Employment Regulations
Hong Kong employment law appears complex and confusing when looking from an outside view although in some ways there are many similarities to other countries.
The Hong Kong legal system is based on English common law and rules of equity. It is characterized by its strict adherence to the principles of the rule of law and independence of the judiciary. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Hong Kong.
In Hong Kong, the Employment Ordinance (僱傭條例) sets out the minimum entitlements for employees, such as statutory holidays, Mandatory Provident Fund payments, sick and maternity leave and severance and long-service payments. Employment in Hong Kong is said to be less regulated than it is in many other jurisdictions such as the European Union and the United States.
The following are some general guidelines when it comes to probation periods, termination, leave and pension contributions in Hong Kong. The official website for Hong Kong is located at: www.labour.gov.hk/
Key Factors to Consider When Employing in Hong Kong:
There are several key areas to be aware of within Hong Kong’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the Hong Kong laws and rules for both Hong Kong employees as well as foreign nationals.
Employment Termination
Severance / Redundancy Pay
The limit for entitlement to severance pay is at least 24 months for employees made redundant or laid off. The amount of severance pay is two-thirds of a month’s pay for each year of employment or two- thirds of HK$ 22,500 (i.e, HKD$ 15,000), whichever is less, up to a maximum payment of HKD$ 390,000.
The amount of any contractual gratuity based on length of service is deductible from the amount of severance pay due to an employee. In addition, the part of a retirement scheme benefit which is paid to or held in trust for the employee and which is due to the employer’s contributions may be set-off against an employee’s entitlement to the severance pay.
Termination of Employment
In Hong Kong an employment contract can be terminated by the employee or employer at any time and only require sufficient notice.
Notice is required and the exact notice periods can be agreed upon between the employee and employer. Payment can be made in lieu of notice. The Hong Kong Labour Department outlines the required lengths of notice as below:
- During probation within the first month of probation: Not required
- During probation period, but after the first month of probation:
- With agreement to the length of notice: As per agreement, but not less than 7 days
- Without agreement to the length of notice: Not less than 7 days notice
- No/after probation:
- With agreement to the length of notice: As per agreement, but not less than 7 days
- Without agreement to the length of notice: Not less than 1 month
Probation Period
The law does not appear to set any rules for probationary periods, and does not appear to be explicitly defined in the Employment Ordinance or on the Hong Kong Labour Department’s website. However an article entitled “Notes for preparing an employment contract” published on the Labour Department’s website suggests the maximum is 3 months.
Pension Requirements
Under the Mandatory Provident Fund Schemes Ordinance, Hong Kong employment is subject to mandatory contributions to an MPF scheme by both the employer and the employee.
MPF contributions rates are as follows:
- Monthly relevant income 0 – 6,500 HKD: Employer contribution 5%; Employee/self-employed contribution N/A
- Monthly relevant income 6,500 – 25,000 HKD: Employer contribution 5%; Employee/self-employed contribution 5%
- Monthly relevant income 25,000 HKD and above: Employer contribution HKD 1,250; Employee/self-employed contribution HKD 1,250
