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Employment in Hong Kong

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/

Key points on employment in Hong Kong

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.

  1. Probation

    The law does not appear to set any rules for probationary periods, and does not appear to be explicitly defined in the Employment Ordinance or on the Hong Kong Labour Department’s website. However an article entitled “Notes for preparing an employment contract” published on the Labour Department’s website suggests the maximum is 3 months.

  2. Termination

    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:

     

    (During probation) within the first month of probation: Not required
    (During probation period, but after the first month of probation) With agreement to the length of notice: As per agreement, but not less than 7 days
    Without agreement to the length of notice: Not less than 7 days notice
    (No/after probation) With agreement to the length of notice: As per agreement, but not less than 7 days
    Without agreement to the length of notice: Not less than 1 month

    Severance 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.

  3. Leave Entitlements

    Annual Leave

    An employee is entitled to 7 days paid annual leave for every 12 months of work under a continuous contract, accumulating to a maximum of 14 days according to his length of service as follows:

    Service

    (years)

    Annual Leave Entitlement

    (days)

    1 7
    2 7
    3 8
    4 9
    5 10
    6 11
    7 12
    8 13
    9 or above 14

    Sickness leave

    Paid sickness days are accumulated at the rate of two paid sickness days for each completed month of the employee’s employment during the first 12 months, and four paid sickness days for each completed month of employment thereafter. Paid sickness days can be accumulated throughout the whole employment period, but shall not exceed 120 days at any one time.

    Employees are allowed paid sickness days divided into two categories. Paid sickness days can first be accumulated up to 36 days in Category 1 and then 84 days in Category 2. For taking paid sickness day(s) under Category 1, the employee must provide a medical certificate issued by a registered medical practitioner, for sickness leave that extends into category 2, the employer has the right to request a brief record of the investigation carried out and the treatment prescribed by the issuer of the medical certificate should also be produced.

    Maternity Leave

    An employee is eligible for 10 weeks of paid maternity leave if she has been employed under a continuous contract for at least 40 weeks. If they have been employed for less than 40 weeks they are still entitled to 10 weeks maternity leave, but without pay.

  4. Pensions

    Under the Mandatory Provident Fund Schemes Ordinance, Hong Kong employment is subject to mandatory contributions to an MPF scheme by both the employer and the employee.

    MPF contributions rates are as follows:

    Monthly relevant income (HKD) Employer contribution Employee/self-employed contribution
    0 – 6,500 5% N/A
    6,500 – 25,000 5% 5%
    25,000 and above HKD1,250 HKD1,250

Outsourcing Employment Through a GEO Employer of Record Service

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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