A common employment dispute is whether a bonus is a discretionary bonus and if so, whether the employer has properly exercised discretion
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This article provides a high level outline of employment law rights and duties in Hong Kong during the employment life cycle up to the point of termination of employment. It covers key requirements of the Employment Ordinance as well as anti-discrimination laws, immigration laws, tax laws, occupational health and safety laws and personal data privacy laws. If you would like specific information about employment law matters, please contact one of our employment lawyers.
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Hong Kong employment laws prohibiting discrimination in the recruitment of employees are codified in the Sex Discrimination Ordinance, the Disability Discrimination Ordinance, the Family Status Discrimination Ordinance and the Race Discrimination Ordinance. Together, these anti-discrimination laws prohibit direct and indirect discrimination against an employee as well as an employment candidate on the following grounds:
Sex (i.e. whether the employee or candidate is a male or female),
Marital status as well as whether the employee or candidate is pregnant or breastfeeding,
Disability (including physical disability and mental disability, whether total or partial as well as illness, disfigurement, and learning disorders),
Family status (i.e. the status of having a responsibility for the care of an immediate family member), or
Race (i.e. the race, colour, descent, national or ethnic origin of a person).
As a result, an employer should be aware not to make discriminatory statements in job advertisements or discriminate against a particular candidate when deciding on whether to make an offer or when deciding on the terms of employment, including benefits and entitlements, promotion or termination.
Employers may hire an employment agency either to help search for and select suitable candidates to fill open positions or to hire employees on their behalf.
Under the Employment Ordinance, unless exempted, any person who operates a business the purpose of which is to obtain employment for another person or to supply labour of another person to an employer must be licensed by the Commissioner for Labour. Employers may check whether an employment agency is licensed through the Labour Department website.
Hong Kong law distinguishes an employee from an independent contractor. This difference is known as the difference between a contract of service and a contract for services. Benefits and entitlements under the Employment Ordinance are only available to an employee.
Whether or not an individual will be regarded as an employee depends on whether the individual performs his services as a person in business on his own account. If the answer is yes, then the contract is a contract for services. If the answer is no, then the contract is a contract of service. To answer this question, the courts look at a number of considerations. However, there is no exhaustive list of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases.
Control - An employment relationship rather than an independent contractor relationship is more likely to arise where the employer exercises a high degree of control over the individual. Thus, for example, where the manner in which the individual conducts their work is determined by the employer, the individual is more likely to be an employee. Conversely, where an individual is free to conduct his or her work as he or she sees fit, the individual is more likely to be regarded as an independent contractor.
Ownership of Tools and Hiring of Own Staff – An employment relationship is less likely to arise where the individual provides his own equipment and hires his own staff to perform his duties.
Chance of Profit and Risk of Loss – An employment relationship is less likely where the individual has the opportunity to make a profit from his management of the work or suffer a loss as a result of undertaking the work.
A permanent resident or a former permanent resident of Hong Kong has the right of abode or the right to land in Hong Kong and as such, cannot be subjected to any conditions on their stay. As a result, such a person does not need a work visa to work in Hong Kong.
In contrast, an individual who has neither the right of abode nor the right to land in Hong Kong must obtain a visa or entry permit to enter Hong Kong. If an individual enters on a visitor or student visa, he will normally be subject to a condition of stay that he not take up employment, whether paid or unpaid, or join in any business. In other words, such an individual will need a work visa to work in Hong Kong.
An individual who is issued a work visa will normally be subject to a condition of stay that he only take up employment or join in any business as the Director of Immigration may approve. A work visa therefore often permits an individual to work only for a particular employer. If the individual wishes to change employers, he will need a new work visa.
It is illegal for an employer to employ someone who is not lawfully employable. An employer must take all practicable steps to determine whether an individual is lawfully employable and to maintain records to demonstrate the individual is lawfully employable.
With few exceptions, the Employment Ordinance applies to every employee engaged under a contract of employment as well as to the employer of such an employee and to the contract of employment between such an employee and his employer. However, there is conflicting legal authority as to whether global employers may opt out of the Employment Ordinance to standardize employment agreements for senior executives around the world.
No, however the Employment Ordinance requires every employer to inform an employee in an intelligible manner to that employee of:
his wages and how often the wages are to be paid,
if the employee is to receive a year-end payment the amount and timing of such payment, and
the length of notice required to terminate the employment contract.
In any event, it is good practice for employers to conclude a written employment contract to avoid dispute as to the terms of employment and to establish rights of employers which employment laws do not imply into the employment relationship (e.g. right of employer to place employee on garden leave).
Yes. Under the Minimum Wage Ordinance, an employee is entitled to be paid wages in respect of any wage period of not less than the minimum wage. As of July, 2021, the minimum wage rate is HK$37.50 per hour (approx. US$4.78).
