Hong Kong continues to attract businesses from around the world, and this dynamic city offers a wealth of opportunities for growth and prosperity. However, navigating the HR and Payroll landscape requires a deep understanding of its unique regulatory and cultural nuances.
Understanding and navigating the intricacies of HR and Payroll in Hong Kong is essential for any business, whether it's an established corporation or a new entrant to this dynamic market. This comprehensive guide equips businesses with the knowledge and tools to ensure compliance, efficiency, and success in managing HR and Payroll in Hong Kong.
Overview of Hong Kong Payroll and HR requirements
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Employee onboarding |
Employers are obligated to provide information regarding the terms and conditions of employment. Includes details about wages, wage periods, termination notice periods, and year-end payment entitlements. |
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Visa and Legal Compliance |
Employers must ensure that employees are legally employable in Hong Kong. Employment cannot commence until the employee holds a valid visa or HKID status permitting work. |
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Wage Management |
Employers are required to pay wages to employees promptly, no later than seven days after the end of the wage period. Failure to do so results in the employer paying interest on the outstanding wages to the employee. |
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Statutory Paid Leave |
Employees enjoy various paid leave entitlements, including rest days, statutory holidays, paid annual leave, and paid sickness days. The number of statutory holidays and annual leave days varies based on employment duration, and paid sickness days can be accumulated. |
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Maternity and Paternity Leave |
Female employees are entitled to 14 weeks of maternity leave, which must be paid. On the other hand, male employees can take five days of paternity leave for each spouse's confinement. |
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Compliance and Record-Keeping |
Employers must maintain and submit various records and notifications to ensure compliance with employment regulations, including filing annual employer returns, notifying new hires, and reporting terminations as well as key employment details, such as the employee's name and HKID, employment contract, job title, wages, and Mandatory Provident Fund (MPF) contributions. |
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Termination of employment |
Terminating an employment contract can be done for valid reasons such as employee conduct, qualifications, redundancy, statutory requirements, or other substantial reasons. Employers may also summarily dismiss employees for certain misconduct. Employees in Hong Kong enjoy legal protection against dismissal under specific circumstances, such as maternity protection, paid sick leave, participation in trade union activities, and injury at work. |
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Severance and Long Service Payment |
Employees may be eligible for severance payment or long service payment based on specific conditions, including continuous employment and the reason for dismissal. |
Labor laws
The Employment Ordinance is the main piece of legislation governing conditions of employment in Hong Kong. It covers a comprehensive range of employment protection and employee benefits, including.
- Wage protection;
- Rest days;
- Statutory holidays;
- Paid annual leave;
- Sickness allowance;
- Maternity protection;
- Statutory paternity leave;
- Severance payment;
- Long service payment;
- Employment protection;
- Termination of employment contract; and,
- Protection against anti-union discrimination.
With minimal exceptions, the Employment Ordinance applies to all employees in Hong Kong, whether domestic or foreign.
Other labor laws also play a key role in specific aspects governing the rights and responsibilities of employers and employees in the Special Administrative Region. These laws are:
- Health ordinance: Hong Kong's labor law prioritizes workplace safety and health, emphasizing creating a hazard-free environment.
- The Employees' Compensation Ordinance requires employers to compensate workers for work-related injuries or illnesses; and
- Occupational Safety and Health regulations mandate preventive measures.
Hiring employees
Hiring employees in Hong Kong must comply with the region’s key labor legislations, especially the Employment Ordinance, which is the main piece of legislation governing conditions of employment in Hong Kong. The Employment Ordinance highlights employees’ rights as well as the duties and responsibilities of employers and employees.
The Employment Act separates employees into two categories, which are:
- Employees employed under a continuous employment contract (entitled to all the statutory benefits under the Employment Ordinance); and
- Employees employed under an employment contract (entitled to essential protection under the Employment Ordinance).
An employee who has been employed continuously by the same employer for four weeks or more, with at least 18 hours worked each week, is regarded as being employed under a continuous contract.
