Labour & Employment

Employment Ordinance

This is the primary piece of law governing employment in Hong Kong, and covers a vast range of employment protection and benefits for employees, including wage protection, rest days, paid holidays and annual leave, sick pay, maternity protection, severance payment and long-service payment.

Employees’ Compensation Ordinance

This provides for the payment of compensation to employees who have suffered injuries in the course of their employment by accident or certain occupational diseases, and stipulates the extent of liability and the amount of compensation.

Occupational Safety and Health Ordinance

This sets out the requirements for health and safety protection to employees and applies to general workplaces.

Factories and Industrial Undertakings Ordinance

This provides for the health and safety protection of workers who work in certain industries (ie, factories, construction sites, catering establishments, cargo and container handling undertakings, repair workshops and other industrial workplaces). It serves to impose general duties on employers to ensure health and safety at work.

Labour Tribunal Ordinance

This gives the Labour Tribunal jurisdiction to hear cases that involve breaches of the terms of a contract of employment or apprenticeship performed in Hong Kong, as well as contracts of employment performed outside Hong Kong.

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Yes. Discrimination on the grounds of gender, pregnancy, marital status (Sex Discrimination Ordinance), disability (Disability Discrimination Ordinance), race (Race Discrimination Ordinance) and trade union membership (Employment Ordinance) is prohibited in Hong Kong.

Harassment is also prohibited under the Sex Discrimination Ordinance, Disability Discrimination Ordinance and Race Discrimination Ordinance. A victim of discrimination or harassment may commence civil proceedings against the person engaging in the unlawful conduct, any other person who has aided or abetted such unlawful conduct, and the employer. In addition to compensation for specific monetary loss, damages for injury to feelings may also be awarded.

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The Labour Department is the primary governmental authority with powers for enforcement. Matters including payments to employees in insolvency cases, matters relating to employees’ compensation and registration of trade unions for employees all fall within the Labour Department’s responsibilities.

Under the Labour Department is the Minor Employment Claims Adjudication Board (MECAB), which adjudicates minor employment claims in a quick, simple and inexpensive manner. The MECAB adjudicates on claims that involve fewer than 10 claimants for a claim amount not exceeding HK$8,000 per claimant, and that cannot be resolved through conciliation.

The Labour Tribunal is a judicial body with exclusive jurisdiction on certain labour issues. The Tribunal has jurisdiction to hear and adjudicate on claims arising from a contravention of a provision in the Employment Ordinance.

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The right for Hong Kong residents to form and join trade unions and the freedom of association is derived from article 27 of the Basic Law.

Employees also have the right to join registered trade unions, to take part in trade union activities and to associate with others for the purpose of forming trade unions under the Employment Ordinance.

An employer cannot prevent its employees from exercising their right to do so, and cannot discriminate against an employee based on his or her involvement in a trade union. It is also unlawful for an employer to make an offer of employment conditional on the job applicant not being a member of a trade union.

The Trade Union Ordinance provides a system of registration for trade unions.

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A registered trade union has the right to sue in its own name.

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Under the Personal Data (Privacy) Ordinance, only personal data that is necessary for the purposes for which the data is to be used should be collected. Further, it requires that the data collected should be adequate for those purposes, but not excessive. No hard and fast rules can be laid down as to what data is necessary for employment purposes. This will depend on the facts of each case.

Applicants have to be expressly informed of the collection, use and disclosure of any personal data, which may be done by way of asking the applicant to sign a Personal Information Collection Statement.

It does not make a difference whether an employer conducts its own checks or hires a third party. Where a third party is engaged, the employer should take all practicable steps to ensure that the third party will not act in contravention of the data protection principles.

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An employer may make an offer of employment conditional upon the fulfilment of a medical examination. However, the employer may only obtain the necessary information regarding the candidate’s health condition that supports the medical practitioner’s opinion that he or she is fit for employment (see also question 6 on the collection of personal data). There is no rule on whether an employer can refuse to hire an applicant who does not submit to such examination.

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There is no rule on whether an employer can refuse to hire an applicant who does not submit to such testing. If an applicant or employee has given prior consent to releasing the results of his or her testing to the employer, this practice is acceptable under the Personal Data (Privacy) Ordinance.

