Hong Kong's Labor Laws

Labor laws overview

Hong Kong's labor law provides a comprehensive framework governing the rights and responsibilities of employers and employees in the Special Administrative Region.

Contributing Advisor

Jennifer Lu

Partner

The critical component is the Employment Ordinance, which outlines fundamental employment terms, including working hours, rest days, holidays, and termination procedures. It also addresses important issues such as wages, benefits, and maternity leave to ensure employee protection.

The labor laws also recognize collective labor rights, allowing employees to form or join trade unions and engage in collective bargaining. This ensures that workers have a say in employment terms, wages, and working conditions, ultimately promoting a fair and conducive working environment.

These include:

• Health ordinance: Hong Kong's labor law prioritizes workplace safety and health, emphasizing creating a hazard-free environment.
• The Employees' Compensation Ordinance requires employers to compensate workers for work-related injuries or illnesses; and
• Occupational Safety and Health regulations mandate preventive measures.

Employment ordinance

The Employment Ordinance is the main piece of legislation governing conditions of employment in Hong Kong. It covers a comprehensive range of employment protection and benefits for employees, including:

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

All employees covered by the Employment Ordinance, regardless of their work hours, are entitled to fundamental safeguards outlined in the Ordinance. Employees under continuous contracts are entitled to additional privileges, such as rest days, paid annual leave, sickness allowance, severance payment, and long service payment, if certain conditions are met for each item.

Exemptions

The Employment Ordinance does not apply to:

• Any family member residing with the employer.
• Employees as defined by the Contracts for Employment Outside Hong Kong Ordinance.
• Individuals serving under crew agreements as per the Merchant Shipping (Seafarers) Ordinance or on ships not registered in Hong Kong.
• Apprentices with registered apprenticeship contracts under the Apprenticeship Ordinance, excluding specific provisions of the Employment Ordinance.

Employment contracts

Employment contracts must align with the regulations outlined in the Employment Ordinance. Any contract clause that seeks to undermine the rights, benefits, or protections granted to employees by the Ordinance will not hold legal.

Hong Kong's employment landscape offers two main types of contracts—non-continuous and continuous employment contracts. The latter provides enhanced statutory benefits, while the former serves as a basic employment agreement.

The differences between both of these contracts are:

An employment contract is a formal agreement between an employer and an employee outlining the terms and conditions under which the employee will work. This contract can be verbal or written, encompassing explicitly stated and implicitly understood terms. These terms include the following key aspects and must be communicated before the commencement of employment:

• Wages: This includes the wage rate, overtime compensation rate, and additional allowances. Employers have flexibility in calculating salaries based on various methods such as piecework, specific tasks, hours, days, weeks, or other applicable criteria.
• Wage Period: The designated timeframe for disbursing wages.
• Wage components: Such as commissions and allowances), wage rates, payment conditions, and related contracts.
• Benefits: Holiday pay, annual leave compensation, sickness allowance, maternity leave remuneration, and paternity leave stipends are calculated based on the wage structure.
• Notice Period: The length of notice the employer or employee must provide to the other party if any party would like to terminate the employment.
• End-of-Year Payment: If an employee is entitled to an end-of-year payment, the contract must outline the specific details, its proportional amount, and the period the employer will pay it. If the employment contract is documented in writing, the employer must provide the employee with a copy of the written agreement, and if the employee submits a written request before their formal employment begins, the employer should furnish them with the written contract.

Any changes in the terms of employment, whether proposed or already in effect, must be clearly and comprehensibly communicated to the employee. If such changes are documented in writing or at the employee's request, the employer should provide a copy of the revised agreement.

Maintenance of wage and employment records

Employers must maintain accurate records containing each employee's wage and employment history for the preceding 12 months.

These records should include the following details for each employee:

• Full name and identity card number
• Date of commencing employment
• Job title
• Compensation for each wage cycle
• Duration of the wage cycle
• Total hours worked during each wage cycle (if applicable)
• Instances of annual leave, sick leave, maternity leave, paternity leave, and holidays entitled to and taken, along with precise payment details
• Year-end payment sum and corresponding period (if applicable)
• Notice period required for contract termination
• Date of employment termination (if applicable)

Legal consequences for non-compliance

Failure to maintain the mentioned records can lead to prosecution by employers, resulting in a fine of HK$10,000 (US$1,279) upon conviction. The Labor Department has the authority to inspect these records, question individuals, and seize items that could serve as evidence of a violation of the Employment Ordinance. Non-compliance with the Labour Department's requirements can lead to prosecution and, if convicted, a fine of HK$100,000 (US$12,794) and a one-year prison sentence.

Working hours

Hong Kong does not have any statutory limits to working hours for adults, nor does it have any regulations on overtime compensation.  

For minors, the Employment Ordinance does set out limitations for the number of hours and days an employee can work per week. Children under the age of 15 are prohibited from working.   

