Grassroots Up: Understanding Hong Kong’s General Employment Provisions

Primasia is a Hong Kong based company incorporations services provider, which has been supporting our local client and overseas clients from across the world since 1987. With over three decades’ worth of experience and knowledge of our field, we have been able to successfully incorporate our clients in top business locations across Asia. Hong Kong offers a very business-friendly environment for employment, both for the recruitment of local staff and for the relocation to Hong Kong of overseas staff. In addition, Hong Kong offers a pool of multilingual, skilled labor with a strong work ethic. Because of our employee friendly rules, management/labor disputes involving individuals are rare and strikes are virtually unknown to Hong Kong. In addition, Hong Kong’s low tax rates are an incentive for both companies and individuals to relocate to Hong Kong, and the city has an open-door policy making obtaining a work visa for employees or an investment visa for entrepreneurs easier than most other jurisdictions in East Asia.

 

The Hong Kong employment law is quite straightforward, with most of the provisions and protections contained in the Employment Ordinance (EO), a single piece of legislation that cannot be contracted out of. The EO includes basic provisions such as minimum annual leave entitlements, due dates for payment of salary, and rules on dismissal, sick leave, maternity leave and so on. Anyone familiar with European rules will be pleasantly surprised to find that there are no complicated procedural requirements for terminations (first and second written warnings, etc.). Other aspects of the administration of staff are included in the Mandatory Provident Fund Ordinance covering the Mandatory Provident Fund (MPF) and the Inland Revenue Ordinance covering Hong Kong profits and salaries taxes. Here are an employee detailed provisions after recruitment:

Detailed Provisions

Technically, an employment contract is not even required under the EO, as the basic terms will be implied if nothing is formalized. However, employers are well advised both to put a signed employment contract in place and to take advice as to what is included. For examples, simply “importing” an employment contract from the head office may risk including unenforceable terms and conditions (e.g. terms on non-competition, where Hong Kong law will strike out restrictions that are too severe) or over-generous – and therefore uncompetitive – terms (e.g. the EO provides for only seven days of annual leave. Though many employers do in fact offer more).

Paid annual leave

An employee is entitled to paid annual leave based on the length of service. A progressive scale of minimum annual leave entitlements for employees based on the employee’s length of service is provided by the EO. This ranges from even sevens days for employees with more than one year but less than three years of service, up to 14 days for employees with at least nine years of service.

Rest Days

An employee is entitled to not less than one rest day every seven days. This is in addition to statutory annual leave and statutory holidays

Sickness allowance

An employee accumulates two paid sickness days for each completed month of employment. This operates as a ‘cap’ on the number of paid sick days that can be claimed (with supporting documentation). After the first year of service, the employee would accumulate four paid sickness days for each completed month, up to a maximum accumulation of 120 days. An employee is entitled to sickness allowance only if his/her sick leave is for four consecutive days or more, and the pay would be at the rate of four-fifths of the employee’s daily average wage.

Severance payment

An employee who has been continuously employed for more than two years is entitled to severance pay if the employment is terminated by reason of redundancy or lay-off, such as when the employer has ceased to carry out business for the purpose of which the employee was employed. The amount of severance pay is calculated as 2/3 (two-thirds) of the lower of last full month wage of the employee or HK$ 15,000, for each year of continuous service, up to maximum amount of HK$390,000.

Long Service Payment

An employee who has been continuously employed for five or more years is entitled to long service payment if the employee is dismissed for any reason other than misconduct. Payment is due only if the employee does not receive any severance payment and does not enter a new employment relationship with a new business owner following a change of business ownership. Payment is calculated in the same way as that for severance pay.

Offset of long service/severance payments

An employer may recover his/her contributions to the employee’s MPF scheme from any long service or severance payment made.

 

Primasia would welcome the opportunity to assist you with understanding how the employment process works in Hong Kong if necessary. If you’re looking for more information about the investment visa process, Primasia has written a beginner’s guide on how to obtain a Hong Kong investment visa here. If you are more interested in the application process for employment visas, please click here. For more information about us, Please click here to visit the Primasia Corporate Services website and learn more about company registration in Asia, as well as the wide range of corporate services we offer.

Primasia Corporate Services is a Hong Kong based corporate services provider that has been supporting its clients in Asia for over three decades. Among several of our services, Primasia Hong Kong (Primasia) offers our clients Online Accounting services, China Company Incorporation services, Virtual CFO services, MPF Filing services, Profit tax filing services, Employment return filing services, Wholly Foreign Owned Enterprise (WFOE) incorporation and registration services etc. One of our services which we are proud to be offering our clientele is our investment visa and working visa Hong Kong services.

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