The Employment Ordinance contains provisions setting out an employer’s obligation to pay wages, the timing of payment of wages, the manner in which the wages are paid and strict limitations on the deductions which an employer can make from an employee’s wages.
In Hong Kong, employers and employees are generally free to agree upon the terms of pay and benefits package, subject to some minimum statutory conditions. Although parties are free to agree on the terms of an employment contract, the Employment Ordinance will render unenforceable any term which purports to reduce or extinguish any statutory right, benefit or protection conferred upon the employee by the Employment Ordinance.
Key terms in an employment contract include:
the term of employment,
the employee’s position,
the probation period (if any),
the employee’s duties, remuneration including bonuses, other benefits and entitlements (e.g. sick leave, annual leave, holidays, rest days, maternity leave, paternity leave, severance payment, long service payment and mandatory provident fund), and
the period of notice required for termination.
Some employment contracts will provide for other commercial matters including the use and disclosure of confidential information and post-employment restraints.
Under the Employment Ordinance, an employee who is employed under a “continuous contract” (which means that the employee must have been continuously employed for a minimum duration of four consecutive weeks for at least 18 hours a week) of more than 3 months is entitled to paid statutory holidays.
There are currently 12 statutory holidays in Hong Kong, namely:
Lunar New Year’s Day;
the second day of Lunar New Year;
the third day of Lunar New Year;
Ching Ming Festival;
Tuen Ng Festival;
the day following the Chinese Mid-Autumn Festival;
Chung Yeung Festival;
Christmas Day or Chinese Winter Solstice Festival (at the option of the employer);
the first day of January;
Hong Kong Special Administrative Region Establishment Day; and
Subject to compliance with statutory procedures, an employer and employee may arrange for the employee to work on a statutory holiday as long as an alternative holiday is provided in lieu.
Statutory holidays under the Employment Ordinance should be distinguished from general holidays under the General Holiday Ordinance. General holidays includes the statutory holidays plus Sundays and the following days:
the day following Good Friday;
the Birthday of the Buddha;
Christmas Day (if the employer makes the Chinese Winter Solstice Festival a statutory holiday); and
the first weekday after Christmas Day.
General holidays are, with some exceptions, observed by all banks, educational establishments, public offices and government departments and, in practice, many private employers observe general holidays though they are not obliged to do so.
Under the Employment Ordinance, an employee who is employed under a “continuous contract” is entitled to paid statutory annual leave. Depending on the employee’s length of service, the Employment Ordinance provides for a sliding scale of minimum annual leave entitlements from 7 days (for employees who have worked for more than 1 year but not less than 3 years) up to 14 days (for employees who have worked for 9 or more years). This entitlement is in addition to statutory holidays.
Yes. Under the Employment Ordinance, an employee who is employed under a “continuous contract” is entitled to at least one rest day (i.e. a continuous period of not less than 24 hours without work) each week. This entitlement is addition to statutory annual leave and statutory holidays. The Employment Ordinance does not specify whether the rest days are paid or unpaid. If the contract pays wages on a monthly basis, the rest days are generally accepted to be paid and covered by the monthly wages of the employee.
Under the Employment Ordinance, an employee who is employed under a “continuous contract” for 1 month immediately before a sick day is entitled to sickness allowance. An entitlement to sickness allowance will accrue at the rate of 2 paid sick leave days each month in the first year of employment and 4 paid sick leave days each month thereafter, subject to a cap of 120 days. An employee is entitled to receive sick leave pay equal to four-fifths of his average daily wages in the past 12 months (or a shorter period if he has been employed for less than 12 months). However, such payment falls due only when the employee is off sick for at least 4 consecutive days. An employer is not liable for any sickness allowance unless the employee provides the employer with a medical certificate which specifies the number of days on which, and the nature of the sickness or injury due to which, the employee is unfit for work.
Employees in Hong Kong have no legal entitlement to a year end bonus unless their employment contract specifically provides for such a bonus. However, it is common for employees to receive an end of year bonus in addition to their wages. This is sometimes referred to as a “13th month payment” or “end of year payment” and is often paid by employers at the end of the Chinese Lunar New Year.
An issue which is sometimes contentious is whether a year end bonus is a contractual entitlement or whether it is completely discretionary. Where the payment is contractual, the Employment Ordinance provides for the amount, payment and timing of the bonus if the contract is silent on these matters.
Even where a year end bonus is completely discretionary, the employer should not exercise that discretion irrationally, perversely or capriciously.
Under the Employment Ordinance, a female employee who is employed under a “continuous contract” is entitled to at least 14 weeks’ maternity leave. If she has been continuously employed for more than 40 weeks before the commencement of the maternity leave, she is entitled to maternity pay (otherwise the leave is unpaid). Maternity pay is equal to four‐fifths of her average daily wages in the past 12 months (or a shorter period if she has been employed for less than 12 months). However, maternity pay for the period following the first 10 weeks of maternity leave is capped at HK$80,000 (which can be reimbursed by the government).
