Definitive Guide to Hiring in Hong Kong

Hiring in Hong Kong

Hiring employees compliantly in Hong Kong means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Hong Kong so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Hong Kong; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Hong Kong

Employment laws in Hong Kong are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on Hong Kong employment laws and Hong Kong policies here.

Employee Probation Period

• A probationary period in Hong Kong usually lasts from 1 to 3 months.

Annual Leave in Hong Kong

• By law, Hong Kong employees are entitled to 7 vacation days after serving a period of 12 months.
• This increases progressively to a maximum of 14 days after 9 years of service.
• Most employers provide at least 14 vacation days to white-collar professionals, and senior executives may command more (3-4 weeks).

Holidays in Hong Kong

Maternity Leave Hong Kong

• An employee is entitled to 14 weeks of paid maternity leave.

Paternity Leave Hong Kong

• A male employee is entitled to 5 days’ paternity leave for each confinement of his spouse/partner if he: -
  • Is the father of a new-born child or a father-to-be
  • Has been employed under a continuous contract
  • Has given the required notification to the employer

Sick Leave in Hong Kong

• In Hong Kong, an employee is generally entitled to a sick leave allowance if s/he has taken at least four consecutive days, has a medical certificate, and has accumulated a sufficient number of paid sick days.
• Paid sick days may be accumulated at a rate of two days for each month of employment for the first year, and four days per month for each year thereafter.
• No more than 120 paid sick days can be accumulated.
• Sick pay is granted at a rate equivalent to 4/5ths of the average daily wages earned by the employee in the prior 12 months, or time since hire if the employee has been with the company for less than 12 months.

Working Hours in Hong Kong

• There is no legislation governing the number of working hours per week, but there is a requirement that employees are entitled to one rest day in every period of seven days.
• According to the statistics of the International Labor Organization ("ILO") and relevant governments, working hours in Hong Kong averaged at 42 hours per week in 2018

Overtime in Hong Kong

• Employees who work more than 40 hours in a week are usually paid an overtime rate of “time and a half” or 1.5 times their usual rate for the extra hours.
• But there is no such legislation in Hong Kong and any overtime pay is on a company basis.

Termination of Employment in Hong Kong

• A contract of employment may be terminated by resignation, dismissal by the employer, constructive dismissal, the expiry of a fixed term or by mutual agreement, among other reasons.
• A contract of employment may be terminated by the employer or employee through giving the other party due notice or payment in lieu of notice.
• The procedure, formalities and costs which apply on a termination of employment are determined by an individual's employment contract and the Employment Ordinance.
• An employer must also ensure that any reason for dismissal does not constitute discrimination on a prohibited ground (i.e. sex, race, pregnancy, marital status, family status and disability).
• There is no qualifying period for discrimination claims.
• An employer may only terminate a contract of employment without notice or payment in lieu of notice if an employee, in relation to his/her employment willfully disobeys a lawful and reasonable order, is guilty of gross misconduct or misconduct that is inconsistent with the due and faithful discharge of his/her duties, is guilty of fraud or dishonesty or, is habitually neglectful in his/her duties.
• Summary dismissal is also allowed on any other ground on which the employer would be entitled to terminate the contract without notice at common law.
• An employer and employee can agree to terminate an employment agreement by mutual consent. In such cases a settlement agreement will often be entered into to achieve finality or to deal with any risk that the employee may subsequently bring proceedings.

Notice Period in Hong Kong

• The minimum notice that may be specified is seven days unless the contract includes a probationary period
• In the absence of an agreed notice period, either party may terminate the contract on not less than one month's notice.

Severance in Hong Kong

• An employee is eligible for Severance Payment if they have worked more than 24 months and less than 5 years in a continuous contract and the termination reason was either for:
  • Redundancy
  • lay off
  • a fixed-term contract was completed and not renewed due to redundancy.
• An employee is eligible for Long Service Payment if they have worked for more than 5 years and the termination reason was for one of the following reasons.
  • The employee is dismissed but not due to serious employee misconduct or redundancy*
  • A fixed-term contract was completed and not renewed
  • Death of the employee
  • Retirement of an employee who is 65 or older
  • Employee resignation due to ill health
• The formula for the severance payment is two-thirds of the employee’s monthly wages for every year of service with a maximum payment of HK$390,000.

Hong Kong Salary and Wages

13th / 14th Month Salary in Hong Kong

• Yes
• There is no statutory requirement to pay the 13th or 14th month salary.
• It is however customary to pay the 13th month either in December or Chinese New Year.

Profits tax

• Under the two-tiered profits tax rates regime, the rate of tax for the first HKD2 million of profits of unincorporated businesses is reduced by half (that is, reduced from 15% to 7.5%).
• The remainder of the profits continue to be taxed at the normal rate of 15%.
• However, each group of “connected entities” can only elect one entity in the group to benefit from the two-tiered regime for a given year of assessment.
• In this regard, an entity is a defined to include a natural person and a “connected entity” of another entity if any of the following circumstances exist:
  • One of them has control over the other
  • Both of them are under the control of the same entity
  • If the first entity is a natural person carrying on a sole proprietorship business, the other entity is the same person carrying on another sole proprietorship business.
• “Control” generally refers to one entity holding directly or indirectly of more than 50% of the issued share capital, voting rights, capital or profits of another entity.

