Hong Kong is a bustling metropolis at the heart of Asia, known for its booming economy, diverse Hong Kong employment opportunities across multiple sectors, and attractive high salaries paired with low tax rates. It draws talent from around the globe, making it a desired location for businesses seeking to expand or establish a presence in Asia.
However, hiring in Hong Kong comes with its own set of challenges, including navigating its distinctive employment laws, understanding the local work culture, and managing the complexities of payroll and taxes.
This guide provides a comprehensive overview of the step-by-step process for Hong Kong employment, ensuring you are well-equipped to successfully build and manage your team in this dynamic city.
1. Understanding the Hong Kong Labor Market
Employment ordinance
Employment ordinance refers to laws and regulations that govern the working relationship between employers and employees in Hong Kong. In 1968, under the Laws of Hong Kong, Chapter 57, the Employment Ordinance came into force. This comprehensive law covers various aspects of work, such as wage protection, terms and conditions of employment, rest days, holidays, and termination. The ordinance also serves as a legal framework that ensures fair treatment of employees and provides clear guidelines for employers in managing their workforce.
Minimum wage
Understanding Hong Kong employment also means that employers must adhere to the minimum wage requirements set by the government. The minimum wage in Hong Kong was legally mandated by the government to ensure that all employees receive a fair and basic level of pay for their work. This amount falls at HK$40 per hour. It applies to all workers in Hong Kong regardless of age, contract type, or payment period. Employers who cannot adhere to these laws can face legal penalties, fines, and reputational damage.
Learn more: Hong Kong Minimum Wage Guide for Employers
Working hours
When considering Hong Kong employment, businesses looking to hire should pay attention to working hours because Hong Kong does not have statutory limits on working hours. This means that employers can set work hours without legal restrictions, allowing for flexible arrangements but also leading to potential overwork and employee burnout. However, employers must clearly define working hours in employment contracts to avoid misunderstandings and ensure that they comply with other related regulations, such as providing appropriate rest days and overtime compensation. Failure to provide rest days can result in a fine of up to HK$50,000.
Mandatory provident fund (MPF)
The MPF is a unique retirement scheme where both the employer and employee contribute. Unlike other pension systems, it’s mandatory for all employees aged 18 to 65, and contributions are strictly regulated. Employers must be diligent about enrolling employees within 60 days and making timely contributions.
2. The Hong Kong Employment Process
The Hong Kong employment process refers to the series of steps that employers in Hong Kong typically follow when hiring new employees.
Job description
This process begins with defining the job description, which outlines the job scope including skills, responsibilities, duties, and qualifications required for the position. To ensure clarity when writing job descriptions, use a concise writing style, focus on essential duties and responsibilities, specify required qualifications and skills for your Hong Kong employment, and use a clear and consistent format.
Recruitment channels
In the Hong Kong employment process, employers must leverage various recruitment channels to effectively reach and attract qualified candidates for the role. Popular options include job boards like JobsDB, CTgoodjobs, and Job Market. Recruitment agencies, such as Randstad and SVA Recruitment are also commonly used for recruitment. Another thing to consider is that hiring in Hong Kong isn't limited to these platforms; employers can also utilize social media platforms like LinkedIn and others to expand their reach and connect with potential candidates.
Screening and selection
Screening and selection is also a crucial part of the Hong Kong employment process, which involves effectively reviewing resumes, conducting screening interviews, and assessing candidates to find the best fit. It's also important to ensure this process remains fair and transparent.
Job offers
Once a candidate has been selected, the next step in the Hong Kong employment process is extending a formal job offer. The offer letter should include details such as the job title, salary, fringe benefits, start date, and any other relevant terms of employment. In Hong Kong, it is customary to provide a probation period, usually lasting three to six months, during which either party can terminate the employment with shorter notice.
3. Onboarding and Compliance
Onboarding and compliance play a vital role in successful employee integration.
For example, research shows that organizations with effective onboarding processes see an 82% improvement in new hire retention. This contributes to fostering a productive and engaged workforce. Therefore, it is important to take note of the following processes when considering Hong Kong employment.
Employment contracts
In Hong Kong, it is mandatory to provide employees with a written employment contract outlining the terms and conditions of employment. This contract should cover essential elements, such as job duties, salary, working hours, leave entitlements, and termination conditions. Both the employer and employee must sign the contract before the commencement of employment.
Mandatory provident fund (MPF)
Part of the onboarding process for Hong Kong employment involves enrolling new hires into the MPF scheme within 60 days of employment.
Employees and employers are both required to contribute 5% of the employee’s relevant income to the MPF. Employees get to select their investment options from the scheme based on their risk tolerance and retirement goals. Employers who cannot comply with the regulations of the Mandatory Provident Fund Schemes Authority (MFPA) can face fines and imprisonment.
Induction training
In regards to Hong Kong employment, there are no specific laws mandating induction training for all sectors. However, training helps new employees working in Hong Kong get familiar with their roles and the company's culture.
4. Managing Your Employees Working in Hong Kong
This is the stage in the Hong Kong employment process where new employees transition from onboarding to becoming productive members of your team.
Payroll Hong Kong and benefits
Managing payroll HK involves ensuring accurate and timely payment of salaries, benefits, and bonuses. Employees are required to receive their salary on a monthly basis. Wages must be paid no later than seven days after the wage period.
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If an employer fails to adhere to this law, they will have to pay interest on the outstanding wages to the employee. In addition to payroll Hong Kong, employees often receive benefits such as medical insurance, housing allowances, and performance-based bonuses.
Benefits administration is also regulated by the Employment Ordinance, and this law mandates certain benefits should be provided to employees. These benefits include:
- Mandatory Provident Fund, which includes 5% retirement contributions from the employer and employee.
