Hong Kong Employment Ordinance: Complete Employer Guide (2026)

The Employment Ordinance (Cap. 57) is the foundation of employment law in Hong Kong. It governs wages, rest days, annual leave, sick leave, maternity and paternity leave, termination, severance pay, and the Mandatory Provident Fund. Non-compliance exposes directors personally to criminal liability - fines and even imprisonment in serious cases.

This guide covers everything a Hong Kong employer needs to know in 2026, from the moment you hire your first employee through to termination and final payment.

What the Employment Ordinance Covers

The Employment Ordinance Cap. 57 governs all employment relationships in Hong Kong, from wages to termination.

The Employment Ordinance (Cap. 57) applies to all persons employed in Hong Kong under a contract of employment - whether the contract is written or verbal, full-time or part-time, local or expatriate. The key question is whether the work is performed in Hong Kong under a contract governed by HK law.

Who is covered:

• Full-time and part-time employees
• Fixed-term contract employees
• Expatriate employees working in Hong Kong
• Employees on probation

Who is NOT covered:

• Self-employed contractors and freelancers (no employment relationship)
• Domestic helpers (covered by a separate ordinance, Cap. 57A)
• Certain apprentices and student interns (exempt from minimum wage provisions)
• Seafarers and certain categories of civil servants

If you are unsure whether a worker qualifies as an employee or a contractor, err on the side of the Employment Ordinance. The Labour Tribunal applies a substance-over-form test - the label "contractor" in a contract does not override the actual working arrangement.

Statutory Minimum Wage

The Statutory Minimum Wage (SMW) was set at HKD 40 per hour effective 1 May 2023. The minimum wage is reviewed every two years by the Minimum Wage Commission, with the next review expected in 2025.

The SMW applies to all employees covered by the Employment Ordinance, with two key exceptions:

• Student interns performing internship work as a required part of their studies
• Live-in domestic helpers (covered by separate arrangements)

Employer obligations under the SMW:

• Pay at least HKD 40 per hour for all hours worked
• Keep wage and time records for 12 months (even if you pay well above the SMW)
• Calculate the SMW for employees paid on a monthly, daily, or piece-rate basis using the prescribed formula

Monthly SMW equivalent: For a standard 44-hour work week (common in HK), the minimum monthly wage is approximately HKD 7,333. Most professional roles pay significantly above this - the SMW is primarily relevant for entry-level service, hospitality, and cleaning roles.

Rest Days

Every employee is entitled to at least one rest day per week - a period of not less than 24 consecutive hours. Rest days may be a fixed day (e.g. Sunday) or a rolling day arranged between employer and employee, but they must be granted.

• Rest days must be paid for continuous contract employees
• An employee cannot be required to work on a rest day without consent
• If an employee works on a rest day by mutual agreement, they must be given a substitute rest day within the following month

The "418 Rule" - Continuous Contract

One of the most important concepts in Hong Kong employment law is the continuous contract. An employee qualifies as a continuous contract employee if they work:

18 or more hours per week for 4 or more consecutive weeks

Once this threshold is met, the employee is entitled to the full range of statutory benefits under the Employment Ordinance:

Critical point for employers: You cannot structure working hours to avoid the 418 threshold. The Labour Tribunal looks at the actual working pattern over time, not just the written contract. An employee who regularly works 20 hours per week but is formally classified as "casual" is almost certainly a continuous contract employee.

Annual Leave

Continuous contract employees are entitled to paid annual leave. The entitlement increases with years of service:

Annual leave pay is calculated as the average daily wages earned by the employee in the 12-month period immediately before the leave. Employees are not permitted to be paid in lieu of annual leave except upon termination of the employment contract.

Employers must notify employees of the timing of annual leave at least 14 days in advance, or reach agreement on dates with the employee. Unused annual leave generally cannot be forfeited at year end - it must be taken or paid out on termination.

Sick Leave and Sickness Allowance

Employees on continuous contracts accumulate paid sickness days as follows:

• 2 paid sickness days per month for the first 12 months of employment
• 4 paid sickness days per month thereafter
• Accumulated days are capped at 120 days

Sickness allowance is paid at 4/5 (80%) of the employee's average daily wages over the preceding 12 months. The employee must:

1. Be absent for at least 4 consecutive days (for sickness allowance to apply to the full period)
2. Present a valid medical certificate from a registered medical practitioner

Employers cannot dismiss an employee on sick leave who is absent with a valid medical certificate, except in specific circumstances (gross misconduct, contract expiry, etc.).

