Hong Kong Employee Benefits

Employee Benefits

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Hong Kong might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Hong Kong including local benefits. 

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Hong Kong, benefits are mainly guaranteed by labor law and national legislation but may also include the influence of trade unions. 

What Compensation Laws exist in Hong Kong?

In Hong Kong, compensation is regulated by The Employment Ordinance, and depends on the employee’s contract category. A continuous contract entitles an employee to more benefits, whereas an employment contract only guarantees basic protection (medical insurance, pension scheme payments, public holiday pay, overtime), and is valid for a shorter period.

Once an employee has worked for more than 4 weeks, they are in the continuous contract category and are subject to different compensation laws.

Employee compensation is due at the end of the last day of the wage period – and employees must be paid before or on the due date, or no later than 7 days afterward.

Also, is it best practice for employers to provide a 13th month salary payment as an end of year or Lunar New Year bonus payment. Other bonuses, commissions, awards, and other compensation can be included by employers in the employment contracts.

It is also important to note that there is no law in the Employment Ordinance that prescribes the maximum number of working hours in a workday, or the length of a work week – this is based on an agreement between the employer and employee. This is also the case for overtime payments.

Common practice, however, is 5 days a week of work, between 40-50 hours.

There are other benefits/compensation that are guaranteed by national legislation:

• National Minimum Wage: All employees must be paid at least the National Minimum Wage amount for their work, which currently stands at HK$37.50 an hour – the wage amount will vary according to the employee’s experience, qualifications, and sector.
• Rest Days: Even though there is no law for a standard work week, there is a law that employees must have at least one rest day in a seven-day period. In cases where the employee will need to be called in, the rest day will be granted after the work is done, and the work will be compensated.
• Social Insurance Contributions: There is only one social security contribution that must be paid by both employers and employees – a pension scheme known as a Mandatory Provident Fund.
• Redundancy, Termination and Severance: For termination, it is common practice for the employer or the employee to send in a one month’s notice. In the case of the employer enabling the termination contract, employees are entitled to a severance payment.

There are two kinds of severance payments – a severance payment, and a long service severance payment. However, both types only apply if a certain amount of time has passed. Employees are entitled to a severance payment after 24 months of work and are entitled to a long service payment after at least 5 years of work.

Other factors for eligibility include:

1. Severance – the employee is dismissed due to redundancy, employment contract expires without being called for renewal either employer or employee, or the employee is laid off.
2. Long Service – the employee is dismissed for reasons other than serious misconduct or redundancy, employment contract expires without being called for renewal either employer or employee, the employee dies, the employee resigns due to ill health, or the employee resigns due to old age.

• Sick Leave: Employees in Hong are entitled to both sick days, as well as a bonus sickness allowance (eligible under certain conditions). The amount of paid sick leave days an employee is entitled starts at 2 days for the first month of employment, and progressively increases according to the length of employment.
  
  The sickness allowance is granted according to an employees’ eligibility under certain conditions and must be compensated no later than the employee’s pay day.
  
• Holiday/Vacation Leave: Employees are granted 12 days of statutory holidays with full day pay, as well as paid annual leave. Annual leave starts at 7 days for the first year and increases progressively.
• Maternity/Paternity Leave: Female employees are entitled to a continuous period of 14 weeks of maternity leave, which also applies to miscarriages occurring at or before 24 weeks of pregnancy.

Employees on maternity leave are also entitled to maternity leave pay which amounts to about 80% of the average daily wages earned by the employee in the last 12 months. The 4 extra weeks of maternity leave (which were added from 10 weeks in late 2020) will be paid at the same rate as maternity leave but will be reimbursed by the government in an administrative scheme.

Paternity Leave is also granted to male employees for 5 days and is paid at the same rate as maternity leave – 80% of the average daily wages of the employee.

Social Security in Hong Kong

In Hong Kong, the only social security contributions that both the employer and employee must pay monthly are pension schemes, which is known as the Mandatory Provident Fund. The employer must withhold 5% of the employee’s wages, as well as make their own contributions of 5% of the employee’s wages, which is to be paid directly to the appropriate pension fund.

Employers oversee setting up funds for themselves and their employees to contribute to. Employees automatically join your company’s scheme after 60 days of work.

Contributors & Mandatory Provident Fund Percentages (%)

• Employee – 5%
• Employer – 5%

Statutory Employer Costs in Hong Kong

Most benefits and compensation depend on the type of contract an employee has – an employment contract only covers basic protection, whereas a continuous contract includes additional benefits and is subject to different compensation laws. Most employee benefits (besides pensions, holiday pay, and medical insurance) are only applicable if the employee is listed under a continuous contract.

Statutory costs concerning employment in Hong Kong include:

• the minimum wage requirements
• the Mandatory Provident Fund payments 
• Income Tax 

However, in case of employee benefits, it is common practice to add an additional 20% on top of an employee’s gross salary.