An employee who intends to take maternity leave should notify her employer of her pregnancy and her intention to take maternity leave after the pregnancy has been confirmed, such as by presenting a medical certificate confirming her pregnancy to the employer.
Under the Employment Ordinance, a male employee who is employed under a “continuous contract” is entitled to five days’ paternity leave for the birth of each of his children. If he has been continuously employed for more than 40 weeks before the commencement of the paternity leave, he is entitled to paternity pay (otherwise the leave is unpaid). Paternity pay is equal to four‐fifths of his average daily wages in the past 12 months (or a shorter period if he has been employed for less than 12 months). An employee who intends to take paternity leave should notify his employer in advance.
Under the Mandatory Provident Fund Schemes Ordinance, unless exempted, an employer must enrol an employee who has been employed for a continuous period of not less than 60 days in a Mandatory Provident Fund (“MPF”) scheme within the first 60 days of the employment.
An employer must pay contributions to an employee’s MPF account for each contribution period (generally meaning the wage period).
At present, in case of a monthly paid employee:
If the employee’s monthly relevant income is less than HK$7,100, only the employer is required to make a mandatory contribution (i.e. 5% of the employee’s monthly relevant income); and
if the employee’s monthly relevant income is HK$7,100 or higher, each of the employee and the employer are required to make a mandatory contribution equal to 5% of the employee’s monthly relevant income subject to a contribution cap of HK$1,500 for each of the employee and employer.
Under MPF legislation, an employer must deduct an employee’s contribution from the employee’s wages and make the contribution for the employee.
In Hong Kong, the Personal Data (Privacy) Ordinance (“PDPO”) governs the collection, handling and use of personal data of employees and prospective employees. Under the PDPO, employers must ensure that:
Personal data is collected on a fully-informed basis and in a fair manner, with due consideration towards minimising the amount of personal data collected;
Personal data should be processed in a secure manner and should only be kept for as long as necessary for the fulfillment of the purposes of using the data; and
Use of personal data should be limited to or related to the original collection purpose. As data subjects, employees and candidates are entitled to access and make correction to their data.
As a result, for example, when an employer collects personal data from a job applicant or employee, the employer should state the purpose of collection, the classes of persons to whom the data may be transferred and whether it is obligatory or voluntary for the individual to supply the data (unless this is obvious from the circumstances). When an employer uses the personal data, the employer should inform the individual of the rights to request access to, and correction of, his personal data and the person to whom such requests should be made. If a job advertisement directly solicits the submission of personal data by interested individuals, the employer should also comply with such notification requirements in the advertisement.
In Hong Kong, employers are obliged to ensure the safety and health of their employees at work under both common law and legislation. The Occupational Safety and Health Ordinance (“OSHO”) imposes specific obligations on employers, occupiers and employees in relation to the safety and health in the workplace. The Factories and Industrial Undertakings Ordinance (“FIUO”) aims to ensure the safety and health of all persons employed in industrial undertakings. The two statutes set out regulations to cover various aspects of hazardous activities in factories, building, construction sites, restaurants, commercial premises and other workplaces.
Although employees are responsible for paying their own salaries tax in respect of income arising in or derived from an employment in Hong Kong, employers face tax filing and record keeping obligations.
The Inland Revenue Department (“IRD”) expects employers to keep payroll records in relation to each employee, including the employee’s personal particulars, the nature of the employment (full time or part-time), the capacity in which the employee is employed, the amount of cash remuneration, non-cash and fringe benefits, MPF contributions, the employment contract (including any amendments) and the period of employment. Such payroll records (together with other business records) must be kept for at least 7 years.
Under the Inland Revenue Ordinance, employers must report to the IRD:
the commencement of employment by any employee,
the cessation of any employee’s employment and the employee’s departure from Hong Kong.
Each year, the IRD requires employers to file a return (“Employer’s Return”) of remuneration with the IRD for each employee still under employment as at March 31.
The Employment Ordinance requires employers to keep a record which sets out the wage and employment history of each employee covering the period of his employment during the preceding 12 months. The Immigration Ordinance requires employers to keep at the place of employment a record which contains the full name of the employee as shown in his identity card or other travel document, and the type and the number of that document.
If the employer is a regulated financial institution in Hong Kong (e.g. a firm licensed or regulated by the Securities and Futures Commission, the Insurance Authority or the Hong Kong Monetary Authority), onboarding an employee may trigger filing obligations and sometimes may require prior approval from the relevant financial regulator. Since the law in this area is relatively complicated, employers with particular concerns can contact one of our financial services regulatory lawyers for more information.
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