Maternity Leave

Hong Kong's maternity leave entitlement was extended to 14 weeks in 2020:

• Employees must have been employed for at least 40 weeks before the expected date of delivery to qualify
• Maternity leave must start no earlier than 4 weeks before the expected delivery date (unless medical grounds require earlier leave)
• Maternity leave pay: 4/5 of average daily wages for all 14 weeks
• Government reimbursement: From 11 April 2023, the government reimburses employers for weeks 12, 14 of maternity leave pay, up to a cap of HKD 80,000 total. Employers claim reimbursement from the Labour Department after paying the employee

Dismissal of a pregnant employee is prohibited once the employer has been informed of the pregnancy. Violations carry criminal penalties.

Paternity Leave

Male employees who have been employed for at least 40 weeks are entitled to 5 days of paid paternity leave within 4 weeks of the child's birth.

• Paternity leave pay is 4/5 of average daily wages
• The employee must notify the employer within a reasonable period
• Evidence of birth or expected birth must be provided on request

Mandatory Provident Fund (MPF)

Employers and employees each contribute 5% of relevant income to MPF, capped at HKD 1,500 per month each.

The MPF is Hong Kong's compulsory retirement savings scheme, administered by the Mandatory Provident Fund Schemes Authority (MPFA).

Contribution rates:

• Employer: 5% of the employee's relevant income
• Employee: 5% of the employee's relevant income
• Cap: Both contributions are capped at HKD 1,500 per month each for employees earning above HKD 30,000 per month
• Minimum: For employees earning below HKD 7,100 per month, only the employer contributes (employee is exempt from contribution but employer's 5% still applies)

Enrolment obligations:

• Employers must enrol new employees in an MPF scheme within 60 days of their employment commencement date
• Contributions are due within 10 business days after the end of each contribution period (typically monthly)
• Casual employees in the construction or catering industries must be enrolled immediately

MPF and non-resident employees: Employees who are seconded to Hong Kong from overseas may be exempt from MPF if they are covered by a comparable retirement scheme in their home country and their HK employment is expected to last less than 13 months. Seek professional advice on this exemption.

Late contributions: MPFA imposes surcharges of 5-10% on late contributions. Persistent failure to contribute is a criminal offence with fines up to HKD 450,000 and imprisonment up to 4 years.

Public Holidays

Hong Kong has 17 statutory holidays per year under the Employment Ordinance. All employees (including those not on continuous contracts) are entitled to these. In addition, continuous contract employees are entitled to the same holidays plus any additional general holidays listed in their contract.

Employers who require employees to work on a statutory holiday must grant a substitute holiday within 60 days.

Termination of Employment

Notice requirements:

• During probation: 7 days notice (or as specified in contract if longer)
• After probation: minimum 1 month's notice (or 1 month's wages in lieu of notice)
• Written contracts may specify longer notice periods - both parties must honour them

Wages in lieu of notice: If either party wishes to terminate immediately without serving the notice period, they may pay the other party the equivalent of the notice period's wages. Employers frequently use this in practice.

Summary dismissal (no notice required): An employer may dismiss an employee without notice only in cases of serious misconduct:

• Wilful disobedience of a lawful and reasonable order
• Misconduct inconsistent with continued employment
• Fraud or dishonesty
• Conviction of a criminal offence arising from the employment

Summary dismissal must be for genuine cause - wrongful summary dismissal exposes the employer to a claim for wages in lieu of notice plus potential damages.

Severance Pay

Severance pay applies when an employee is dismissed by reason of redundancy after completing 24 months of continuous service.

Formula: 2/3 of the employee's last full month's wages × years of service (including fractions of a year)

Cap: HKD 390,000 total

Example: An employee with 5 years of service earning HKD 30,000/month receives: 2/3 × HKD 30,000 × 5 = HKD 100,000.

Severance pay is not applicable if the employee resigns, is dismissed for misconduct, or is offered and unreasonably refuses suitable alternative employment.

Long Service Payment

Long service payment applies when an employee has completed 5 or more years of continuous service and the employment ends in circumstances other than redundancy dismissal or resignation:

• Dismissal other than for misconduct (e.g., company closure)
• Contract expires and is not renewed
• Employee resigns due to ill health
• Death of the employee

Formula: Same as severance - 2/3 of last month's wages × years of service, capped at HKD 390,000.

