What You Should Know About Hiring Employees in Hong Kong

Hiring employees for your company is a crucial part of setting up a company in Hong Kong. The employer should be aware of the job-seeking formalities and the employment laws for recruiting in Hong Kong so that they are properly informed. These are the key issues you should be considering when you are hiring employees in Hong Kong : 

• The employment and labor laws in Hong Kong are binding upon employers and employees.
• Employers have to follow some legal provisions and rules for the recruitment of local and foreign staff in Hong Kong.
• Customary standards and regulations in the course of the hiring process.
• Hong Kong recruitment stipulations.

Are you establishing a business entity in Hong Kong? Not certain as to which employment law and employment Ordinance will be of concern to you? This article provides an overview of Hong Kong’s key labor legislations, hiring policy for local and foreign employees including procedures for termination and employee benefits, and recruitment principles in Hong Kong.

Employment Ordinance Hong Kong

The Employment Ordinance is the main legislation that gives the basic terms and conditions for the working environment, which has been implemented in Hong Kong.

Scope of the Employment Ordinance

• The Employment Ordinance is the most important law of Hong Kong when it comes to labor and employment matters. It is to clearly spell out the individual rights, duties as well as the responsibilities of an employer and an employee. The Ordinance regulates an employment contract that is signed to secure all the worker`s rights and provides some basic and obligatory conditions of employment.
• Initially, you should check if your employee is protected by the Employment Ordinance.
• If your employee is subject to the Employment Ordinance, the terms of the employment contract must comply with the minimum Employment Ordinance requirements.
• The contractual terms should be mutually agreed upon by both you and the employee. This is applicable if the Employment Ordinance does not cover your employee.

Whom Does the Employment Ordinance Apply to?

The employment ordinance applies to all employees both temporary and part-time employees except : 

• A family member who lives in the same place as the employer.
• The term employee is used in the Contracts for Employment Outside Hong Kong Ordinance. This Ordinance so applies to employees employed by foreign companies whose offices and employment bases are located outside of Hong Kong, executing primary manual work, and who earn monthly wages not exceeding HK$20,000. Their employment contracts will be considered to be arranged and entered into in Hong Kong.
• A person who is employed according to the provisions of the Merchant Shipping (Seafarers) Ordinance or who is on board a ship that is not registered in Hong Kong.
• The skilled apprentice whose apprenticeship contract has been registered under the Apprenticeship ordinate, and to some extent entitled to the protections of the Employment ordinance.

Moreover, the Employment Act classifies employees under 2 categories such as: 

• Employees who are in employment under an employment contract; and
• Employees who are on a continuous employment contract.

Employees hired through employment contracts are under the protection of the Ordinance and the basic rights cover the payment of wages, the restriction on the deduction of wages and allowances the granting of statutory holidays, etc.

Employees who have a continuous contract, whether it is temporary or part-time, are entitled to all the statutory benefits under the Employment Ordinance including rest days, paid annual leave, sickness allowance, severance payment long service payment, etc. Regular employment is a contract of employment for 4 weeks or more with at least 18 hours in each week.

Important Features Of The Employment Ordinance And Common Practices In Hong Kong

Duties And Responsibilities Of Hong Kong Employers

Employment Contract Drafting

The employment contract in Hong Kong is an agreement between the employer and the employee that outlines the terms and conditions of both the parties which are explicit and implicit. In particular, if the employee is covered by the Employment Ordinance, the contract has to comply with its terms. Contracts can also be oral or written but where written contracts are used, employers are required to furnish employees with a copy of the said contract. Later amendments to the conditions of contract have to be approved by the employees. Some of the important points to be covered in the contract are as follows: 

• Position of appointment;
• Length of employment agreement;
• Responsibilities during employment;
• Commencement date of employment;
• Compensation package;
• Work hours;
• Employee perks;
• Probationary period, if applicable;
• Ethical guidelines; and
• End of contract/ Termination

The Reporting of Employee Remuneration in Tax Returns

You have to prepare a profit and loss statement together with other financial statements as a legal requirement. Additionally, all payroll recordings must be kept for a period of at least seven years. 

Read: Salary Tax Return (BIR60) Guide for Business Owner

Tax Formalities for Employees Leaving Hong Kong

With respect to Tax Clearance, this applies to employees leaving Hong Kong for good or for a duration longer than one month. The tax clearance makes sure that the leaving employees have settled their tax liabilities. This rule does not apply to those who travel a lot to perform their job. As an employer, you must provide the tax authority (Inland Revenue Department of Hong Kong) with the date of the employee’s departure expected to occur is, no later than a month before the departure date. As of the notice date, the employer must withhold all payments owed to the employee for one month or until the IRD conducts an assessment and issues a letter of release confirming the payment of all taxes, whichever comes first.

