Employment Law Essentials for Hong Kong Employers: The Employment Ordinance

Introduction

The Employment Ordinance (Cap. 57) is the cornerstone of Hong Kong's employment law framework, establishing minimum standards for employment terms and conditions that apply to the vast majority of employees working in Hong Kong. Employers operating in Hong Kong must navigate a complex web of statutory obligations under the Employment Ordinance, the Minimum Wage Ordinance, the anti-discrimination ordinances, and various other pieces of employment-related legislation.

This article provides a comprehensive overview of the key obligations imposed on employers by Hong Kong's employment law framework, covering the statutory entitlements of employees, the requirements for lawful termination, the operation of the anti-discrimination regime, and practical guidance for maintaining compliance.

Scope and Application of the Employment Ordinance

The Employment Ordinance applies to employees working under a contract of employment, whether the contract is in writing or oral, express or implied. Certain categories of workers are excluded from the Ordinance's provisions, including domestic workers (who are covered by separate provisions) and persons employed in managerial or executive positions who are remunerated above specified thresholds for certain provisions.

The Ordinance distinguishes between continuous contracts (under which an employee has been employed for four weeks or more, working at least 18 hours per week) and non-continuous contracts. The full range of statutory entitlements under the Ordinance applies only to employees working under continuous contracts, although basic protections against unlawful deduction of wages and termination payment requirements apply to all employees.

Statutory Leave Entitlements

Annual Leave

Employees under continuous contracts who have completed one year of service are entitled to paid annual leave. The minimum annual leave entitlement increases from seven days after one year of service to fourteen days after nine years of service, scaling by one additional day per year of service from year four onwards. Employees may not waive their annual leave entitlements, and employers who prevent employees from taking annual leave may face criminal liability.

Statutory Holidays

Hong Kong maintains a list of twelve general holidays prescribed under the Employment Ordinance, including significant festivals such as Chinese New Year, Ching Ming Festival, the Dragon Boat Festival, and the Mid-Autumn Festival. Employees under continuous contracts are entitled to these holidays with pay. Many employers also grant the Bank Holidays prescribed under the General Holidays Ordinance, bringing the total to 17 paid public holidays.

Sick Leave

Employees under continuous contracts are entitled to paid sickness days at a rate of two sickness days per month for the first year of service and four sickness days per month thereafter, subject to a maximum accumulation of 120 sickness days. To qualify for sickness allowance (paid at 80% of the average daily wage), an employee must take sick leave for four or more consecutive days and must produce a medical certificate from a registered medical practitioner.

Maternity Leave

Female employees under continuous contracts are entitled to maternity leave of at least 14 weeks. Maternity leave pay is paid at 80% of the employee's average daily wages for the first 11 weeks of leave, with the remaining three weeks unpaid. Maternity leave pay is capped at HKD 80,000 in aggregate. Employers cannot terminate a female employee while she is on maternity leave or, in certain circumstances, during her pregnancy.

Paternity Leave

Male employees under continuous contracts whose spouses give birth are entitled to five days of paternity leave, paid at 80% of the average daily wage. The paternity leave must be taken within four weeks before or ten weeks after the birth of the child.

Wages and the Minimum Wage

Minimum Wage

Hong Kong's Statutory Minimum Wage is currently set at HKD 40 per hour (as of May 2023, with periodic reviews by the Minimum Wage Commission). The minimum wage applies to all employees working in Hong Kong, regardless of their immigration status or the nature of their employment contract. Employers must ensure that total wages paid in each wage period are at least equal to the statutory minimum wage multiplied by the total hours worked.

Timely Payment of Wages

The Employment Ordinance requires that wages be paid promptly. For monthly-paid employees, wages must generally be paid within seven days of the end of each wage period. Employers who fail to pay wages on time may face criminal prosecution and a surcharge on the overdue wages.

Deductions from Wages

Deductions from wages are strictly regulated. Employers may only make deductions for absence from work, damage or loss caused by the employee, accommodation provided by the employer, advances of wages, and other purposes expressly provided for by the Ordinance. Unauthorised deductions are a criminal offence.

Termination of Employment

Notice Requirements

Both employers and employees must give notice to terminate employment under a continuous contract. The minimum notice period under the Employment Ordinance is one month (or payment in lieu of notice), unless a longer period is specified in the employment contract. Many employment contracts specify longer notice periods of two or three months, and the contractual notice period applies if it is more generous than the statutory minimum.