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There are no legal requirements for mandated preferences in hiring.

An employer cannot, however, discriminate against an applicant on the grounds of sex, pregnancy, marital status, disability, family status, race or trade union membership.

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There is no requirement for an employment contract to be in writing, although written employment contracts are strongly encouraged by the Labour Department. However, upon the employee’s written request, the employer must provide the employee with the terms and conditions of the employment in writing. Where the employment contract is in writing, the employee must be provided with a copy of the signed employment contract. Basic information to be included are:

• wages;
• wage period;
• length of notice for termination of the employment contract; and
• any end-of-year payment.

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Fixed-term employment contracts are permissible and there is no restriction as to the minimum or maximum duration of such contracts. However, every contract where the employee is employed for at least 18 hours per week for more than one month will be deemed to be a one-month contract, renewable from month to month, unless there is an express term in the contract that provides for the contrary.

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The Employment Ordinance does not expressly restrict the length of time for the probation period of an employee. The probationary period can be agreed in the employment contract. Under the Employment Ordinance, both the employer and employee have the right to terminate the employment contract without giving notice within the first month of the employee’s probation period.

The Employment Ordinance does not provide for an extension of the probationary period. The employer may extend the probationary period at his or her discretion if the employment contract so provides.

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There are a number of factors that the courts will consider in distinguishing an employee from an independent contractor, including:

• the control test: the extent to which the worker has independent control over how the work is carried out;
• the integration test: the extent to which the worker in question has become integrated into the employing organisation; and
• the entrepreneurial test: the extent to which the worker can realistically be regarded as operating in business on his or her own account.

However, it is important to note that there is no one single conclusive test to distinguish an employee from an independent contractor.

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No. There is no legal restriction against temporary staffing through recruitment agencies.

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There are no short-term visas in Hong Kong. Employees involved in an intra-group transfer can apply for employment visas in Hong Kong.

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Any person other than those having the right of abode or right to land in Hong Kong must obtain a work visa or permit before taking up employment in Hong Kong. As such, the spouse of a foreign worker in Hong Kong will also be required to obtain a work visa or permit in order to be entitled to work in Hong Kong. However, if the spouse of the authorised worker has obtained a dependant visa from the Immigration Department, he or she is not prohibited from taking up employment in Hong Kong during the term of the dependant visa.

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Each employer is required to take all practical steps to certify that the foreign employee is legally employable. If the foreign employee does not hold a Hong Kong permanent identity card, the employer is legally required to inspect his or her valid travel documents to ensure that he or she can be employed. The employer will be liable to a maximum fine of HK$350,000 and three years’ imprisonment if it hires a foreign employee who is not lawfully employable.

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The Immigration Department will take into the account whether there is any shortage of local persons in Hong Kong who are willing and qualified to undertake the position offered to a foreign national when exercising its discretion to grant a work visa to the foreign national. However, no local market test is required in Hong Kong.

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There are no legal restrictions on the maximum or minimum number of working hours an employee is required to work.

Under the Employment Ordinance, every employee who has been employed by the same employer under a continuous contract must be granted no less than one rest day in every period of seven days. The Employment Ordinance overrides any term of an employment contract that purports to extinguish or reduce any right, benefit or protection conferred upon an employee by the law. As such, a term in the employment contract will not be valid if it is contrary to the stipulations in the Ordinance.

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There are no specific categories of workers under the law that are entitled to overtime pay. Employers are not prohibited from specifying categories of employees that are entitled to overtime pay and the method of calculating overtime pay in the employment agreement.

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Employees do not have a statutory entitlement to receive overtime payments. Since an employee’s entitlement to overtime payments is provided in the contract of employment, it is possible for such right to be contractually waived by the employee.

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The Employment Ordinance governs employees’ rights to annual leave. An employee is entitled to seven days’ paid annual leave after serving every period of 12 months under a continuous contract. An employee’s entitlement to paid annual leave varies depending on his or her length of employment.

Paid annual leave for a continuous period should be granted if it is required by an employee. For leave not exceeding 10 days, up to three days can be granted separately and the remaining leave should be granted consecutively. For leave exceeding 10 days, at least seven days should be granted consecutively.