Long service payment and severance pay are mutually exclusive - only one applies per termination.

Key Employer Obligations Checklist

A written employment contract, MPF enrolment within 60 days, and payroll records are the three non-negotiables.

Use this checklist when hiring your first employee in Hong Kong:

• Prepare a written employment contract (not legally required but strongly recommended - protects both parties)
• Enrol the employee in an MPF scheme within 60 days of start date
• Keep wage records and time records for 7 years
• Issue monthly payslips showing wages, allowances, MPF contributions, and deductions
• Notify IRD of new employees within 3 months of commencement (IR56E form)
• Notify IRD at least 1 month before an employee's departure from Hong Kong (IR56G form) or within 1 month of departure where advance notice is not possible (IR56F)
• Maintain a record of rest days taken and annual leave balances
• Track sickness days to ensure the 120-day accumulated cap is correctly maintained
• Notify the Labour Department of any industrial accident within 14 days

A good company secretary can help you maintain statutory records and ensure filings are made on time.

Common Employer Mistakes

1. Misclassifying employees as contractors to avoid MPF The MPFA regularly investigates businesses where workers are labelled contractors but work exclusively for one employer, follow set hours, and have no genuine business independence. Reclassification results in back-contributions plus surcharges.

2. Failing to pay sickness allowance Some employers deduct the full day's salary when employees take sick leave. Under Cap. 57, employees on continuous contracts with valid medical certificates are entitled to 80% of their average daily wages - not zero.

3. Late MPF contributions MPF contributions must be paid by the 10th business day after the end of the contribution period. Delays of even a few days trigger MPFA surcharges. Set up automatic payments.

4. Not tracking annual leave balances Unused annual leave that cannot be attributed to a specific year becomes a liability at termination. Implement a simple leave tracker from day one.

5. Terminating without proper documentation A verbal dismissal with no written record leaves the employer exposed to unfair dismissal claims. Always issue a written termination notice, state the reason, confirm the last day of employment, and outline final payment details.

FAQ

Is a written employment contract required in Hong Kong?

No - a written contract is not a legal requirement under the Employment Ordinance. However, it is strongly recommended. In the absence of a written contract, the terms of employment are implied by the Employment Ordinance minimums, custom and practice, and any verbal agreements. Disputes over verbal terms are difficult and expensive to resolve. A written contract protects both parties and sets clear expectations from day one.

What is the MPF contribution rate in Hong Kong?

Both the employer and employee each contribute 5% of the employee's relevant income to the MPF scheme. Contributions are capped at HKD 1,500 per month per party for employees earning above HKD 30,000 per month. For employees earning between HKD 7,100 and HKD 30,000, both parties contribute 5% of actual income. For employees earning below HKD 7,100, only the employer contributes (5% of actual income); the employee's contribution is waived.

Can I hire employees before my company has a business bank account?

Technically yes - there is no legal requirement to have a business bank account open before hiring. However, you will need a bank account to pay salaries (payroll by cash is permitted but creates record-keeping risk), make MPF contributions (required by the MPF trustee), and make Profits Tax payments on behalf of employees. Opening a bank account as quickly as possible after incorporation is strongly recommended. See our guide to doing business in Hong Kong for the full post-incorporation checklist.

What happens if I miss MPF contributions?

Late or missed MPF contributions trigger automatic MPFA enforcement action. The MPFA issues a notice of surcharge (typically 5-10% of the outstanding amount) and can pursue recovery through the court. Persistent failure to make MPF contributions is a criminal offence under the MPSO, carrying fines up to HKD 450,000 and up to 4 years imprisonment for directors. The MPFA publishes lists of employers convicted of MPF offences.

How do I legally terminate an employee in Hong Kong?

For a lawful termination: (1) give the required notice period (minimum 1 month, or as specified in contract), or pay wages in lieu of notice; (2) issue a written termination notice stating the last day of employment; (3) calculate and pay all outstanding wages, unused annual leave, any contractual end-of-year payment, and severance or long service payment if applicable; (4) notify the IRD using IR56F or IR56G; (5) follow up on MPF - the employee's accrued mandatory contributions are always vested and cannot be forfeited. Final payment is due on or before the last day of employment.

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