Summary Dismissal

An employer may summarily dismiss an employee without notice or payment in lieu of notice if the employee has been guilty of specific types of serious misconduct, including wilful disobedience of a lawful order, misconduct likely to cause loss or damage to the employer, fraud or dishonesty, or being absent from work without reasonable excuse. Summary dismissal should be exercised with caution and is subject to challenge if the grounds are not clearly established.

Termination Payments

Employees who have been employed under continuous contracts for 24 months or more are entitled to long service payment on termination by the employer (except for dismissal by reason of serious misconduct or redundancy). Employees who are made redundant after five years of continuous service are entitled to severance payment. Long service and severance payments are calculated on the basis of two-thirds of the employee's last full monthly wages (or two-thirds of HKD 22,500, whichever is lower) for each year of service.

Unreasonable Dismissal

The Employment Ordinance protects employees under continuous contracts from unreasonable dismissal. Where an employer dismisses an employee without a valid reason (which includes serious misconduct, capability or qualifications for the work, redundancy, or other substantial reasons) or otherwise acts unreasonably in terminating employment, the Labour Tribunal may award compensation to the employee.

Prohibited Dismissal Grounds

Certain dismissals are absolutely prohibited under the Employment Ordinance, regardless of any purported valid reason. Dismissal is prohibited if it is related to an employee's pregnancy, her giving of evidence in proceedings under the Ordinance, her trade union membership or participation in lawful trade union activities, or her absence from work due to jury service. Employers who dismiss employees on these prohibited grounds face criminal liability.

Anti-Discrimination Laws

Hong Kong has four main anti-discrimination ordinances that employers must comply with: the Sex Discrimination Ordinance, the Disability Discrimination Ordinance, the Family Status Discrimination Ordinance, and the Race Discrimination Ordinance. These Ordinances are administered by the Equal Opportunities Commission (EOC).

Sex Discrimination

The Sex Discrimination Ordinance prohibits discrimination on grounds of sex, marital status, and pregnancy in employment decisions including recruitment, promotion, training, and dismissal. It also prohibits sexual harassment in the workplace. Employers must implement anti-harassment policies and take reasonable steps to prevent workplace harassment.

Disability Discrimination

The Disability Discrimination Ordinance prohibits discrimination against employees on the grounds of disability and requires employers to make reasonable accommodation for employees with disabilities. The Ordinance defines "disability" broadly to include physical, mental, and intellectual conditions, as well as chronic illness and stigma associated with disease.

Race Discrimination

The Race Discrimination Ordinance prohibits discrimination on grounds of race (including colour, descent, and national or ethnic origin) in employment. The Ordinance applies to both direct discrimination (treating an employee less favourably because of their race) and indirect discrimination (applying a requirement that has a disproportionate adverse effect on persons of a particular race without justification).

Mandatory Provident Fund

Under the Mandatory Provident Fund (MPF) Schemes Ordinance, employers and employees in Hong Kong must each contribute 5% of the employee's relevant income to an MPF scheme, subject to minimum and maximum income thresholds. Employers are responsible for enrolling new employees in an MPF scheme within the first 60 days of employment and for making timely contributions. Failure to make MPF contributions is a criminal offence, and the MPFA actively enforces contribution requirements.

Practical Compliance Considerations

Employment Contracts

Employers should ensure that employment contracts clearly specify the terms of employment, including remuneration, working hours, leave entitlements, notice periods, and any applicable post-employment restrictions. Contracts that seek to provide for terms less favourable than the statutory minimums are void to the extent of the inconsistency.

Employee Handbook

A well-drafted employee handbook that sets out the employer's policies on conduct, performance, leave, grievances, and disciplinary procedures is an important tool for managing the employment relationship and defending against claims of unfair treatment. Employers should review and update their handbooks regularly to reflect changes in the law.

Documentation

Maintaining complete and accurate employment records — including timesheets, wage records, leave records, and disciplinary records — is essential for demonstrating compliance with the Employment Ordinance and for defending against claims before the Labour Tribunal.

Conclusion

Hong Kong's employment law framework is detailed and rigorously enforced. Employers who fail to comply with the Employment Ordinance and associated legislation face not only civil liability to their employees but also criminal prosecution and reputational damage.

Alan Wong LLP's corporate and commercial team advises employers across a range of industries on employment law compliance, contract drafting, disciplinary matters, and termination procedures. We assist clients in navigating the complexities of Hong Kong's employment law framework and in managing employment-related disputes before the Labour Tribunal and other forums.