Hong Kong has pursued a market-orientated approach to the economy and to employment law, in the belief that free competition and relatively little intervention would maximise benefits for all. This philosophy has led to a relatively wellbalanced approach to employment legislation and the general observation that Hong Kong is an employer-friendly jurisdiction, while still maintaining and protecting employees' interests.
The Employment Ordinance (Cap. 57) of the laws of Hong Kong (the Ordinance) applies to all employers and employees and to all contracts of employment in Hong Kong. The Ordinance provides for a range of minimum rights and benefits for employees in Hong Kong.
Issues arising on hiring individuals
All individuals without a right of abode or right to land in Hong Kong must obtain an entry permit or employment visa before coming to Hong Kong for the purpose of employment. Applications made to the Immigration Department take around six weeks to process and should be made through the sponsor, usually the employer company in Hong Kong, prior to the employee's arrival in Hong Kong.
Employment structuring and documentation
In Hong Kong, a contract of employment may be made verbally or in writing. It is required under the Ordinance that employers inform each employee of the terms and conditions of their employment before the commencement of their employment, including: (1) wages (rate of pay, overtime rate, any allowances, whether calculated by the job, hour, day, week or otherwise); (2) wage period; (3) length of notice required to terminate the contract; and (4) any entitlement to an end of year payment and the payment period.
A fixed-term contract may be determined by reference to a fixed period or the completion of a task or project. Employees employed on fixed-term contracts enjoy the same statutory benefits and protections as employees employed on indefinite term contracts, save that a fixedterm contract will terminate automatically on expiry of the fixed- term without the need for either party to give notice of termination. Non-renewal of a fixed-term contract is regarded as a dismissal for the purposes of severance and long service payments. Employment protection rights are therefore not diminished merely because a worker is employed under a fixed-term contract.
Issues arising during the employment relationship
Wages, annual leave and working time
The current statutory minimum wage (SMW) rate is HKD 32.5 per hour. In the 2017 Policy Address, the Chief Executive in Council adopted the recommendation of the Minimum Wage Commission to raise the SMW rate to HKD34.5 per hour. Subject to approval by the Legislative Council, the revised SMW rate will take effect from 1 May 2017.
The SMW applies to all employees, whether they are monthly-rated, daily-rated, hourly-rated, permanent, casual, full-time or part-time, and regardless of whether or not they are employed under a continuous contract.
However, SMW does not apply to live-in domestic workers, student interns (including work experience students during a period of exempt student employment) and individuals excluded under the Ordinance.
There are no statutory provisions which prescribe maximum working hours except in relation to the employment of young persons in industrial undertakings where special regulations apply.. The Standard Working Hours Committee (SWHC) of the Labour and Welfare Bureau is responsible for considering the introduction of a working hours policy. This is an extremely controversial topic in Hong Kong, which is currently in the process of a highly political and lengthy debate.
In addition to paid statutory holidays, employees who have been employed under a continuous contract are entitled to at least one rest day in every seven day period.
Employees who have been employed under a continuous contract for 12 months or more are entitled to a minimum of between seven and 14 days' paid annual leave for each period of twelve months' employment depending on their length of service.
Tax and social insurance
Hong Kong uses a territory-based taxation system, whereby income tax is only imposed on income which derives from an office or employment or any pension, arising in or derived from Hong Kong. Employees are responsible for the filing and payment of their own income tax to the Inland Revenue Department.
Female employees employed under a continuous contract are entitled to a minimum of ten weeks' paid maternity leave. This is paid at the rate of four-fifths of the employee's average wage over the preceding 12 month period.
All male public sector employees with at least 40 weeks' continuous service are entitled to five days' paternity leave at four-fifths of their average daily wage immediately before the expected or actual date of childbirth. Male employees in Hong Kong's private sector are now entitled to three days' paid paternity leave.
Employees who have been employed under a continuous contract for a period of one month or more immediately preceding a sickness day are entitled to paid sick leave at the rate of four-fifths of their average wage over the preceding 12 month period.
