Employment Law Essentials for Employers in Hong Kong

Hong Kong's employment law framework is characterised by a combination of statutory minimum protections for employees and considerable contractual flexibility for parties to agree on terms above those minimums. For employers — whether setting up a new operation, expanding a workforce, or managing employee exits — understanding the statutory baseline is essential. Getting employment law wrong is expensive: misfired dismissals, underpaid statutory entitlements, and unenforceable restrictive covenants are among the most common and costly legal mistakes businesses make in Hong Kong.

This guide sets out the key employment law obligations that apply to employers in Hong Kong under the Employment Ordinance and related legislation.

The Employment Ordinance (Cap. 57)

The Employment Ordinance (EO) is the principal statute governing employment relationships in Hong Kong. It sets out minimum statutory protections for employees that cannot be contracted out of — any term of an employment contract that purports to give an employee less than their statutory entitlement is void. The EO applies to most employees, with some specific exclusions (for example, domestic employees, certain apprentices, and casual employees in some contexts).

The EO distinguishes between employees on "continuous contracts" and those who are not. An employee is on a continuous contract if they have been employed under the same employer continuously for four weeks or more, working at least 18 hours per week. Continuous contract employees are entitled to a broader range of statutory protections, including annual leave, sick leave pay, long service pay, and enhanced termination protections. Most full-time employees in Hong Kong will be on continuous contracts.

Mandatory Provident Fund (MPF)

The Mandatory Provident Fund (MPF) system requires employers and employees to each contribute a minimum of 5% of the employee's "relevant income" (subject to a minimum contribution level and a maximum relevant income cap, currently HK$30,000 per month) to an MPF scheme. The employer contribution is a cost of employment that must be factored into remuneration planning.

MPF contributions are due within the first 10 days of the following month. Failure to make timely contributions is a criminal offence under the Mandatory Provident Fund Schemes Ordinance (MPFSO) and may also result in civil liability. Employers must enrol new employees within 60 days of employment commencing. Certain categories of workers are exempt from MPF (including employees under 18 or over 65, and domestic helpers).

Importantly, upon termination, the employer's MPF contributions vest in the employee's account and cannot be clawed back, but the employer may (in limited circumstances, and subject to the employment contract) offset severance pay or long service pay against the employer's MPF contributions.

Statutory Leave Entitlements

Continuous contract employees are entitled to the following minimum statutory leave under the EO:

Annual leave: Employees with less than one year of service are not entitled to statutory annual leave. Entitlement begins at 7 days per year after the first year of continuous service, increasing by 1 day per year up to a maximum of 14 days after 9 or more years of service. Annual leave must be taken within the leave year or paid in lieu. The leave year is typically the anniversary of employment commencement.

Statutory holidays: Employees are entitled to 13 statutory holidays per year. These are distinct from general holidays (public holidays), and the employer may substitute an alternative rest day for a statutory holiday falling on a rest day. Employees required to work on a statutory holiday must be given a substitute holiday or paid at the normal daily rate for the day worked.

Sick leave: Employees accumulate sick leave at the rate of 2 days per month of continuous employment. Paid sicknesses allowance (at 80% of daily wages) is payable for sick leave certified by a registered medical practitioner, provided the employee has accumulated sufficient sick leave days. To claim paid sick leave, the employee must produce a medical certificate.

Maternity leave: Female employees are entitled to 14 weeks of maternity leave (increased from 10 weeks in 2020), paid at 80% of average daily wages for the first 14 weeks, subject to the employee having 40 weeks of continuous employment before the expected date of birth. The government reimburses employers for the cost of the additional 4 weeks (the 11th to 14th weeks) up to a cap.

Paternity leave: Male employees are entitled to 5 days of paid paternity leave.

Wages and Payment

Wages are contractually agreed, but must be paid at the intervals specified in the contract (and at least monthly if not otherwise specified) and in legal tender or by payment to the employee's bank account. Unauthorised deductions from wages are prohibited except for limited statutory purposes (such as MPF contributions and court-ordered deductions).

Since 1 May 2023, the statutory minimum wage in Hong Kong is HK$40 per hour. This applies to virtually all employees. The Minimum Wage Commission reviews the minimum wage periodically; employers should monitor for updates.

Wages, including any contractual commission or bonus that has become due and payable, must be paid in full. Employers should clearly distinguish in employment contracts between discretionary bonuses (which the employer is not obliged to pay) and contractually committed payments (which become a debt once the conditions for payment are met).

Termination of Employment

Termination of employment in Hong Kong is regulated by the EO and by the terms of the employment contract. Key rules include:

Notice and payment in lieu: The EO requires a minimum notice period of 7 days for continuous contract employees (or 1 month if the contract does not specify a notice period — the contract term prevails if it is longer than the statutory minimum). Most professional employment contracts specify 1 to 3 months' notice. Payment in lieu of notice is permissible if the contract allows it (or if both parties agree).

