There are many things you will need to know before you hire in Hong Kong but here’re our top 3:
1. Employment in Hong Kong
Employer and Employee Social Security in Hong Kong
Both the employer and employee make monthly contributions to the Mandatory Provident Fund of 5% each, based on a maximum of HKD 30,000 salary per month, but some foreign workers may be exempt.
2. Tax in Hong Kong
Tax Rates in Hong Kong
Income tax rates in Hong Kong range from 2-17% depending on gross income level, or a flat rate of 15% on all income after deductions.
Corporate Tax in Hong Kong
The corporate tax rate in Hong Kong is 16.5% of taxable profit.
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3. Payroll in Hong Kong
Social Security Registration
Only expats working longer than 13 months in Hong Kong need to register or contribute to social security. Also, an employee may be exempt if they are continuing to pay into social security in their home country.
13th/14th month bonus
A 13th month bonus is not required, but it is customary in Hong Kong to coincide with Chinese New Year.
It’s going to be hard to employ someone remotely. Here’s what else you should be worried about:
The risk of non-compliance is very high, especially when employing in a new country like Hong Kong
Employing in an unfamiliar country like Hong Kong can be overwhelming. The burden and risk of non-compliance is all on you and your company and you need to be careful when navigating the employment and tax laws of Hong Kong. The information you’re looking at may be inaccurate, outdated or in another language. The consequences of non-compliance in Hong Kong are far too high to not invest time and money in thoroughly understanding the Hong Kong jurisdiction.
Involving tax and immigration providers early is the number 1 most preferred method to manage compliance risks for companies, with 72% stating that they are focusing on outsourcing these services early on in the assignment.
There are many hidden costs that you may have overlooked
When employing in Hong Kong, it is highly like that you may fail to factor in some costs involved while estimating a budget for the assignment. Usually, these costs occur during the course of employment and tend to be country-specific. They are often unpredictable and unavoidable resulting in the assignment being far more expensive than the business intended it to be. Hiring just one employee in Hong Kong doesn’t justify the effort and cost it takes for a company to learn everything from scratch about employing in Hong Kong.
Outsourcing services is the most preferred way for global mobility professionals to contain costs with 71% stating that they have already made outsourcing changes in an effort to maximise cost savings. Unsurprisingly, outsourcing is preferred over reducing the number of assignments/transfers or improving in-house administrative processes as a method to save costs.
These considerations are common when hiring an employee in any new country. In our years of experience employing in Hong Kong we have helped our clients with several other problems specific to Hong Kong. Here’re a few examples:
Other Issues Our Clients Have Encountered When Employing in Hong Kong
There are termination laws that apply to employees on assignment in Hong Kong, regardless of the rules in the home country. Notice periods can be set by contract, but no less than 7 days, and if not specified the statutory minimum notice is one month.
There is only a requirement of severance pay if the employment exceeds 2 years, and the termination is involuntary.
Paid sick leave is generous in Hong Kong, and may total up to 24 days in the first year, and 48 days in the second year of employment. Unused sick leave can be accrued up to 120 days total, and the payment is 80% of average daily salary.
Work Permits and Visas
All assignees to Hong Kong will need a work permit, and the process can take from four to eight weeks to obtain the final visa. One important point is that only legally married spouses can accompany an assignee on the work permit, and common law or life partners cannot qualify.
Hong Kong does not use a PAYE system, and the employee is required to calculate and pay their own taxes each year (rather than having the amounts withheld from the pay check each month).
The Employer of Record Solution
As you can see from this overview, the process of hiring even one employee in Hong Kong can be a real challenge for any HR department. This is why the Shield GEO Employer of Record (EOR) solution is a cost-effective and simple way to address your payroll, tax and immigration requirements. The EOR becomes the legal employer of your worker in Hong Kong, with a registered entity that is already in place and prepared to take care of your employment needs.
Our team members can offer personal service, quick communication and the expertise of our regional partners to ensure that our EOR service is delivered seamlessly to support your staff assignments. We do have account managers and a principal office in Asia-Pacific, giving your HR department regional support for Hong Kong employment.
Here is a quick summary of what you can expect from your Shield GEO regional account manager:
- A single point of contact for all employee or HR issues and questions
- Assistance with meeting Hong Kong requirements for the employment contract
- Advice on changes in legislation
- Obtaining visas and work permits sponsored by our Hong Kong EOR
- Full compliance with Hong Kong payroll, immigration and employment laws
- Outsourced payroll: Monthly payroll and employment administration
For a HR department located in the home country, the Shield GEO team becomes a local, dedicated resource to handle every aspect of your employee assignments. This allows you to focus on supporting your staff’s project and performance needs, while we take care of the multiple employment administration tasks for you.
Need help hiring an employee in Hong Kong? Get in touch!
Hiring your first employee in another country? Let us know which country and we’ll send you a guide on everything you need to know about employing there.