Hong Kong employment law appears complex and confusing when looking from an outside view although in some ways there are many similarities to other countries.
The Hong Kong legal system is based on English common law and rules of equity. It is characterized by its strict adherence to the principles of the rule of law and independence of the judiciary. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Hong Kong.
In Hong Kong, the Employment Ordinance (僱傭條例) sets out the minimum entitlements for employees, such as statutory holidays, Mandatory Provident Fund payments, sick and maternity leave and severance and long-service payments. Employment in Hong Kong is said to be less regulated than it is in many other jurisdictions such as the European Union and the United States.
The following are some general guidelines when it comes to probation periods, termination, leave and pension contributions in Hong Kong. The official website for Hong Kong is located at: www.labour.gov.hk/
There are several key areas to be aware of within Hong Kong’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the Hong Kong laws and rules for both Hong Kong employees as well as foreign nationals.
|Severance / Redundancy Pay ?||
The limit for entitlement to severance pay is at least 24 months for employees made redundant or laid off. The amount of severance pay is two-thirds of a month’s pay for each year of employment or two- thirds of HK$22,500 (i.e, HKD$15,000), whichever is less, up to a maximum payment of HKD$390,000.
The amount of any contractual gratuity based on length of service is deductible from the amount of severance pay due to an employee. In addition, the part of a retirement scheme benefit which is paid to or held in trust for the employee and which is due to the employer’s contributions may be set-off against an employee’s entitlement to the severance pay.
|Termination of Employment ?||
In Hong Kong an employment contract can be terminated by the employee or employer at any time and only require sufficient notice.
Notice is required and the exact notice periods can be agreed upon between the employee and employer. Payment can be made in lieu of notice. The Hong Kong Labour Department outlines the required lengths of notice as below:
Companies entering Hong Kong can make a decision whether to use their own resources or to use a Global Employment Organization to handle employment and payroll responsibilities. A GEO solution is particularly beneficial when a company is looking to setup an office quickly with a manageable cost. The complexity of employment regulations in Hong Kong makes the use of a GEO advisable to ensure full compliance with employment laws, including the drafting of local employment contracts for workers.
The company that is expanding into Hong Kong contracts with the GEO to employ and payroll their staff on their behalf. The GEO then assumes the legal responsibility for these employees, sponsoring them on work permits if necessary, complying with local employment law and running their monthly payroll. This is especially useful to fulfill all of the specific withholding requirements for pensions and benefits, as well as documenting termination, probation periods and leave requests.
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