Read Tax Clearance for Employers and Employees

The Mandatory Provident Fund (MPF) Scheme Contribution

• Contributions to the provident fund are compulsory for all employees (both full-time, part-time, and casual or temporary staff) aged 18-65 years.
• The following employees are exempt from the MPF Scheme:
  • Domestic employees
  • Self-employed hawkers;
  • Pensioners with statutory pension or provident fund schemes such as civil servants, and subsidized or grant school teachers;
  • Participants of their respective occupational retirement schemes with MPF exemption certificates registered.
  • Foreigners who stay in Hong Kong not more than 13 months for employment, or who are covered by overseas retirement schemes; are all included in this list.
  • The employees of the European Union Office of the European Commission in Hong Kong. 
• Both employers and employees must contribute 5% of the employee’s monthly cash income to a registered MPF Scheme.
• Contributions are capped at HK$1,500 for employees earning over HK$30,000 monthly.
• Employees earning below HK$7,000 monthly are exempt from mandatory contributions, but employers must still contribute.
• Casual employees remunerated daily follow a separate contribution scale.
• Employers are required to provide monthly pay records to each employee within seven working days after making contributions, detailing relevant income, contributed amounts, and payment dates to the MPF scheme.

Hong Kong Recruitment Guideline

The workforce of Hong Kong is an international group consisting of different people concerning ethnicities, genders, and ages. Thus, employers should eliminate any discriminatory procedures in employment. The Labor Department has issued a recruitment guideline that makes it clear that such discrimination on the basis of gender, disability, family status, and race will not be tolerated in the workplace. Here is the summary of guidelines: 

• Employers should apply the same selection criteria for recruitment, promotion, transfer, training, dismissal, and redundancy as well as terms and conditions of employment consistently.
• Skills, experience, and capability are what matter the most in relation to whether the person can do the job or not as opposed to age, race, gender, religion, family status, and disability.
• Employees who are engaged in application processing and interview arrangements must be educated on ways of avoiding acts of discrimination.
• Employers should always examine all the advertising materials and other literature connected with the job to ensure that these materials do not contain any information about the age, gender, marital status, race, religion, or language of the applicants unless it is clearly justified.
• Candidates can only be short-listed if their skills and capacities could meet the objectives of the selection criteria.
• Application forms should be drafted in such a way that will not allow discrimination questions on the basis of age, gender, marital status, race, religion, and language.
• Employers must only ask questions at job interviews that are directly related to the essential requirements of the job.
• Tests that are applied for job selection are professionally developed so that they can definitely help in determining the extent of an applicant’s suitability for the job.

Legal Employment Age in Hong Kong

In Hong Kong, the legal age to go to work starts from 18 years and above. Nevertheless, you may work with children and young people who are 13 to 17 years old but please be informed about the limitations of the job categories that children and young people can perform. At this moment, the mandatory retirement age has not been legislated in Hong Kong. Nonetheless, the retirement age is usually 60-65 years in reality.

Hiring Students in Hong Kong

Hong Kong citizens or Permanent Residents who are students can be hired on a full-time or part-time basis without restrictions and are entitled to MPF contributions, with interns typically receiving only a monthly allowance.

Foreign students enrolled in full-time, locally accredited degree programs lasting at least one academic year can be hired as interns, provided they meet certain conditions.

• Internships must be relevant to the field of study and approved or facilitated by the educational institution.
• The total period of the internship shall not be more than one academic year or one third of the prescribed period of study for a similar full-time undergraduate course, whichever is less.. 

The nature of work, salary, location, number of working hours, and employees are not limited. 

Besides the students (excluding exchange students) can take up :

• Part-time on-campus job for not more than 20 hours/week the whole academic year.
• Summer job without any restriction on work hours and location.

Part-Time Employees And Contractual Staff Hiring in Hong Kong

There are no formal legal definitions for part-time and contractual employees outlined in the Hong Kong Employment Ordinance. In general, part-time laborers work for fewer hours than full-time workers. Contract workers are often those who have a certain time duration to be with their company. Employment Ordinance in Hong Kong includes part-time and contract workers in the legal protections as the permanent full-time workers.

Hiring Foreign Employees in Hong Kong

The local employment counsel of the government of Hong Kong states that the first choice for a vacancy must be local employment. Foreigners who have special knowledge, experience, or skills that are valuable to and not easily available in Hong Kong are permitted to enter and stay in Hong Kong for professional employment.

For a foreigner to be employed in Hong Kong, a valid work visa will be required. Apart from the normal hiring procedure, you will be required to apply for a valid work visa for your employees to be able to come to work for you.

The foreign workforce can be divided into two main sections. 

• Specially trained employees such as software developers, doctors, and R&D specialists, who are granted an employment visa and
• Medium-skilled professionals like technicians for which a visa is granted under the Supplementary Labor Scheme.

The following table gives a summary of the work visas in Hong Kong.

How FastLane Group Can Help?

Our FastLane HR and Payroll services make it possible for you to perform various payroll system functions such as payroll processing, disbursing salary, issuing e-pay slips, making contributions, e-leave management, and reimbursement of employees’ expenses. Our services include salary calculation considering statutory deductions, payment of employee salaries and statutory authorities, expense reimbursement arrangements, computation of employee benefits, determination of final salary upon termination of an employee, year-end tax form preparation for employees, and personal tax return preparation for filing with HK Inland Revenue Department.

Enter a new world where employees can easily submit their payroll, electronic leave, and expense claims through FastLane. Let us manage your workforce for you; this way your business is saved from the administration burden and you focus on doing what you’re good at. If you are interested, contact us now!