For children between the ages of 15 and 18 who work in industrial undertakings, the maximum working hours and days are as follows:  

• Eight hours per day (between 7 am and 7 pm only)
• 48 hours per week
• Six days per week
• Five hours of maximum continuous work followed by an interval of at least half an hour for meal or rest

Children aged 13 and 14 can only work in non-industrial establishments, while children under 13 are prohibited from taking up employment unless the Commissioner for Labor grants special permission.

Compensation structure

Employers in Hong Kong are required to pay compensation to employees or their families in the event of injury, illness, or death arising from and during employment. This applies to all workers under a service contract or apprenticeship, including those employed in Hong Kong by local employers who suffer an injury while working outside of Hong Kong.

Minimum wage ordinance - Salary and wages

The Minimum Wage Ordinance establishes a Statutory Minimum Wage (SMW) regime aimed at striking an appropriate balance between forestalling excessively low wages and minimizing the loss of low-paid jobs while sustaining Hong Kong’s economic growth and competitiveness. SMW provides a wage floor to protect grassroots employees.

In 2023, Hong Kong has increased the minimum hourly wage rate from HK$37.5 (US$4.8) to HK$40 (US$5.11).

Hong Kong employers must record the total number of hours worked by an employee in a wage period if:

• The employee is paid the minimum wage, and
• The wages payable to the employee for the period are less than the monetary cap specified in the Ninth Schedule to the Employment Ordinance (or a proportionate amount if the wage period is less than a month).

Accordingly, the monetary cap for keeping records of hours worked is HK$16,300 (US$2,085) per month.

Social insurance – Mandatory Provident Fund (MPF)

Social security is a vital part of employment in Hong Kong. For foreign investors, knowing these obligations is critical.

Employers' specific MPF responsibilities encompass enrolling eligible employees, contributing funds, and keeping accurate records. The mandatory contribution rate is five percent of the employee's relevant income, subject to the minimum and maximum relevant income levels.

Employee’s portion of mandatory MPF is deductible for calculating Hong Kong salaries tax, subject to a capped amount of HK$18,000 (US$2,300).  

Hong Kong workers social security covers:

• Medical coverage, including dental care and medical appliances such as hearing aids, braces, prescription glasses, and the like. Employers cover treatment costs up to HK$200/day (US$25.6) (in-patient or outpatient) or HK$280 (US$35.8) for both in a day. The limit for medical appliances is HK$33,000 (US$4,222), increasing to HK$100,000 (US$12,794) for renewals.
• Old-age pensions or lump sums based on contributions.
• Disability benefits range from HK$1,170 (US$149.7) to HK$2,340 (US$299.4) monthly, with lump-sum options.
• Survivor benefits are lump sums, too, combining contributions and interest.
• Social security also covers burial grants, up to HK$10,750 (US$1,375) for funeral costs.

Abolition of MPF offsetting arrangement

The Hong Kong government announced in April 2023 that the abolition of the MPF offsetting arrangement would take effect on May 1, 2025 (referred to as the “Transition Date”). After the abolition of the MPF offsetting arrangement, employers will categorize the offsetting of severance payment and long service payment for employees into two main categories based on their employment days.

The Transition Date serves as the dividing line:

• Employees whose employment commenced before the transition date: For employees who are already in an employment before the transition date, their severance payment and long service payment will be divided into the pre-transition portion (i.e. for the employment period before the transition date) and post-transition portion (i.e. for the employment period starting from the transition date). Employers can continue to use the accrued benefits derived from their MPF contributions (irrespective of whether the contributions are made before, on or after the transition date, and irrespective of whether the contributions are mandatory or voluntary) to offset the pre-transition portion (but not the post-transition portion) of severance payment and long service payment.
• Employee whose employment commenced on or after the transition date: For employees whose employment commenced on or after the Transition Date, employer mandatory contributions cannot be used to offset their severance payment or long service payment. However, the accrued benefits (vested portion) derived from employer voluntary contributions and gratuities based on employees’ years of service can continue to be used for offsetting both pre- and post-transition portions of severance payment or long service payment.

This change aims to enhance employee protection and ensure fair treatment during employment termination. Employers should be aware of these adjustments and comply accordingly.

Employees' compensation ordinance

The Employees' Compensation Ordinance establishes a no-fault, non-contributory employee compensation system for work injuries. Employers are liable to pay compensation for injuries sustained by their employees due to an accident arising out of and during employment or in respect of occupational diseases specified in the Ordinance suffered by the employees.

The Ordinance, in general, applies to employees who are employed under a contract of service or apprenticeship. Employees who are injured while working outside Hong Kong are also covered if they are employed in Hong Kong by local employers.

Compensation for a fatality

In the event of the death of an employee, the employer is liable under the Employees’ Compensation Ordinance (ECO) to pay both compensation to the employee’s surviving family members and to reimburse funeral and medical expenses.