While the Employment Ordinance prohibits an employer from obtaining an employee’s consent to waive or forgo the employee’s annual leave entitlement, an employee can choose to accept payment in lieu of that part of his or her leave entitlement that exceeds 10 days.

Where an employment contract is terminated and not by reason of summary dismissal, an employee having worked for three months is entitled to pro rata annual leave pay.

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For the first 12 months of the employment, the employee accumulates two paid sick leave days at the end of each completed month. For each month thereafter, the employee accumulates four paid sick leave days at the end of each completed month. For employees employed under a continuous contract, up to a maximum of 120 paid sick leave days can be accumulated.

Paid sick leave days are divided into two categories: category 1 being the first 36 days accumulated, and category 2 being the subsequent 84 days. Paid sick leave taken under category 1 requires a medical certificate issued by a registered medical practitioner, registered Chinese medicine practitioner or a registered dentist. Paid sick leave taken under category 2 requires a medical certificate issued by a registered medical practitioner, registered Chinese medicine practitioner or a registered dentist attending the employee as an out-patient or in- patient in a hospital.

An employee is entitled to paid sick leave days where the employee:

• has accumulated the number of paid sick leave days taken;
• the sick leave taken is not less than four consecutive days; and
• the sick leave is supported by an appropriate medical certificate.

Sick leave does not have to be paid under the following circumstances:

• the employee, without reasonable excuse, refuses treatment by a company doctor of a medical scheme recognised by the director of health or disregards the advice of the doctor. If the recognised scheme of medical treatment operated by an employer does not cover treatment from a certain medical discipline, the employee may choose to receive treatment from any registered medical practitioner, registered Chinese medicine practitioner or registered dentist under that particular discipline;
• the sick leave days fall on a statutory holiday on which the employee is entitled to holiday pay; or

compensation is payable under the Employees’ Compensation Ordinance.

The rate of paid sick leave days is four-fifths of the average daily wages earned by an employee in the 12-month period preceding the sickness day. In calculating the average daily wages, however, the sum already paid to the employee for the following periods may be excluded from the calculation:

• periods for which an employee is not paid his or her wages or full wages, including rest days, statutory holidays, annual leave, sick leave days, maternity leave, sick leave owing to work injuries or leave taken with the agreement of the employer; and
• any normal working day on which the employee is not provided by the employer with work.

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In addition to annual and sick leave, female employees are also entitled to maternity leave while male employees are entitled to paternity leave.

Maternity leave

Female employees under a continuous employment contract for not less than 40 weeks immediately before the commencement of scheduled maternity leave are entitled to paid maternity leave for a continuous period of 10 weeks. The daily rate of maternity leave pay is equal to four-fifths of the average daily wages earned by an employee in the 12-month period preceding the first day of the maternity leave.

In the event that labour occurs later than expected, the female employee is entitled to a further period of maternity leave equal to the number of days from the day after the expected date of confinement to the actual date of labour. The female employee is also entitled to an additional period of leave for not more than four weeks on the grounds of illness or disability as a result of the pregnancy or labour.

Paternity leave

A male employee is entitled to five days’ paternity leave for each confinement of his spouse or partner if he is the father of a new-born child or a father-to-be, has been employed under a continuous employment contract for not less than 40 weeks immediately before the day of paternity leave and has given the required notification to the employer. The daily rate of paternity leave pay is a sum equivalent to four-fifths of the average daily wages earned by an employee in the 12-month period preceding the first day of paternity leave.

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Apart from matters such as rest days, holidays and leave as governed by the Employment Ordinance, employees are entitled to compulsory employees’ compensation insurance, statutory minimum wage, the mandatory provident fund, severance payment and long-service payment.

An employer must be in possession of a valid insurance policy to cover his or her liabilities both under the Employees’ Compensation Ordinance and at common law for work injuries for his or her employees.

Employees must be paid at a rate of not less than the statutory minimum wage (SMW), which has come into force since 2011. The current SMW rate is HK$34.50 per hour. It is proposed that the SMW is to be increased to HK$37.50 per hour. Subject to approval by the Legislative Council, the revised SMW rate will take effect from 1 May 2019.

Severance payment

An employer should pay an employee a severance payment for his or her dismissal owing to reasons of redundancy or layoff if the employee has been employed for not less than 24 months.

