entitled to 7 days of leave after completing the initial 12 months of employment. After working for a company for 9 years, you can take up to 14 days of vacation. Most employers in Hong Kong provide at least 14 days of leave to employees in "white-collar" occupations. In addition, senior managers receive three to four weeks of vacation per year. Hong Kong's employment laws allow employees to take partial leave if the period exceeds 10 days. For example, an employee entitled to 15 days of annual leave may take 10 days of leave and receive the equivalent pay for the remaining 5 days of leave. Employers may not impose a cap on the number of days carried forward. Furthermore, there are no legal limits.

Sick Leave

Employees in Hong Kong usually receive sick leave benefits if they take at least four consecutive days off. They also need to have medical certification and have the required number of paid sick days.

Paid sick leave generally accrues at the rate of two days per month for the first year. This is then calculated at the rate of four days per month for each subsequent year. In Hong Kong, the accumulated paid sick leave cannot exceed 120 days.

Sick pay is allocated equal to 80% of the employee's average daily wage over the preceding 12 months. If the employee has been with the company for less than a year, the rate is calculated based on average daily earnings since joining.

In Hong Kong, it is illegal to dismiss an employee while on sick leave. The only exception is in cases of serious misconduct.

Maternity and Paternity Leave in Hong Kong

Hong Kong female employees can enjoy 14 weeks of paid maternity leave if they meet the following requirements:

The employee must have worked for the company for more than 40 weeks before the due date, submit a medical certificate confirming her pregnancy, and be properly notified of her schedule for maternity leave. Employees who do not meet this criterion may take up to 10 weeks of unpaid maternity leave.

The payment standard for maternity wages is 80% of the employee’s average daily wages in the previous 12 months.

Fathers are entitled to five days of paid paternity leave as long as they provide formal documentation of their relationship with the mother and expected child. Fathers can take it anytime from 4 weeks before the due date to 14 weeks after birth. Vacation can be taken all at once or spread over several days.

Hong Kong Work Bonus

Common practice in Hong Kong is to pay all employees 13 months' salary or a similar annual bonus. However, this bonus is not mandated by law. During periods when Hong Kong's economy is performing well, annual bonuses are usually equivalent to 2-3 months' salary.

By working with our Hong Kong PEO, you can gain insight into recommended practices for motivating employees through monthly and annual bonuses.

Termination and Severance

Both employers and employees in Hong Kong are required to give one month's notice of impending termination or resignation. During the trial period, neither party is required to give notice during the first month. There must be a seven-day notice period in the following months after the first month of probation.

Severance pay will be spread among laid-off employees if they have been with the company for two to five years; termination due to redundancy, redundancy or non-renewal of a fixed-term contract following a layoff.

The payments are two-thirds of an employee's average monthly salary for each year they work for the company. The maximum payment limit for severance pay is HK$390,000. If necessary, employers have the ability to offset these costs by making contributions to employees' pension funds, rather than paying outgoing employees.

For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's Hong Kong PEOs can reduce risks for foreign companies and provide guidance during the process.

Salary and Benefits

Hong Kong Compensation Law

In Hong Kong, remuneration laws are generally determined based on the category of employee. The regulations do not distinguish between full-time and part-time employees or independent contractors. However, employees who have worked for an organization for more than four weeks are classified as "continuous" employment. Therefore, these employees are subject to separate laws.

In Hong Kong, employee remuneration is payable at the end of the last day of each wage period. Employers must pay wages to employees on or before the due date, or no later than 7 days after that date.

Although not mandatory, it is usually a good idea for employers to offer a 13-month bonus during the Chinese New Year period. Employers may also choose to include commissions, bonuses and incentives as part of the employment contract.

Hong Kong Welfare

In Hong Kong, all employees have access to the public healthcare system. Employees are not required to purchase insurance to use the system, and there are no payroll deductions. While the public health system provides an excellent level of care, wait times are often long and there are few English-speaking health care providers. Therefore, many employers offer additional health benefits and life insurance. It is recommended that Hong Kong employers set aside approximately 20% of their budget for supplementary benefits based on employees' total wages.

Employees in Hong Kong are entitled to seven holidays per year after working for an organization for more than one year. Employees then receive an extra day off each year. However, this number stops increasing once an employee reaches 14 days of vacation after nine years of employment. Employees can choose to receive pay in lieu of furlough, but only for a period after the 10 days of furlough.

Hong Kong Welfare Management

Benefits administration in Hong Kong is crucial to both employees and employers. It enables employees to obtain the rights they are entitled to and ensures employers comply with local regulations.

Employers must have a thorough understanding of Hong Kong employment rules and regulations. As employers, they have a responsibility to provide their employees with guaranteed benefits and supplementary benefits that may be applicable.

Employers need to realize that benefits administration in Hong Kong will involve significant time and cost. A contract is required for supplementary benefits, which often involves significant travel to and from Hong Kong. As an alternative, employers can choose to work with a Hong Kong benefits outsourcing company. This will streamline the process because the outsourcing company will select and administer benefits for your employees.

Benefits and Compensation Limitations

For foreign employers, they must recognize employment legislation as it relates to the Hong Kong market. Businesses must adhere to standard benefits and pay restrictions, including minimum wages, working hours and annual leave periods.

Remoly will help your business comply with Hong Kong employment regulations. This ensures that all employees receive the benefits and compensation they deserve.

Onboarding Timeline and Process

For local employees, the onboarding process can be completed within a few days. Once the client company confirms the employment conditions of Hong Kong employees, Victoria Harbor will prepare employment contracts accordingly.

After approval, we arrange for employees to sign labor contracts. This allows employees to get to work as quickly as possible.

For international employees, it usually takes around a month to get approval from immigration authorities to start working. The official effective date will be the date the visa (sponsored by the new employer) is activated. The estimated duration of the contract will be submitted to the Immigration Service.

After completing the immigration process and receiving approval from the authorities, international employees will be onboarded in approximately 7-10 days.