While not mandatory by law, having a written employment contract is highly recommended in Hong Kong for both employers and employees.
Once you have set up your Hong Kong company, the next step involves hiring the right talent to ensure that your business is successful.
But here's the thing — finding the brightest mind in the business is only the tip of the iceberg.
Without a solid employment contract in place, neither your employees nor you have enough security and protection.
After all, a legally binding agreement is essential for capturing the specific terms and conditions of employment.
It is beneficial to both the employer and the employee.
So here's what you need to keep in mind when you are drawing up an employment contract in Hong Kong
Always Use a Written Contract
A written agreement is always beneficial for you as it minimizes the chances of any dispute about the terms of the contract.
You can clearly specify all the conditions of right in the contract of employment, or if you have issued a separate letter, incorporate the terms by reference.
While Hong Kong law recognizes oral/verbal contracts, employees can also request that employers provide a written agreement. Failure to comply with this request can result in a fine of up to HKD 10,000.
Don't Reduce the Rights of Employees
According to the Hong Kong Employment Ordinance, any term that extinguishes or reduces the rights of the employee is legally void.
Say, for instance, the employment contract of your company provides that if an employee works on a statutory holiday, the company will pay twice the daily wages as remuneration for such work but not arrange for an alternative holiday.
Under the Hong Kong Employment Ordinance, all employees must get statutory holidays, and employers cannot make payments instead of granting a holiday.
Moreover, if an employee works on a statutory holiday, the employer must arrange for an alternative holiday.
Therefore, your contract will be invalid as per the terms of the Employment Ordinance. Feel free to check other relevant ordinances for your benefit.
Inform Employees of Changes to the Contract
Hong Kong Employment Ordinance provides that if there are changes to the employment terms or employment conditions, the employee must be notified as soon as possible.
A copy of the amended terms must be provided to the employee.
Moreover, before you change any terms, ensure that the employment contract expressly allows for such change.
An employee who is under a continuous contract with a company can challenge such variation if done in the absence of a specific clause allowing it and the modifications are done without any valid reason or without the consent of such an employee.
Include Key Details
While a written employment contract isn't mandatory in Hong Kong, it's highly recommended for both employers and employees. Here's a breakdown of what should be included in such contracts:
Mandatory Information:
- Wages and salary: This includes the amount of salary, payment period (e.g., monthly), and any allowances or bonuses. If you need to pay MPF under the laws of Hong Kong and require the employees to pay their contribution, specify it in the contract. Employees Compensation Ordinance is another resource employers can refer to when specifying details on employee compensation in the contract.
- Working hours: This should specify when the employment begins, the regular working hours, rest periods, and overtime arrangements.
- Notice period for termination: This details the required notice period for either party to terminate the employment.
Other Key Terms:
- Position and duties: This outlines the employee's job title and responsibilities.
- Leave entitlements: This specifies details on paid annual leave, sick leave (or sickness allowance), and other forms of leave.
- Probation period (if applicable): If there's a probationary period, the contract should define its duration and terms.
- Termination clauses: This should outline the grounds for termination and any associated severance payment.
- Confidentiality: This may be included if the role requires handling sensitive information.
Note that the Hong Kong Employment Ordinance permits both the employer and the employee to terminate the employment contract without notice within the first month of the probation period.
Post-termination Must be Reasonable
If you want to impose restrictions on the employees to protect business interests, you can do that but make sure that these restrictions are reasonable.
For example, you can include a non-compete clause that prohibits a former employee from working with your competitor for a certain period after the termination of employment.
Remember that the Hong Kong Employment Ordinance doesn't make any distinction between “temporary,” “part-time,” “substituted,” “permanent,” and “full-time” employees.
The wording of the employment contract should be able to demonstrate the type of employment.
For example, suppose you have hired someone as an independent contractor.
In that case, the employment contract should contain express provisions to show that such a person has independent control over their work and can be regarded as someone operating their own business.
Lastly, whenever you are drafting an employment contract in Hong Kong, be sure to refer to the Labour Department's booklet “Using Written Employment Contract” and the “Sample Employment Contract,” available here.
This will ensure that the terms of the contract are in sync with the legal requirements.
Ready to Start Preparing the Employment Contracts?
Does this all sound too daunting? Don't worry — Air Corporate is here to help.
We recommend hiring an independent legal practitioner who can draft employment contracts. Our experts can clarify your doubts so that you can access standard employment contracts and hire without sweat.
Also, we are happy to help you incorporate and register your Hong Kong Company.
Just focus on your business. We are here to take care of the rest.