Long-service payment

An employee is entitled to long-service payment if he or she has been under a continuous contract for five years or more, and:

• is dismissed for reasons other than serious misconduct or redundancy;
• is certified by a registered medical practitioner or registered Chinese medicine practitioner as permanently unfit for the present job and he or she resigns;
• his or her fixed term employment contract expires without being renewed;
• is aged 65 or above and he or she resigns; or
• dies in service.

If a long-service payment is payable, no severance payment is required. The calculations of the severance payment and long-service payment are the same and are as follows: for every year (and pro rata in respect of an incomplete year) of employment under a continuous contract by his or her employer, subject to a current maximum of HK$390,000, the severance pay or long-service payment is calculated as follows:

• in the case of a monthly rated employee, two-thirds of his or her last full month’s wages or two-thirds of HK$22,500, whichever is less; and
• in any other case, 18 days’ wages based on any 18 days chosen by the employee and occurring during his or her last 30 normal working days, or two-thirds of HK$22,500, whichever is less.

An employee may elect to have his or her wages averaged over the period of 12 months immediately preceding the termination date, but if he or she elects this, then:

• in the case of a monthly rated employee, the monthly average shall not exceed HK$22,500; and
• in any other case, the total wages for the period of 12 months shall not, for the purpose of calculating the daily average, exceed 12 times HK$22,500.

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There are no specific rules relating to part-time or fixed-term employees.

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There is no statutory requirement for employers to publish information on pay or other details about employees or the general workforce.

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Restrictive covenants are generally void unless the employer can show that such covenant is reasonable in all the circumstances to protect a legitimate business interest. Examples of legitimate business interests include:

• protection of trade connections and goodwill;
• protection of confidential information and trade secrets; and
• stability of a workforce.

Factors in determining whether a restrictive covenant is reasonable include:

• the duration (a restraint of more than a year will generally be hard to justify);
• geographical scope; and
• nature of the activities restrained.

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There is no statutory requirement for the employer to continue paying the former employee while they are subject to post-employment restrictive covenants.

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Regardless of whether the employer gave consent or had knowledge of any misconduct, the employer will be held vicariously liable for an employee’s unlawful conduct during his or her employment. In order for the employer to not be held vicariously liable, the employer needs to demonstrate that it took ‘reasonably practicable’ steps to prevent the employee from committing the unlawful act.

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Salaries tax is charged on every person in respect of his or her income arising in or derived from Hong Kong from any office or employment of profit and any pension. Income is deemed to include all wages, salary, leave pay, perquisites, bonuses and allowances. Income (after deducting the Mandatory Provident Fund (MPF) contribution as mentioned below) will be subject to salaries tax at progressive rates, subject to the maximum limit, by applying the standard rate of 15 per cent to the net total income. The standard rate may change for subsequent years of assessment.

Under the Mandatory Provident Fund Schemes Ordinance, an employer is required to arrange for employees (aged between 18 and 65) who worked 60 days or more to join the MPF scheme. As required by the Ordinance, an employer is required to calculate the MPF contribution for each period and deduct the relevant MPF contribution from the employee’s income. The minimum contribution rate is 5 per cent of the relevant income (not exceeding HK$30,000) for each party. For relevant income of more than HK$30,000, no mandatory contribution is required for the portion of the income that exceeds HK$30,000.

For employees who work partly in Hong Kong and partly in foreign countries, only the income derived from services performed outside of Hong Kong and that is subject to foreign tax of substantially the same nature will be exempt from the Hong Kong tax.

There is no withholding tax liability on the part of the employer, unless in the situation where the employer is aware that the employee will be leaving Hong Kong permanently. The employee is responsible for bearing his or her tax liability.

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Intellectual property created in the course of an employee’s employment generally belongs to his or her employer unless otherwise stated in the employment contract.

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There is no legislation that specifically provides for the protection of trade secrets and other confidential business information. That being said, employees have an implied duty not to disclose confidential information of an employer.

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The collection, use and handling of personal data of employees in Hong Kong is governed by the Personal Data (Privacy) Ordinance, which sets out six data protection principles for data users (ie, employers) to comply with.