The compensation amount depends on the age of the employee:

• Under 40: 84 months' earnings or minimum compensation amount, whichever is higher;
• 40 to 56: 60 months’ earnings or minimum compensation amount, whichever is higher; and
• 56 or above 36 months' earnings or minimum compensation amount, whichever is higher.

The minimum compensation amount is HK$486,300 (US$62,112), while monthly earnings for compensation are capped at HK$36,550 (US$4,668) for incidents that occurred on or after April 13, 2023.

The maximum reimbursable amount for funeral and medical expenses is HK$94,690 (US$12,094) for incidents that occurred on or after April 13, 2023.

Compensation for permanent total or partial incapacity

Compensation for permanent total incapacity caused by an accident occurring as a result of and during employment is also dependent on the age of the employee:

• Under 40: 96 months' earnings or minimum compensation amount, whichever is higher;
• 40 to 56: 72 months’ earnings or minimum compensation amount, whichever is higher; and
• 56 or above 48 months' earnings or minimum compensation amount, whichever is higher.

The maximum compensation amount is HK$552,190 (US$70,527), while monthly earnings for compensation are capped at HK$36,550 (US$4,668) for incidents that occurred on or after April 13, 2023.

In the event of permanent partial incapacity, the compensation amount will be a percentage of the amount given for total incapacity, proportional to the loss of earning capacity caused by the injury.

Occupational safety and health ordinance

The Occupational Safety and Health Ordinance provides safety and health protection to employees in industrial and non-industrial workplaces. It is an enabling ordinance setting out requirements in general terms.

This Ordinance covers almost all workplaces - places where employees work. In addition to factories, construction sites, and catering establishments, other areas, such as offices, laboratories, shopping arcades, and educational institutions, also come under the ambit of the law. However, there are a few exceptions, namely:

• An aircraft or vessel in a public place;
• The place occupied by the driver of a land transport vehicle when it is in a public place (but other employees working in the vehicle are covered);
• Domestic premises at which only domestic servants are employed; and
• Places where only self-employed persons work.

Hiring foreign employees

The Hong Kong government strongly advocates that employers should first consider hiring local employees to fill job vacancies. However, foreigners with special skills, knowledge, or experience that Hong Kong needs are allowed to enter and stay for employment as professionals.

Individuals who meet the specified criteria may seek eligibility for a work visa in Hong Kong. To qualify, applicants should meet the following requirements:

• Must be 18 years or older, with some exceptions.
• Maintain a clean criminal record.
• Possess a solid educational background, typically holding a primary university degree in the relevant field of employment.
• Demonstrate the existence of a genuine job opening.
• Secure a confirmed employment offer.
• Receive a compensation package in line with the prevailing market rates for professionals in Hong Kong.

The Immigration Department evaluates work visa applications based on the following conditions:

• The applicant can substantiate their exceptional experience and qualifications for the position, which local Hong Kong residents need more time to fill.
• The sponsoring company must provide supporting documents and explain why they cannot fill the job locally.
• The company can exhibit a commitment to conducting business activities in Hong Kong.

A foreigner must have a valid work visa to be able to work in Hong Kong. The foreign workforce can be categorized into two main groups:

Employment termination and severance payment/ long service payment

Terminating employment in Hong Kong hinges on two primary approaches:

• Notice-based termination: A seven-day notice is obligatory during the probation period, whereas post-probation, one month's notice is required. Payment in place of notice is calculated based on the employee's earnings over the preceding year. Continuous contracts exhibit varying notice or payment prerequisites, while non-continuous contracts follow the agreed period.
• Immediate termination: Employers can terminate an employment contract without notice in case of willful disobedience of a lawful and reasonable order, misconduct, fraud, dishonesty, or habitual neglect of duties. Conversely, employees can terminate contracts without notice for diverse reasons.

Certain circumstances restrict termination, including pregnancy, sick leave, court-related obligations, trade union membership, or workplace injuries without compensation.

Severance pay

Termination payments are contingent upon factors like tenure and contractual terms, encompassing wages, notice pay, unused leave, end-of-year payments, severance, long service payments, and additional benefits.

Severance payments are extended to employees with more than 24 months of continuous service, primarily in cases of redundancy or layoffs, with a maximum cap of HK$390,000 (US$49,900).

On the other hand, long service payments apply to employees with over five years of uninterrupted service, covering various termination scenarios, also capped at HK$390,000 (US$49,900). 

An employee who wishes to claim severance payment should write a written notice to the employer within three months after the dismissal/layoff takes effect. The employer shall make a severance payment to the employee not later than two months after receiving such notice. An employer must promptly disburse long service payments within seven days after the termination of an employment contract.

Retirement age

Hong Kong has no statutory retirement age. Companies are permitted to create their own retirement policies, usually setting the age between 60 and 65.

The retirement age for civil servants is 65.