inbrief Employment law in Hong Kong – an overview Inside The employment law landscape Commencing employment Key minimum employment rights Terminating employment Other important matters employment contracts, and English, Chinese or both are most often used. There is no restriction on the use of probationary periods and they are common, typically ranging from three to six months. Regardless of what the contract says, either party may terminate the contract without notice during the first month of a probationary period. Key minimum employment rights The principal statute regulating the employment relationship is the Employment Ordinance (“EO”). Many benefits and protections under the EO are only available to employees who are employed under a continuous contract (“Continuous Employees”). A Continuous Employee must have been employed continuously by the same employer for at least four consecutive weeks, working at least 18 hours in each week. In practice, this excludes a large number of parttime employees from many of the benefits and protections provided by the EO. Working time There are no specific laws on working hours. However, a Continuous Employee is entitled to at least one rest day every seven days and to statutory annual leave. Leave Continuous Employees with at least one year’s service are entitled to paid annual leave of up to 14 days depending on their length of service. It is also common for employers to provide enhanced contractual leave above the statutory minimum. There are 12 statutory holidays in Hong Kong. However, only Continuous Employees with at least three months’ service are entitled to be paid for these. Many employers also allow an extra five days of paid holiday, known as general holidays. Continuous Employees accrue a “sickness allowance” at the rate of two paid sickness days for each completed month of service in the first year of employment and four paid sickness days for each completed month of service in subsequent years’ employment, up to a maximum number of 120 days. Save for pregnancy related check-ups or treatment, statutory sickness The employment law landscape Although Hong Kong is a Special Administrative Region of China, the employment law environment in both regions in many ways remains poles apart. This is consistent with the concept of “one country, two systems” under which Hong Kong has been granted a degree of autonomy in certain areas since Britain handed back sovereignty to China in 1997. Employment in Hong Kong is significantly less regulated than in China, and indeed many other jurisdictions. Unlike China, Hong Kong has a common law system under which its courts refer to precedents of other common law jurisdictions when making decisions. Hong Kong’s labour market is also a lot more flexible than China’s. Although certain minimum benefits are provided by statute, freedom of contract largely remains the guiding principle. Commencing employment Structuring the employment relationship A foreign entity can directly engage employees in Hong Kong and there is no need to set up a local entity in order to do so. However, if the foreign entity is to conduct business in Hong Kong, then its business must be registered for this purpose. Types of employment Employment contracts can be for an open term (i.e. permanent) or a fixed term. If the period of employment is not specified in the contract, it will be deemed to be a “rolling” one month contract once the employee has worked for at least 18 hours per week for a continuous period of four weeks. While not unheard of, the use of agency or “dispatch” workers is not as common in Hong Kong as in certain other jurisdictions in Asia - no doubt partly due to the fact that it is relatively easy to terminate the employment of permanent employees (see the “Terminating employment” section below). The employment contract There is no requirement for contracts to be in writing, although in practice most are. There is also no particular language that must be used in Introduction With its historical ties with the West and reputation as a “gateway” to Mainland China, it is not surprising that Hong Kong is already home for many Western companies and is top of the list for those wishing to expand into Asia Pacific. This in-brief provides an overview of employment law in Hong Kong. Our Hong Kong office was opened to meet a growing demand from many of our clients for coordinated employment and immigration/global mobility support across the Asia Pacific region (including in Hong Kong itself). This publication provides general guidance only: expert advice should be sought in relation to particular circumstances. Our Hong Kong office can source Hong Kong law advice through its links with local Hong Kong firms. inbrief been a handful of discrimination claims coming through the courts arising from termination of employment. However, the numbers are very low compared to jurisdictions in North America and Europe. Resolving disputes The labour tribunal has exclusive jurisdiction on certain labour issues, including disputes relating to employment contracts and claims about breaches of the EO. Parties are not entitled to legal representation in the tribunal. The government and tribunal encourage parties to resolve disputes through amicable discussions and conciliation. However, conciliation is an optional procedure and not a pre-condition for proceeding to a tribunal hearing. Protecting the business It is common for contracts to include noncompetition, non-solicitation and non-poaching restrictions. Such a restriction will be enforceable if it protects the employer’s legitimate business interests and goes no further than is reasonably necessary to protect that interest. Typically, noncompetition restrictions of anywhere between three and six months can be