Principle 1: Data Collection Principle

Personal data must be collected in a lawful purpose directly related to a function or activity of the data user who is to use the data; data subjects (ie, employees) must be notified of the purpose and the classes of persons to whom the data may be transferred; and the data collected is adequate but not excessive in relation to that purpose.

Principle 2: Accuracy and Retention Principle

All practicable steps shall be taken to ensure personal data is accurate and not kept longer than is necessary to fulfil the purpose for which it is used.

Principle 3: Data Use Principle

Personal data shall not, without the consent of the data subject (ie, employees), be used for purposes other than the purpose for which the data is collected or for a directly related purpose.

Principle 4: Data Security Principle

All practicable steps shall be taken to safeguard personal data from unauthorised or accidental access, processing, erasure, loss or use.

Principle 5: Openness Principle

All practicable steps shall be taken to make personal data policies known to the public and inform the public of the kind of personal data that is being held.

Principle 6: Data Access and Correction Principle

Data subjects (ie, employees) may request access and correction of their personal data.

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If the employees are transferred to the new employer in the event of a sale of business, their employment will be deemed to be terminated to allow the employees to commence employment with the new employer, and the rules of notice will apply. If the employer is a company and the transfer is through a sale of shares, there will be no change of the identity of the employer and therefore there is no need for termination of employment.

Employees are not entitled to severance payments if the new employer has made offers of employment to them at least seven days before the termination of their employment and the offers are unreasonably refused by the employees.

Regarding long-service payments, there is no unreasonable refusal requirement. The old employer is required to make long-service payment to its employees who have worked for not less than five years unless they agree to be re-engaged by the new employer immediately after the business transfer, and to have the new employer assume the obligations.

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An employee may be dismissed summarily without notice if he or she is found to be guilty of serious misconduct or serious breach of the employment contract. In such an event, the employee will also not be entitled to severance or long-service payment. The Employment Ordinance specifies the following kinds of conduct that justify summary dismissal:

• wilful disobedience of a lawful and reasonable order;
• misconduct inconsistent with the due and faithful discharge of duties;
• fraud or dishonesty;
• habitual neglect of duties; or
• under any grounds allowed under common law.

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No; see question 36. An employee can be dismissed at any time with notice or with payment in lieu of notice.

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See question 36.

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The Employment Ordinance stipulates that an employee would be entitled to a severance payment if the employee rendered services under a continuous contract of not less than 24 months and is laid off or dismissed by redundancy.

As mentioned in question 25, the amount of severance payment is two-thirds of one month’s pay for each year of employment or two-thirds of HK$22,500, whichever is less, subject to a maximum payment not exceeding HK$390,000. The amount of any contractual gratuity based on length of service and the part of a retirement scheme payment that is due to the employer’s contributions can be deducted from the amount of severance payment entitlement.

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Where there is no express term in the employment contract requiring termination notice, both the employer and the employee will have the right to give the other party not less than one month’s notice of termination or payment in lieu of such notice. The notice period must be not less than seven days if the employee is still under probation and the probationary period exceeds one month.

The employer is required to send a notification of an imminent dismissal of an employee to the Inland Revenue Department using form IR56F one month before the employee leaves his or her employment.

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An employee cannot be dismissed based on the following reasons:

• the employee is a member of a trade union;
• the employee gives or agrees to give evidence in relation to proceedings or inquiries under the Employment Ordinance or the Factories and Industrial Undertakings Ordinance;
• the employee performs jury service;
• the employer intends to evade the statutory obligation to provide maternity leave or sickness allowance;
• when the employment is terminated while the employee is entitled to employees’ compensation under the Employees’ Compensation Ordinance;
• the employee is pregnant;
• the employee is on paid sick leave;
• the employee gives evidence or information in any proceedings or inquiry in connection with the enforcement of labour legislation, industrial accidents or breach of work safety regulations;
• the employee’s trade union membership and activities; or
• when an injured employee’s employment is terminated prior to an agreement for employee’s compensation or the issue of a certificate of assessment.

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There are no special rules relating to mass terminations or collective dismissals in Hong Kong. However, mass terminations or collective dismissals may attract liability for severance or long-service payments on the part of the employer.

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Class or collective actions are not available in Hong Kong.

