How to Deal with Employment Contracts in Hong Kong

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 employment right in the contract or if you have issued a separate letter of employment, incorporate the terms by reference.

While Hong Kong law recognizes oral/verbal contracts, employees can also request employers to provide a written agreement. Failure to adhere to the request can result in a fine of up to HKD 10,000.

Don’t reduce the rights of employees

As per the terms of the Hong Kong Employment Ordinance, any term which 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. 

Inform employees of changes to the contract

Hong Kong Employment Ordinance provides that if there are changes to the employment terms, the same must be notified to the employee at the earliest.

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

Details about the job, remuneration and appraisal policy, termination, leave policy (including maternity leave), sickness allowance, and the working hours should be clearly specified in your contract. 

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. 

The probation period, if any, should also be included in the contract.

Typically, the probation period in Hong Kong is around three months.

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 have access to standard employment contracts and hire without breaking a sweat.

Also, we are happy to help you with incorporating and registering your Hong Kong Company

 

Just focus on your business. We are here to take care of the rest.

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