enforceable, although courts carefully scrutinise such restrictions. For example, in some cases, even a restriction covering the Central district of Hong Kong has been held to be unreasonably wide. Employee representation Employees are free to join unions but union representation is very low. Hong Kong enjoys relatively harmonious industrial relations. Business transfers There is no automatic transfer of employment in business or asset sale situations. However, employees of the seller who accept employment with the buyer have various rights. These include keeping continuity of service from the seller, and being able to reject an offer of less favourable terms from the buyer. allowance is payable only for sickness-related absences of four or more consecutive days. Female employees are entitled to 10 weeks’ paid maternity leave and male employees are entitled to three days’ paid paternity leave, if certain eligibility criteria are met - including being a Continuous Employee. Pay and social security Hong Kong has had a statutory minimum wage since 2011, which is currently HK$34.50 an hour. Payment of Hong Kong tax is the employee’s responsibility and employers are not generally required to withhold tax through the payroll system. The default statutory pension fund scheme is called the Mandatory Provident Fund (“MPF”). An employer is generally required to enrol an employee who has been employed for 60 days into a MPF scheme. Both the employer and employee must contribute a minimum of 5% of the employee’s pay into the fund, the employee’s pay being subject to a statutory cap. Hong Kong employees are not entitled to a bonus unless it is expressly provided for in the employment contract. Many employers pay an automatic bonus of one month’s salary at Chinese New Year, although this is increasingly being replaced by performance-related bonuses. Terminating employment Terminating employment is relatively straightforward in Hong Kong. An employer is not required to give a reason for termination, and the contract can be terminated at any time by the employer giving the notice specified in the contract or by making a payment in lieu of notice. There is no statutory procedure for an employer to follow before terminating employment. Statutory minimum notice varies depending on the term of the contract, from seven days to one month. Unusually, the employee can also terminate the contract by making a payment in lieu of notice. An employer may dismiss an employee without notice in certain limited circumstances, including gross misconduct, although the threshold to justify a summary dismissal is very high. Despite an employer having considerable freedom in terminating employment, there are some limited protections for employees. The EO allows a Continuous Employee with at least two years’ service to make a claim for remedies against an employer for “unreasonable dismissal” if the employer dismisses the employee to evade liability imposed on the employer by the EO. To defend this claim, the employer must produce a valid reason for the dismissal. These include: the conduct of the employee; the capability or qualifications of the employee for performing the work of the kind he/she was employed by the employer to do; redundancy; or genuine operational requirements. So long as the employer can show such a reason, this should be sufficient to defeat the claim - there is no requirement to show that the termination was reasonable or fair in the circumstances. Certain categories of employee are also specifically protected from dismissal - including employees who are pregnant and employees who are in receipt of the sickness allowance. The number of dismissal claims is low by European standards. This is partly because it is relatively easy for employers to successfully defend such claims (except where termination is for a prohibited ground such as pregnancy) and partly because the potential remedies are limited. Unless the employee obtains reinstatement or reengagement, which requires the employer’s consent so is extremely rare, the remedy for unreasonable dismissal is limited to an employee’s unpaid contractual and statutory entitlements. Statutory severance is payable under the EO to a Continuous Employee with at least two years’ service who is dismissed by reason of redundancy or is laid off. The amount is calculated using a statutory formula based on the employee’s monthly wages and period of continuous employment. Long service payments are also payable to Continuous Employees if certain criteria are met, including a minimum of five years’ service. Discrimination Discrimination or harassment on the grounds of sex, pregnancy, marital status, disability, family status and race are prohibited. There have inbrief This publication provides general guidance only: expert advice should be sought in relation to particular circumstances. Please let us know by email (firstname.lastname@example.org) if you would prefer not to receive this type of information or wish to alter the contact details we hold for you. © May 2017 Lewis Silkin LLP For further information on this subject please contact: Kathryn Weaver Head of Employment Law Hong Kong T + 852 2972 7133 email@example.com Charmaine Yong Paralegal T + 852 2972 7138 firstname.lastname@example.org inbrief Universal Trade Centre 3 Arbuthnot Road Central Hong Kong T +852 2972 7100 E email@example.com www.lewissilkinemployment.com Data protection Employers must comply with the general principles contained in the Personal Data (Privacy) Ordinance (“PD(P)O”). The PD(P)O governs the collection, use and handing of personal data of employees, and is broadly similar to data protection legislation found in Europe. Codes of practice published by the Privacy Commissioner provide practical guidance in respect of the PD(P)O.