For decades, Hong Kong has been the bridge between East and West and its unique working culture attracts talent from all over the world. To create a successful working team, local regulations of employment, which differ in many ways from Mainland China, must be taken into consideration.
Apart from labor laws and work contracts, it is important that foreign companies respect cultural factors and perceptions.
Hiring employees in Hong Kong is not a complicated process, but learning about the regulations will reduce unpleasant surprises.
The Employment Ordinance is the law that regulates and encompasses the rights and protections that an employee receives in Hong Kong. The authority that governs the enforcement of the law and the minimum requirements covered in a working relationship is the Hong Kong Labor Department.
The employee's protection includes the right to maternity or paternity leave, wage payment, right to holidays, year-end payment, sickness allowance, and proper termination of the working contract and others. In this sense, all Hong Kong employees, either full-time or part-time, are covered by this legislation.
In general, a company is allowed to run a background check on a potential employee. However, the background check should not be conducted in a manner that amounts to unlawful discrimination and employers should ensure that the collection and processing of applicants’ personal data comply with the requirements of the Personal Data (Privacy) Ordinance.
In this case, having written consent from the employee before conducting the background check is a good idea.
Companies should know that under the Rehabilitation of Offenders Ordinance, the conviction of a person who was not sentenced to imprisonment exceeding three months or to a fine exceeding HK$10,000 and who has not previously been convicted in Hong Kong of any offence will be treated as spent once three years have elapsed without another conviction.
According to the Rehabilitation of Offenders Ordinance, neither the spent conviction nor any failure to disclose it justifies dismissal or exclusion from employment, or any form of prejudice in employment.
An employer may conduct its own checks or hire a third party, which would be considered a data processor under the Personal Data (Privacy) Ordinance. The employer would be liable for any wrongful acts by the data processor and should ensure that the processor complies with the law.
A company may ask a candidate to undertake a medical examination as a condition of employment and may refuse to hire an applicant who does not submit to an examination, provided that the employer complies with the obligations under the Disability Discrimination Ordinance and the Personal Data (Privacy) Ordinance.
There are a few conditions under which the applicant’s health-related personal data could be collected through a pre-employment medical examination, such as if the data directly relates to the requirements of the job; the employment is conditional upon the fulfilment of the medical examination; and the data is collected by means that are fair in the circumstances and not excessive in relation to the purpose.
There are no restrictions or prohibitions against drug and alcohol testing of candidates. Employers may request a test and refuse to hire an applicant who does not submit to drug and alcohol testing, provided that the employers comply with their obligations under the law.
In Hong Kong, companies are not required to give preferences in hiring to any particular group of people. However, employers cannot discriminate on the grounds of sex, race, skin color, descent, national or ethnic origin, disability, marital status, pregnancy, breastfeeding status, family status or trade union membership.
The Labor Department encourages companies to have a written contract with their employees, though it is not mandatory. Employers should provide their employees with the terms and conditions of employment in writing upon the employee’s written request.
Under the Employment Ordinance, once an employer has entered into a written employment contract with an employee, it is obliged to provide a copy of the signed contract to the employee. An employer should consult the employee before making any subsequent change to the terms of the contract.
In general, written contracts include basic information, such as wages; wage period; length of notice for termination of the employment contract; and any end-of-year payment.
Fixed-term employment contracts are permitted and there is no regulation on the minimum or maximum duration. However, a contract under which the employee works for at least 18 hours per week for more than four weeks would be regarded as a continuous contract. A continuous contract is deemed to be a contract for one month, renewable from month to month unless there are any express terms that provide otherwise.
The Employment Ordinance does not limit the length of an employee’s probation or any extension of the period, which can be agreed upon in an employment contract. However, the law allows the employer and the employee to terminate the contract without notice within the first month of probation. No less than seven days’ notice must be given if the employee is terminated after the first month.
The classification as contractor or employee depends on the work situation. There are a few factors that determine the relationship, such as extent of control over work procedures, working time and methodology; ownership of work equipment and material; whether the work carried out was through the employee’s own account with investment and management responsibilities; or whether the individual is regarded as an integral part of the organization; among other.
There is no legislation governing temporary staffing through recruitment agencies. Anyone who wishes to operate an employment agency to provide job-placement services must have a license or a certificate of exemption under Part XII of the Employment Ordinance and the Employment Agency Regulation.
Keeping a record of the payment of salaries can be useful proof to solve any dispute arising between a company and the employees. As it may be requested or needed in the future, it is mandatory to have these records for at least seven years for accounting purposes and to make the latest audited financial report of the company as well.
Besides receiving the Profit Tax Return, Hong Kong companies may also receive the Employer's Return, in which employers report to the Inland Revenue Department the salaries and remunerations employees and directors receive within a fiscal year. This form is usually received around March or April every year.
Failing to report the number of current employees working at the company or the remunerations and submit the form within the stipulated period can have consequences for both the employees and the employers since it would be considered a breach of compliance.
As employers in Hong Kong do not need to withhold taxes from their employee's salaries, they must do so with their contributions for retirement. These contributions go into a government fund known as the Mandatory Provident Fund Scheme (MPFS).
The Hong Kong Mandatory Provident Fund Authority sets this contribution at a minimum rate of 5% of the monthly salary amount. The employer contributes an extra 5% from their pocket.
Hiring employees in Hong Kong is not difficult. The more informed and prepared a company is, the fewer troubles it will face and the better it will navigate the local regulations of Hong Kong.
Having a solid strategy to keep and retain talent will benefit the business operations in the long run.
To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at firstname.lastname@example.org. DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.