- Paid annual leave, which starts at 7 days after one year of service and is increased to a maximum of 14 days.
- Sick leave entitlements, with different allowances based on tenure.
- Maternity and paternity leave provisions.
Employers must also comply with regulations regarding severance and long-service payments, workplace safety, and employee compensation for work-related injuries.
Read next: Your Guide to Managing Payroll Hong Kong
Performance management
Over time, you will track your employees' work to see how well they're performing and if this performance aligns with the company's goals. The evaluation process is often done by using Key Performance Indicators (KPIs) to measure employees' success. Performance management regarding Hong Kong employment also involves regular appraisals, 1-on-1 meetings, feedback sessions, and performance reviews. This helps to foster employee engagement and career development in the workplace.
Employee relations
Maintaining positive employee relations is crucial in Hong Kong’s work culture, where respect and harmony are highly valued. This is a common practice in the workplace that involves clear and open communication between employers and employees, handling disputes and grievances in an effective manner, ensuring every worker's voice is heard, and receiving adequate support needed to function in their roles.
Compliance
Ensuring compliance with Hong Kong’s labor laws is essential for avoiding legal disputes and maintaining a good reputation. Employers must keep up-to-date with any changes in employment legislation and ensure that their policies and practices are aligned with legal requirements. Regular audits and reviews of HR practices can help identify and address any compliance issues.
5. Taxes and Contributions
The final stage regarding Hong Kong employment is tax filing and the contribution of money paid into an insurance plan. For taxes, both employers and employees have specific obligations they must fulfill. Failure to fulfill these obligations can result in penalties, fines, legal consequences, and business disruptions. Therefore, it's essential for Hong Kong employers to understand their tax responsibilities to avoid penalties and maintain smooth business operations.
Learn more: HK Income Tax Manual for Employers Preparing for 2024’s Hong Kong Tax Return
Employer obligations
Mandatory provident fund (MPF)
The MPF is a retirement savings scheme designed to provide financial security for individuals after they retire. And as explained in previous sections, employers are required to contribute 5% of their employees’ relevant income to the MPF, up to the maximum contribution limit. MPF Hong Kong contributions are calculated based on the employee’s income level.
- For employees earning less than HK$30,000 per month, contributions are calculated as 5% of the actual income. For example, if an employee earns HK$20,000 per month, both the employer and the employee would each contribute 5% of HK$20,000, which is HK$1,000.
- For employees earning HK$30,000 or more per month, contributions are capped, meaning that no matter how much more the employee earns above HK$30,000, the contributions are only calculated on HK$30,000. Both the employer and the employee each contribute 5% of HK$30,000, which is HK$1,500.
- If an employee earns less than HK$7,100 per month, the employee is not required to make MPF contributions, though the employer still must contribute.
Other taxes
- Profits tax: Profits tax in Hong Kong is set at a rate of 16.5% for corporations and 15% for unincorporated businesses. It is calculated based on the company’s assessable profits, which include income derived from business activities in Hong Kong.
- Stamp duty: This refers to a tax on certain documents, including those related to property transactions, leases, and share transfers. The rate of stamp duty varies depending on the type of document and the value of the transaction.
Tax compliance
- Payroll processing: Payroll processing in Hong Kong employment involves calculating and disbursing employee salaries, benefits, and bonuses, as well as withholding taxes and MPF contributions. Employers must maintain accurate payroll records and ensure that all payments are made on time.
- Record keeping: To ensure compliance with local labor laws and tax regulations, Hong Kong employers are required to keep detailed records of all payroll transactions, including salary payments, MPF contributions, and tax deductions. These records must be kept for at least seven years and must be available for inspection by the Inland Revenue Department (IRD) upon request.
- Tax filing: Employers are required to file an annual employer’s return with the IRD, detailing the total income and tax deductions for each employee. This return must be filed within one month of the end of the tax year.
Employee obligations
Mandatory provident fund (MPF)
Employees are also required to contribute 5% of their income to the MPF, up to the maximum contribution limit. Employees must ensure that their contributions are remitted on time, as late payments can result in penalties.
Salaries tax
Salaries tax in Hong Kong is levied on an individual’s income from employment, including salary, bonuses, and benefits. It is calculated using a progressive tax rate, where the tax rate increases with income.
For the year of assessment 2023/24, the progressive tax rates are as follows:
It's also important to note that Hong Kong also has a standard tax rate, which for 2023/24 is 15%. Employees in Hong Kong are also entitled to various deductions and allowances that can reduce the taxable income, such as personal allowances, dependent allowances, and deductions for MPF contributions. These are applied before the progressive tax rates are calculated, further lowering the tax burden.
Optimize Your Hong Kong Hiring Strategy Today
Managing Hong Kong employment requires meticulous attention to legal requirements and thorough documentation—especially when the consequences for misfiling can cause significant trouble for your organization. You should strive to minimize human error by leveraging automation to ensure accuracy and compliance.
Omni’s comprehensive payroll solution is tailored to Hong Kong’s specific requirements. With features like support for HKD, automated tax calculations, and managed MPF contributions, Omni can help HR teams simplify their payroll processing and tax calculations and ensure compliance with ease, reducing the risk of penalties. Not only that, with secure document storage and straightforward data input, you can quickly access and submit essential information required for working in Hong Kong.
Omni’s time off management capabilities allows managers can approve leave applications on the go, and keep track of who’s in and out of the office with at-a-glance scheduling. Our employee self-service portal allows employees to submit their employee time off request, which automatically routes to the appropriate manager thanks to customizable approval workflows. With automated calculations, employees and managers can easily view leave balances in real-time, and track how many vacation days they have left without having to go through HR.
Book a demo with our team to learn more about how Omni can simplify the intricacies and complexities of Hong Kong employment.
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