In Hong Kong, the sole machinery for dealing with multiparty proceedings is that, where numerous persons have the same interest in any proceeding, the proceedings may be begun by any one or more of them as representing all or as representing all except one or more of them. The court is also empowered, on the application of the plaintiffs, to appoint a defendant to act as representative of the other defendants being sued. A judgment or order given in representative proceedings will be binding on all persons so represented.

The ‘same interest’ requirement means that all class members have to show identical issues of fact and law. The implication is that they have to prove:

• the same contract between all plaintiff class members and the defendant;
• the same defence (if any) pleaded by the defendant against all the plaintiff class members; and
• the same relief claimed by the plaintiff class members.

Labour disputes

The existing Protection of Wages on Insolvency Fund may have already taken care of the situation where an employer is insolvent. Ex gratia payment may be made out of the fund. In addition, section 25 of the Labour Tribunal Ordinance (Cap 25), which is broadly worded, specifically provides for representative claims in the context of labour disputes. There are almost identical provisions in section 24 of the Minor Employment Claims Adjudication Board Ordinance (Cap 453) and section 21 of the Small Claims Ordinance (Cap 338). Many of the multiparty labour disputes were dealt with under the rules governing the Protection of Wages on Insolvency Fund and some other current rules. Hence, there might not be a need for a class action regime in such cases.

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There is no law against imposing a mandatory retirement age. The age of retirement is subject to the provisions of employment contracts.

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Parties to an employment contract are generally free to enter into private arbitration or any other method of conciliation in the event of employment disputes.

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When an employee’s employment is terminated, the parties to an employment contract can agree by separate agreement for the employee to waive all future rights against the employer arising out of the employment contract or the termination upon payment of an ex gratia payment.

In relation to waiver of statutory rights, section 70 of the Employment Ordinance generally prevents an employer from obtaining the agreement of the employee to waive his or her rights under the ordinance.

However, an employer and employee can agree to waive their right to notice or to payment in lieu of notice of termination at the time notice is to be given. Such waiver is allowed under section 8 of the Ordinance and will not be void under section 70 of the Ordinance.

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The time limitation for an employee to commence proceedings against an employer for breach of the employment contract is six years from the date on which the cause of action accrued.

Where an employee has been unreasonably dismissed, unlawfully dismissed or where his or her employment contract has been unreasonably varied, the employee has three months from the date of termination or variation of contract to serve a written notice to the employer in relation to his or her claim. The three months’ deadline can be extended for a further six months if approved by the commissioner for labour. The employee has nine months from the date of termination or variation of contract to file his or her claim if the employee wants to file a claim with the Labour Tribunal.

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Proposed change to statutory maternity leave

Under the current regime, female employees who have been employed under a continuous contract for at least 40 weeks immediately before the commencement of scheduled maternity leave are entitled to 10 weeks of statutory maternity leave with 80 per cent of their average daily wages. To keep pace with the global standard, in the Policy Address 2018, the Chief Executive proposed to increase the maternity leave period to 14 weeks with the same leave pay rate, which will be subject to a cap of HK$36,822.

The government further proposed to reimburse employers for the additional four weeks’ statutory maternity leave pay. Although the amendment is yet to come into effect, the government has already extended the maternity leave of civil servants to 14 weeks, to set a good example to employers.

Currently, there is no proposed timeline for implementing the changes and but there are heated arguments over the changes given that the maternity leave policy has been in place for over 40 years.

Abolishment of China work permit requirement for Hong Kong residents

Prior to the abolishment of the China work permit system, if a Hong Kong, Macau or Taiwan (HMT) resident wished to work in China, he or she had to prove that he or she was uniquely qualified and that the post he or she wished to fill could not be filled by a local mainland resident, despite it being advertised for at least three weeks. Further, up to 10 documents had to be submitted to the municipal human resources department to obtain the work permit.

On 3 August 2018, the State Council ordered the work permit system for HMT residents to be abolished, and by the end of 2018, work permits previously issued were no longer valid. Currently, employment contract, salary or social security payment records can be used as evidence to prove employment in mainland China.

This is a significant shift in policy, enabling HMT residents to generally be treated the same as mainland residents in the employment context.

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