Grounds and protection against unreasonable dismissal: An employer may terminate employment with notice or payment in lieu for any reason, or without notice in cases of summary dismissal (for serious misconduct). However, it is unlawful to terminate employment on discriminatory grounds (under the Sex Discrimination Ordinance, Disability Discrimination Ordinance, Race Discrimination Ordinance, and Family Status Discrimination Ordinance), or to terminate an employee on specified protected grounds under the EO — including pregnancy, maternity leave, sickness leave, and the giving of evidence against the employer.

Employees with at least 2 years of continuous employment who are dismissed without a valid reason may be entitled to seek remedies for unreasonable dismissal under Part VIA of the EO, including reinstatement, re-engagement, or terminal payments. The burden of proving a valid reason for dismissal lies with the employer.

Severance Pay and Long Service Pay

Severance pay is payable to an employee who has been continuously employed for at least 24 months and is dismissed by reason of redundancy, or who has been laid off for a specified period. The rate is 2/3 of the employee's last full month's wages (or 2/3 of HK$22,500 if higher) multiplied by each year of service (pro-rated for incomplete years), up to a maximum of HK$390,000.

Long service pay is payable to employees with at least 5 years of continuous employment who: are dismissed (other than for serious misconduct); resign on grounds of ill health; die in service; or reach the retirement age specified in the contract (if any) and retire. The calculation is the same as for severance pay. An employee is not entitled to both severance pay and long service pay for the same employment — the more favourable applies.

Employers may offset their MPF employer contributions against the severance or long service pay liability, reducing the actual cash payment required. This offset mechanism is subject to proposed legislative changes that would reduce the offset proportion over time — employers should monitor developments.

Restrictive Covenants

Restrictive covenants in employment contracts — including non-compete clauses, non-solicitation clauses, and confidentiality obligations — are enforceable in Hong Kong but subject to a reasonableness test. Hong Kong courts will not enforce a restrictive covenant that goes beyond what is reasonably necessary to protect the employer's legitimate business interests.

The key questions a court will ask are: does the employer have a legitimate interest to protect (a protectable trade connection, confidential information, or business goodwill)? Is the scope of the restriction (in terms of time, geography, and subject matter) reasonable relative to that interest? A six-month, Hong Kong-wide non-compete for a senior relationship manager at a financial services firm is far more likely to be enforced than a two-year, worldwide non-compete for a mid-level administrative employee.

Non-solicitation clauses (restricting former employees from soliciting the employer's clients or poaching former colleagues) are generally treated more favourably than non-compete clauses, as they are narrower in scope. Confidentiality obligations survive termination and do not require a specific contractual clause — the obligation to maintain the employer's trade secrets is implied by law in Hong Kong — but express confidentiality provisions in a well-drafted employment contract make enforcement significantly easier.

Key Employment Contract Provisions

A well-drafted employment contract should address: job title and duties (avoiding unnecessary rigidity that limits flexibility to reassign); remuneration (distinguishing discretionary and contractual elements); notice period; probationary period (typically 1 to 3 months, during which a shorter notice period may apply); annual leave and sick leave (setting out any contractual entitlements above the statutory minimum); MPF and any supplementary retirement scheme contributions; the treatment of intellectual property created during employment; confidentiality obligations; restrictive covenants (where appropriate, and with careful attention to reasonableness); governing law (Hong Kong law, for Hong Kong-based employment); and the employer's right to make deductions or offsets permitted by the EO.

Anti-Discrimination Obligations

Employers must comply with Hong Kong's four main anti-discrimination ordinances: the Sex Discrimination Ordinance (gender and marital status), the Disability Discrimination Ordinance, the Family Status Discrimination Ordinance, and the Race Discrimination Ordinance. These prohibit discrimination not just in termination but throughout the employment relationship — in recruitment, terms and conditions, promotion, training, and access to benefits. The Equal Opportunities Commission enforces these ordinances and can investigate complaints. Claims under the anti-discrimination ordinances may be brought in the District Court.

Data Privacy in Employment

The collection and use of employees' personal data is regulated under the Personal Data (Privacy) Ordinance (PDPO) (Cap. 486). Employers must: issue a Personal Information Collection Statement (PICS) when collecting employees' personal data (including at the recruitment stage); use data only for the purposes for which it was collected (or purposes directly related to those purposes); ensure data security; and comply with data access and correction requests. Monitoring of employees (including CCTV surveillance of workplaces and monitoring of email and communications) must be proportionate, disclosed to employees, and consistent with the PDPO.

How Alan Wong LLP Can Help

Alan Wong LLP advises employers in Hong Kong on the full range of employment law matters, including: drafting and reviewing employment contracts, service agreements, and consultancy agreements; advising on termination and redundancy procedures; advising on restrictive covenant enforceability and employment disputes; advising on anti-discrimination compliance; and advising on data privacy obligations in an employment context. We act for employers across a range of sectors, including financial services, technology, professional services, and family-owned businesses.