What You Need to Know About Payroll in Hong Kong

Hong Kong, officially the Hong Kong Special Administrative Region of the People's Republic of China (abbreviated as Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delta in South China. With 7.5 million residents of various nationalities in a 1,104-square-kilometer territory, Hong Kong is one of the most densely populated places in the world. Hong Kong is also a major global financial center and one of the most developed cities in the world.



Hong Kong is a highly developed territory and ranks fourth on the UN Human Development Index. The city has the most significant number of skyscrapers of any city in the world, and its residents have some of the highest life expectancies. The dense space has led to a highly developed transportation network with public transport rates exceeding 90%. Hong Kong is also ranked third in the Global Financial Centers Index.

Foreign Hires

All non-local nationals are subject to immigration controls and require appropriate visas before entering Hong Kong to work. A local sponsor (normally the employing company) is necessary for an employment visa to support the application. The sponsor is required to assume responsibility for the employee’s repatriation at the expiration of their permitted stay in Hong Kong. The application should be completed and returned to the Chinese Embassy in the country of residence, which will forward it to the Immigration Department in Hong Kong for processing. Alternatively, the local sponsor may submit the employee’s application to the Hong Kong Immigration Department. In considering an application, the Immigration Department must be satisfied (among other things) that there is no suitable local candidate for the position. Where the post involves a special skill or is of a senior nature, this is not usually a problem.

Labor Code In Hong Kong, Employment Ordinance (EO), Chapter 57, enacted in 1968, is the law that regulates matters related to working in Hong Kong, including the following:

• Employment contracts
• Wage protection
• Rest days
• Holidays with pay
• Paid annual leave
• Sickness allowance
• Maternity protection
• Statutory paternity leave
• Severance payment
• Long service payment
• Employment protection
• Termination of employment contract
• Protection against anti-union discrimination

Minimum Wage

The minimum wage in Hong Kong is 37.50 HKD. Note: The Chief Executive in Council has adopted the recommendation of the Minimum Wage Commission to raise the statutory minimum wage (SMW) rate to 40 HKD per hour. Subject to approval by the Legislative Council, the revised SMW rate will take effect from 1 May 2023.

Working Hours/Conditions

Working hours are typically 9:00 a.m. to 6:00 p.m. from Monday to Friday and are limited to eight hours between 7:00 a.m. to 7:00 p.m. with a maximum of 48 hours per week. There are no legislative requirements on maximum working hours except for a young person in industrial settings. A young person is categorized as someone between the ages of 15 to 18.

Overtime Pay

There are no laws on overtime pay. This usually is stated in either the employment contract or collective bargaining agreements.

13th Salary

In Hong Kong, it is customary to pay a 13th salary during the Lunar New Year or at the end of the year.

Severance Pay

In Hong Kong, severance pay is mandatory when applicable and is determined by the employee’s contract terms and length of service.  The employer must calculate the severance pay per the EO (Chapter[CA1]  57). In general, provided that an employee has been employed under a continuous contract for a minimum of two years and has not resigned or been summarily dismissed before termination, the employee will be entitled to statutory severance pay.

Statutory severance pay is calculated as two-thirds of the employee’s regular monthly salary rate or two-thirds of 22,500 HKD, whichever is less, for each year of service. The statutory severance payment is subject to a maximum of 390,000 HKD.

Composition of the Workforce

There is no statutory requirement that a percentage of employees must be local nationals or that a portion of payroll is paid to local, national employees. All non-local nationals are subject to immigration controls and require appropriate visas before entering Hong Kong to work.

Taxes

Regardless of whether the employees are residents of Hong Kong, employers are not required to withhold tax for employees. The only exception is in the case of a termination and if the employee intends to leave Hong Kong for one month or more following the cessation of employment.

In this case, the employer is required to give the Inland Revenue Department (IRD)[CA2]  notification in writing of such impending departure at least one month before the separation and must temporarily withhold all payment due to the employee until the IRD issues a "letter of release."

Social Insurance Contributions

Hong Kong has no social security or social entitlement program except for the Mandatory Provident Fund (MPF) as a retirement scheme.
Employers are required to withhold 5% of their employees' relevant income (capped) as the employees' contributions and pay an additional 5% as their contributions (capped) to the MPF scheme or an MPF-exempted Occupational Retirement Scheme.
Currently, the maximum mandatory contributions of each employer’s and employee shares for such an MPF scheme is 1,500 HKD for employees with a monthly relevant income exceeding 30,000 HKD. If the employee's monthly relevant income falls under 7,100 HKD, their monthly contributions to MPF are not required, but the employer's contributions remain the same.

Annual Leave

Employees who have been employed for at least three months are entitled to seven days of paid annual leave. This increases by one day per additional year of employment until the annual leave reaches a maximum of 14 days on the ninth year of employment.

Paid Sick Leave

Employees under a definite contract are entitled to paid sick leave. During the first 12 months of employment, employees are granted two paid sick days per month, increasing to four paid sick days per month after one year of service.

Sick pay is calculated based on the rate of 80% of the average daily earnings in the preceding 12-month period before the first day of sickness. If the employee has been employed for less than 12 months, the calculation is based on the average earnings received since the employment start date.

Employees can accumulate sick days throughout their employment up to 120 days at any given time.

Maternity Leave

A pregnant employee is entitled to 14 weeks of maternity leave with the potential to increase to 18 weeks with complicated or multiple births if the employee has been employed under a continuous contract for not less than 40 weeks immediately before the commencement of scheduled maternity leave. The maternity leave should start two to four weeks before the due date.

The employer pays the maternity payment based on a calculation of four-fifths of their average daily wages (from the past 12-month period up to a maximum of 80,000 HKD) and will be reimbursed by the government.

Paternity Leave

New fathers are entitled to five days of paid paternity leave if they have been employed under a continuous contract for at least 40 weeks before the first day of paternity leave.
Pay is calculated as 80% of the average daily earnings in the preceding 12-month period before the first day of paternity leave. If employed for less than 12 months, the calculation is based on the shorter period. The calculation must exclude non-working periods such as statutory holidays, annual leave, or sick leave.

Parental Leave

There is no statutory parental leave in Hong Kong.

Holidays