Property tax

• levied at a flat rate of 15% on rental income, after a standard deduction of 20%

Salaries tax

• levied on net chargeable income (assessable income less personal deductions and allowances) at progressive rates ranging from 2% to 17%, or at a flat rate (maximum rate) of 15% on assessable income less personal deductions, whichever calculation produces the lower tax liability

• There are no social security/social insurance taxes in Hong Kong (SAR).
• Employers are required to make arrangements for all employees aged between 18 and 65 normally residing and working in Hong Kong (SAR) to join a mandatory provident fund (MPF) scheme.
• However, exemption from the MPF requirements is available to any person entering Hong Kong (SAR) for the purpose of being employed or self-employed (i.e. on a valid employment visa) for a limited period (13 months or less) or who is a member of an overseas retirement scheme.

Immigration Hong Kong

• An applicant is not allowed to take up any employment in Hong Kong under a visitor visa.
• Work visas are granted for a particular job with a particular employer.
• Generally, the employer must demonstrate that the applicant has recognized professional qualifications, has relevant work experience, and is uniquely qualified for the job.
• A work visa is generally valid for an initial period of up to two years and may be renewed.
• The first extension is granted for a maximum period of three years and followed by a second extension for a maximum period of three years.
• If an applicant has been allowed to take up employment as a professional in Hong Kong for not less than two years and had assessable income for salaries tax of not less than HKD2 million in the previous tax year, the applicant may apply at any time for an extension of stay for a maximum period of six years under the top-tier employment stream.
• After seven consecutive years of employment in Hong Kong, an individual may apply for permanent residence.
• This enables him or her to work in Hong Kong without a work visa.
• A prospective employee should complete application Form ID990A, and send it, with a photograph attached, to the local sponsor in Hong Kong or directly to the Hong Kong Immigration Department.
• This application should be sent with specified documents, including, but not limited to, the following:
  • A photocopy of the applicant’s travel document containing its date of issue, date of expiration and details of the re-entry visa (if applicable).
  • The name, contact address and telephone number of the applicant’s local sponsor in Hong Kong.
  • An up-to-date résumé of the applicant’s qualifications and work experience. This must be accompanied by certification of the applicant’s academic qualifications by a university, as well as by proof of the applicant’s previous working experience.
  • A copy of the applicant’s service contract or letter of appointment with a detailed description of the position, salary and assignment period.
  • A letter, with supporting proof from the applicant’s employer (if possible), stating the reason why the post cannot be filled locally.
  • The most recent financial statements of the employer.
  • Form ID990B completed and signed by the local sponsor.
  • A copy of the local sponsor company’s business registration certificate.
  • Copies of the marriage certificate and birth certificates of the children, if dependent visas are sought.
• At the port of entry in Hong Kong, the official work visa is endorsed on the applicant’s passport or travel document with the effective period stated on a landing slip.
• Extensions of the visa may be obtained subsequently if applied for before the expiration date.
• A foreign national wishing to invest in or start a business in Hong Kong must apply for an employment (investment) visa.
• To obtain this type of visa, the applicant must demonstrate that the business that he or she proposes to invest in and carry on will benefit the Hong Kong economy.
• Because the application procedure for the employment (investment) visa is more complicated than for other visas, it generally requires from four to eight weeks for the Immigration Department to process.

Value Added Tax (VAT) in Hong Kong

There is no Value Added Tax, VAT, GST or any other sales tax in Hong Kong.

Mandatory Benefits in Hong Kong

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, maternity leave, paternity leave, sick leave, notice period and severance pay
• Statutory benefits also include social security benefits

Payments And Invoicing

• The tax year in Hong Kong runs from 1 April to 31 March.
• Penalties apply for breaches of time limits in filing returns.
• Individual taxpayers are usually issued composite tax returns and are required to report all income from the various sources subject to profits tax, salaries tax or property tax.
• Salaries tax is automatically levied separately on the employment income of married couples and is paid separately by each spouse.
• However, a married couple not wishing to be assessed separately may elect joint assessment on their salaries, or, if beneficial, elect a combined assessment of their income from all sources under personal assessment.
• No payroll or withholding tax requirements apply for purposes of salaries tax, except for a taxpayer who is about to leave Hong Kong for over one month (other than in the course of his or her employment).
• Profits, property and salaries tax all operate under a system of prepaid tax, known as provisional tax.
• When the actual income for the tax year is determined, a final tax assessment is issued, giving credit for provisional tax already paid.
• The final tax assessment is combined with a provisional tax assessment for the following year.
• The final tax is payable at the same time as the 75% installment of provisional tax for the following year.

Payroll Accrual in Hong Kong

Country Accruals Additional Information

Description

Employers are required to make arrangements for all employees aged between 18 and 65 normally residing and working in Hong Kong (SAR) to join a mandatory provident fund (MPF) scheme. However, exemption from the MPF requirements is available to any person entering Hong Kong (SAR) for the purpose of being employed or self-employed (i.e. on a valid employment visa) for a limited period (13 months or less) or who is a member of an overseas retirement scheme.

Payroll Accruals Additional Information

Accrued Benefits in Hong Kong

Why use Global Expansion to hire in Hong Kong

Establishing a branch office or subsidiary in Hong Kong can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Hong Kong labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Hong Kong law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Hong Kong. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Hong Kong Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.