Depending on the type of employment, employers have specific obligations they need to fulfill, including creating the employment agreement, submitting the employer's Return, notifying tax authorities about the departure of non-resident employees from Hong Kong, and making contributions to the Mandatory Provident Fund.
Salary and wages
The Minimum Wage Ordinance of Hong Kong establishes a statutory minimum wage (SMW) regime aimed at striking an appropriate balance between forestalling inadequate wages and minimizing the loss of low-paid jobs while sustaining Hong Kong’s economic growth and competitiveness. SMW provides a wage floor to protect grassroots employees.
SMW is expressed as an hourly rate and ranges from HK$37.5 (US$4.8) to HK$40 (US$5.11). Wages payable to an employee for any wage period should be no less than the SMW rate on average for the total number of hours worked.
Salary components include a base salary, typically paid monthly, and bonuses, often given at year-end. Bonuses can be contractual or discretionary, though they are customary rather than legally required, taking various forms like 13th or 14th-month salaries or double pay.
Allowances, such as traveling and attendance allowances, are considered part of wages as per the Employment Ordinance, but certain types, like contributions to retirement schemes and gratuity bonuses, are excluded. Overtime pay can be included in employment contracts as an allowance, even though it's not mandated by law.
Hong Kong does not withhold individual income tax (salaries tax) from employees' wages. Instead, employees are responsible for managing their own tax obligations.
Ensuring adherence to minimum wage regulations and maintaining accurate record-keeping is essential for employers in Hong Kong to remain compliant with labor and tax laws.
Visa and employment permits
A visa or entry permit is required to work, study, establish, or join any business or to take up residence in the HKSAR. Otherwise, there is a high risk of being refused admission on arrival.
Hong Kong offers a visitor’s visa, which grants a visa-free period for citizens of most countries, usually for 7, 14, 30, or 90 days, depending on the country in question. For employment and investment, Hong Kong has several different types of visas for investment, including visas under the General Employment Policy (GEP), visas under the Admission Scheme for Mainland Talents and Professionals (ASMTP), visas under Immigration Arrangements for Non-local Graduates (IANG), visas under Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents, and visas under Capital Investment Entrant Scheme (CIES).
The existing visa schemes for foreign employees in Hong Kong are outlined below:
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Types of Visas for Foreign Employees |
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Employment visa |
Supplementary labor scheme visa |
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Foreign professional staff who have graduated from an academic institute in Hong Kong, as well as foreign professional staff and mainland Chinese who have yet to graduate from Hong Kong but possess special skills, knowledge, or experience needed by Hong Kong. |
Semi-skilled professionals at technician level or below.
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Valid for 1 year initially (renewable) |
Valid for 1 year initially (not renewable) |
However, no visa or entry permit shall be required if an individual holds certain travel documents such as Hong Kong Special Administrative Region Passport or British National (Overseas) Passport, etc.
Terminating employees
The Employment Ordinances (EO) (Cap.57) govern employment law in Hong Kong, allowing both the employer and the employee to terminate a contract of employment. The party terminating the contract must provide the other party with a reasonable notice period or payment in lieu of notice, among other requirements.
Although dismissing employees in Hong Kong is easier than in other jurisdictions such as mainland China, the United Kingdom, or the United States, employers must follow all applicable statutory requirements as well as any special contractual stipulations. They should also be aware of the implied requirement of mutual trust and confidence wherever possible to not jeopardize the parties' relationship.
Salaries tax
Income tax rates range from two percent to a maximum of 17 percent after deductions and allowances or 15 percent on net income after deductions.
All individuals earning income arising in or derived from Hong Kong from an office, employment, or pension are subject to salaries tax in Hong Kong. Tax payable is calculated at a progressive rate on the “net chargeable income” or at a standard rate on the “net income” (before deduction of the allowances), depending on which is lower. It is further reduced by the tax reduction, subject to a maximum.