Under the Mandatory Provident Fund Schemes Ordinance (Cap. 485) each employer in Hong Kong is required to contribute an amount equal to at least 5% of an employee's salary to a retirement scheme that is registered as a Mandatory Provident Fund Scheme.
Employees are also required to contribute at least 5% of their salary to the scheme, unless they have a monthly relevant income of less than HKD 7,100 in which case their employer must contribute on their behalf. The maximum contribution from both the employer and the employee is HKD 1,500 per month.
With effect from 1 February 2016, retired employees are allowed to withdraw their Mandatory Provident Fund benefits by instalments. Previously, on retirement, employees either had to withdraw their benefits in a lump sum, or leave all their benefits in the scheme for accumulation. The Employees' Compensation Ordinance (Cap. 282) requires every employer to arrange an insurance policy for a specified minimum amount for all its employees to compensate them for injury, accident or death arising "out of and in the course of employment".
Discrimination on the grounds of gender, pregnancy, marital status (Sex Discrimination Ordinance (Cap. 480)), disability (Disability Discrimination Ordinance (Cap. 487)), family status (Family Status Discrimination Ordinance (Cap. 527)), race (Race Discrimination Ordinance (Cap. 602)) and trade union membership (the Ordinance) is prohibited in Hong Kong. However, there is currently no protection against discrimination on the basis of age or sexual orientation nor is there any specific provision on equal pay legislation.
Each of the anti-discrimination ordinances prohibits direct and indirect discrimination. Direct discrimination is defined as "less favourable treatment by reason of the prohibited ground". Indirect discrimination occurs when the complainant cannot comply with a requirement or condition which has been applied to all but which has a disproportionate impact on the group that is protected from discrimination.
The Government issued a Code of Practice against Discrimination in Employment on the Ground of Sexual Orientation in 2009 but public consultation on bringing sexual orientation under the existing anti-discrimination legislation has not yet taken place.
Issues arising on termination of the employment relationship
Where a change occurs in the ownership of a business or where a trade, business or undertaking is transferred from one entity to another, there is no obligation on the part of the transferee to employ all or any existing employees of the transferor. However, if the transferee decides to employ any of the transferor's employees, the period of continuous employment of those employees before the transfer will be carried forward to the transferee entity and, consequently, continuity of employment is not broken.
If a transferred employee who has been employed under a continuous contract for at least24 months is dismissed by reason of redundancy, the transferor will be liable to make a severance payment to that employee. In addition, if an employee has been continuously employed for five years or more, even if an offer was made for continued employment, the transferor will still be obliged to pay long service payments if the employee does not agree to be employed under the new contract.
An employee who has been employed under a continuous contract for at least24 months is entitled to a severance payment if they are dismissed by reason of redundancy or laid off. The amount of severance payment is two-thirds of one month's pay for each year of employment or HKD 15,000, whichever is less, subject to a maximum payment not exceeding HKD 390,000.
Employees who have been employed under a continuous contract for five years or more and whose employment is terminated other than by summary dismissal are entitled to a long service payment on termination. The amount of the payment is calculated by reference to the same formula as for a severance payment, with the same maximum cap.
The right to a severance payment and a long service payment are mutually exclusive. Furthermore, the amount of any contractual gratuity based on length of service is deductible from the severance or long services payment. Under the current law, employers are entitled to offset redundancy/long service payments payable on termination against the accumulated contributions they have made to an employee's Mandatory Provident Fund. However, in its recent Policy Address, the Government proposed to progressively abolish this offsetting mechanism.
As a matter of practice, parties involved in an employment dispute usually/commonly first approach the Labour Relations Division of the Labour Department, which provides an informal and simple mechanism to encourage settlement through voluntary conciliation. If the parties fail to reach settlement through conciliation, a claimant may lodge a claim with the Minor Employment Claims Adjudication Board or the Labour Tribunal, depending on the amount claimed and the number of claimants involved.
Published in collaboration with L&E Global: an alliance of employers’ counsel worldwide
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