Hong Kong PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record services in Hong Kong to companies willing to join the Hong Kong market or hire local/emigrant employees in this country.

The general approach requires establishing a subsidiary in Hong Kong.  However our solution allows you to start the operations in Hong Kong within days hence save time and money.  WeHG would recruit applicants on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Basic facts about hiring in Hong Kong

The Employment Ordinance (EO) is the main employment legislation in Hong Kong. It guarantees certain minimum benefits, including (among other things):

• Paid annual leave.
• Paid sick leave.
• Paid maternity and paternity leave.
• Minimum notice of termination and a right to make a payment in lieu of notice.

Subject to limited exceptions, the EO applies to all employees working in Hong Kong, regardless of their nationality. Observing the terms of the EO is generally considered to be mandatory, although it is not specifically expressed to be an overriding statute.

Employees who are employed by foreign employers and seconded to Hong Kong are often employed under contracts expressed to be governed by foreign laws. However, there are currently conflicting High Court decisions on whether a choice of law clause in an employment contract can validly exclude the application of the EO.

Employment and Labor Laws in Hong Kong

Hong Kong employment contract types

Hong Kong law does not require an employment contract to be in writing. It is therefore possible (although not recommended) to have an oral employment contract. However, under section 44 of the EO, if a contract is not in writing, an employee can request notice in writing of the employment conditions prior to entering into the contract.

The Employment Ordinance (EO) and the common law imply a number of terms into employment contracts. Statutory benefits conferred on employees under the EO cannot be reduced or excluded (to an employee’s detriment) by the terms of an employment contract, and a contract term purporting to do so is void. In contrast, terms implied by the common law can generally be varied or excluded entirely by agreement of the parties.

Working hours in Hong Kong

There are generally no restrictions on working hours, except in relation to young persons (that is, those below 18 years old). For those employees, the maximum working period is usually eight hours per day or 48 hours per week.

Hong Kong public holidays

The EO specifies 12 statutory holidays that must be granted to all employees. If the employee has been employed continuously for three months and works for at least 18 hours a week, he/she will be entitled to paid leave on a statutory holiday. The statutory holidays include Christmas, Lunar New Year, Chinese Mid-Autumn Festival and HKSAR Day (when Hong Kong celebrates the handover to Chinese sovereignty). There are five additional general holidays specified in the General Holidays Ordinance, which are only guaranteed to certain employees (such as civil servants). However, many employers also treat these as paid holidays.

Monthly Mandatory Provident Fund (MPF)

In general, both the employer and employee must make contributions under the Mandatory Provident Fund (MPF) scheme. Mandatory contributions are made monthly by the employer and the employee, and are currently the lower of:

• 5% of the employee’s relevant income.
• HK$1,500.

The employer must deduct the employee’s contribution from his/her monthly wages and submit it, together with the employer’s contribution, to the MPF fund.

Annual taxation

Salaries tax is calculated on the employees’ net chargeable income, that is, assessable income after deductions and allowances. In the tax year 2019/2020, the net chargeable income is charged at the lower of:

• Progressive rates of up to 17%.
• Standard rate of 15% applying to net chargeable income before personal allowances.

Vacation leave

The Employment Ordinance (EO) prescribes certain minimum holiday entitlements.

In addition to rest days, statutory holidays, sick leave and other statutory leave entitlements, employees who have been employed under a continuous contract for not less than one year are entitled to paid annual leave. The amount of leave depends on the employee’s length of service, starting at seven days after one year of employment up to a maximum of 14 days after nine years of service.

The rate of pay for each day of statutory annual leave must be not less than the employee’s average daily wages calculated over the preceding 12 months.

Sick leave

Employees are entitled to 80% of their average daily wages (as calculated over the previous 12 months), provided that they are off work due to illness or injury for four consecutive days and have accrued enough sick days to cover the period in question. Special rules apply to women who are pregnant or who have recently given birth. An employee who is on paid sick leave cannot be lawfully dismissed except in very limited circumstances.

Maternity and paternity leave in Hong Kong

A female employee who is employed under a continuous contract and who has given notice of her intention to take maternity leave is entitled to ten weeks’ maternity leave, and an additional period of not more than four weeks on the grounds of illness or disability resulting from the pregnancy (Employment Ordinance). If the employee has more than 40 weeks’ service at the time of taking maternity leave, the first ten weeks of maternity leave will be paid, with the payment for each day of leave calculated at 80% of the employee’s average daily wages over the previous 12 months. Maternity leave can begin at any time between two and four weeks before the expected date of birth of the child.

The Employment (Amendment) Bill 2019, which was gazetted on 27 December 2019, will amend the period for statutory maternity from ten weeks to 14 weeks. The additional four weeks’ maternity leave pay will continue to be calculated at four-fifths of the employee’s average daily wages.

Male government employees employed under a continuous employment contract are eligible to take five days’ paternity leave on full pay on the birth of each child.

Male employees in the private sector who are employed under a continuous contract are entitled to three days’ paternity leave in connection with the birth of their child. Leave can be taken at any time (on single or consecutive days) during the period commencing four weeks before the expected date of birth and ending ten weeks after the actual date of birth.

If the employee has more than 40 weeks’ service at the time of taking paternity leave, he will be entitled to a payment for each day of paternity leave, calculated at 80% of the employee’s average daily wages over the previous 12 months.

Hong Kong work bonuses

If the employee’s contract of employment provides for an annual bonus or payment (which is not payable only at the employer’s discretion), the employee is entitled to a proportion of that bonus/payment on termination of employment, provided that the employee has worked more than three months of the year to which the bonus relates, has not resigned and has not been dismissed summarily. The employee is also entitled to be paid a bonus that has accrued in respect of the previous bonus year, but which remained unpaid at the date of dismissal (regardless of the reason for dismissal).

Termination and severance

An employee who is made redundant after having been employed continuously for at least two years will be entitled to a severance payment. The amount is calculated by multiplying two-thirds of the employee’s last month’s wages and the period of continuous employment (in years, including any fraction of a year). Monthly wages above HK$22,500 are disregarded for this purpose, and the maximum payment is HK$390,000. The severance payment can be reduced by the total amount of gratuities paid to the employee based on length of service, or by the then current value of benefits accrued in respect of that employee in a Mandatory Provident Fund scheme or occupational retirement scheme, to the extent that those contributions are attributable to the employer over the same employment period. A severance payment may not be payable in certain cases if the employee unreasonably refuses a re-employment offer, has been dismissed summarily or has been dismissed for a reason other than redundancy.

Other than the requirement to give the relevant period of notice (or payment in lieu), legislation in Hong Kong does not prescribe any particular procedures that must be observed to dismiss an employee lawfully. However, several recent court decisions have highlighted the importance of ensuring that:

• Employees are afforded procedural fairness in the processes leading up to a dismissal for misconduct or on grounds of unsatisfactory performance.
• Where applicable, the employer follows any applicable disciplinary procedure or policy which forms part of the employment terms.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your foreign teams efficiently while minimizing cost and risk.