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Tax Rates |
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Progressive rates (Year of Assessment 2018/19 onwards) |
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Net chargeable income (HK$) |
Rate |
Tax (HK$) |
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On the first 50,000 |
2% |
1000 |
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On the next 50,000 |
6% |
3,000 |
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On the next 50,000 |
10% |
5,000 |
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On the next 50,000 |
14% |
7,000 |
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Remainder |
17% |
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Standard rate of tax (year of assessment 2014/15 onwards) |
15% |
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Annual leaves and statutory holidays
Employees enjoy various paid leave entitlements, including rest days, statutory holidays, paid annual leave, and paid sickness days. The number of statutory holidays and annual leave days varies based on employment duration, and paid sickness days can be accumulated.
Further, Hong Kong has some Western holidays in addition to holidays that match most of China’s official holidays. It currently has 13 statutory holidays (also called labor or factory holidays) and 17 public holidays (also called bank holidays). However, starting in 2024, the number of statutory holidays will gradually increase to 17 by 2030 (one additional holiday to be added every two years).
Further, employees are entitled to various forms of leave:
- Annual Leave: Employees become eligible for paid annual leave after completing 12 months of continuous employment. The duration of paid leave gradually increases from seven days to a maximum of 14 days based on an employee's years of service.
- Sick Leave: To take paid sick leave, employees must meet specific conditions, including a minimum of four consecutive days of sickness (with exceptions) and a medical certificate supporting the sick leave. Paid sickness days accrue at a rate of two days per month during the first 12 months of employment and four days per month after, up to a maximum of 120 days.
- Maternity Leave: Maternity leave entitles pregnant employees to a continuous 14-week leave period, with added leave if childbirth is delayed. Maternity leave pay is calculated at four-fifths of an employee's average daily wages over the past 12 months, subject to a cap. Employers can apply for government reimbursement of maternity leave pay beyond the 10th week.
- Paternity Leave: Male employees can take five days of paternity leave for each childbirth of their spouse/partner. Paternity leave pay is also calculated at four-fifths of an employee's average daily wages over the past 12 months, with a cap.
Social Insurance
The Mandatory Provident Fund (MPF) is a retirement scheme available in Hong Kong. This scheme covers all employees aged over 18 and under 65 with exemptions. An employer must comply with all MPF-related legal obligations under the law. These include enrolling all qualifying employees in MPF schemes and making MPF contributions for them.
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Mandatory Contributions Payable by Employer and Employee by Monthly Relevant Income |
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Monthly relevant income |
Amount of mandatory contributions payable by employer |
Amount of mandatory contributions payable by employee |
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Less than HK$7,100 |
Relevant income x 5% |
No contributions required |
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HK$7,100 to HK$30,000 |
Relevant income x 5% |
Relevant income x 5% |
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More than HK$30,000 |
HK$1,500 (US$191.91) |
HK$1,500 (US$191.91) |
Employee’s portion of mandatory MPF is deductible for calculating Hong Kong salaries tax, subject to a capped amount of HK$18,000 (US$2,300).
Social security is a vital part of employment in Hong Kong. Employees must contribute at least five percent of their monthly earnings, with options for extra contributions; mandatory contributions to recognized retirement schemes are tax-deductible up to HK$18,000 yearly.
For foreign investors, knowing these obligations is critical. Hong Kong workers enjoy medical coverage, including dental care and appliances. Employers cover treatment costs up to HK$200/day (US$25.6) (in-patient or outpatient) or HK$280 (US$35.8) for both in a day. The limit for medical appliances is HK$33,000 (US$4,222), increasing to HK$100,000 (US$12,794) for renewals.
Upon retirement, employees receive old-age pensions or lump sums based on contributions. Disability benefits range from HK$1,170 (US$149.7) to HK$2,340 (US$299.4) monthly, with lump-sum options. Survivor benefits are lump sums, too, combining contributions and interest. Social security also covers burial grants, up to HK$10,750 (US$1,375) for funeral costs. Understanding these details is vital for entering the Hong Kong market smoothly.
