By Globalization PartnersSeptember 2020
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The Hong Kong Special Administration Region, usually just referred to as Hong Kong, is a metropolitan area in the People’s Republic of China that has its own government, language, and customs that distinguish it from other parts of China. It can be an attractive place for companies from outside countries to do business because it is a melting pot of cultures and, as the Hong Kong government points out, has an economy that is characterized by free trade, low taxation, and minimal government intervention.
If your company is considering hiring staff in this region, our guide to hiring employees in Hong Kong can help you navigate through the considerations and costs involved in the process.
What to Know Before Hiring in Hong Kong
To hire employees in Hong Kong, you need to be aware of the customs and government regulations that govern employment practices in Hong Kong.
One of the advantages of expanding to Hong Kong for businesses from English-speaking countries is that English is one of the official languages of Hong Kong, alongside Chinese, and is especially common in business settings. That said, Cantonese — which differs from Mandarin Chinese — is by far the most commonly spoken language in Hong Kong. You can likely hire individuals who are at least bilingual in Cantonese and English if not fluent in other languages, as well, like Mandarin or Putonghua.
Because of the western influence in Hong Kong and the wide use of English, you may find that some job applicants have both a Chinese name and a western name that is designed to be easier for North Americans and Europeans to pronounce and remember. Make sure you know which name a person would like to use. It’s also kind to learn a few phrases in Cantonese to use when greeting Hong Kongers, even if the rest of your discussion is in English.
2. Payroll Considerations
Managing payroll for employees in Hong Kong is simpler than payroll in many other countries. When it comes to paying employees, you should always be aware of the government-mandated minimum wage. As of May 2019, the statutory minimum wage rate in Hong Kong is HK$37.5 per hour. Hong Kong’s official currency is Hong Kong Dollars.
One of the reasons payroll is simpler in Hong Kong is because employers do not have to withhold funds for healthcare or income tax. Instead, employees handle paying their taxes to the Inland Revenue Department (IRD) directly, but employers must prepare tax forms for their employees. Employers do have to withhold contributions for the Mandatory Provident Fund (MPF), a pension program. The government defines minimum amounts employees and employers must contribute monthly. In most cases, it is 5%. You’ll have to partner with a private organization to set up an MPF fund.
3. The Work Week
Hong Kong does not have any regulations on the maximum hours employees can work, and the average employee in Hong Kong works about 42 hours per week. That number has been on a downward trend, especially since the government began encouraging a five-day workweek for white-collar workers rather than a six-day week.
While the government leaves working hours up to the discretion of employers and employees, they do mandate a rest day out of every seven so employees on continuous contracts can recuperate. In this case, a day means 24 hours with no work obligations. This rest day tends to fall on Sundays, but employers can choose a rest day that makes sense for their company. If an employer ignores this requirement, they could incur heavy fines.
4. Holidays and Vacation Leave
There are 12 statutory holidays in Hong Kong. Once an employee on a continuous contract has been with a company for three months, they are entitled to receiving holiday pay for all the subsequent statutory holidays on the calendar. If a holiday falls on a rest day, employers must pick another day to offer as a paid holiday.
In addition to holidays, employees are also entitled to paid vacation days. After working for a company for one year, an employee should receive seven days of paid leave. The next year, they will also receive seven vacation days. After that, the number of vacation days increases by one each year, capping off at 14 days once an employee has nine years of seniority with a company. Vacation days do not expire at the end of the year. Employees can carry them over if they desire.
5. Sick Leave
Employees in Hong Kong also accrue sick leave days. For every month of an employee’s first year with a company, they should receive two paid sick days. After that first year, employees receive four paid sick days for every month of employment. These days can accumulate up to a maximum of 120 days.
Employees can receive pay if they use at least four sick days when they are ill — with the exception of pregnancy-related care — and have a certificate from a medical professional. On approved sick days, employees should receive four-fifths of their average daily wages.
The Cost of Hiring an Employee in Hong Kong
Hiring new employees in Hong Kong involves some costs, especially if you’re expanding your business into Hong Kong for the first time. Some aspects of the recruiting and hiring process that can add to your total cost include:
- Legal compliance: Whenever you begin employing people in a new country, you take on a whole new set of laws related to employment there. You cannot simply get out of fines or legal repercussions by saying you weren’t aware of the law. Therefore, it’s critical that you conduct extensive research or pay a knowledgeable professional to ensure you are compliant with Hong Kong employment laws.
- Business establishment: Unless you use a professional employment organization (PEO) as your employer of record, you have to have a legal business entity in Hong Kong. The options for extending your business in a new country are to create a branch office, a representative office, or a subsidiary. There are costs involved with any of these options.
- Staffing agencies: Staffing agencies can help you pull in the talent you need to help your business succeed in Hong Kong. Of course, as any company that has worked with a hiring agency can attest, this service can add substantially to your total hiring costs.
- Hiring committee: Some companies use an internal hiring committee to define the new positions, recruit candidates, conduct interviews and make hiring decisions. The paid hours these committee members spend on hiring is a large part of your total hiring cost. Add to that any travel expenses if members of your hiring committee travel to Hong Kong to conduct interviews.
- Job boards: Posting your job ad online can also add to your recruiting costs. You’ll find some options for posting without a fee on some sites, which can help to eliminate or minimize your costs for advertising your new positions.
- Screening checks: The pre-employment process often involves verifying a person’s identity and credentials and conducting a background check to ensure they have a clean record. You may need to hire another company to conduct these screening tasks.
What Does a Company Need to Hire Employees in Hong Kong?
Before you can begin to hire Hong Kong staff, you need to have a legal business entity in Hong Kong. The exact requirements will depend on what type of branch or subsidiary you choose to set up. Some things you may need to have in place include:
- Legal establishment: Creating a legal presence for your business in Hong Kong involves submitting an application form, incorporation documents, articles of association, a certificate of incorporation, your parent company’s memorandum, and identification documents for your company officers.
- IRD registration: You must also register your branch or subsidiary with the IRD to obtain a registration certificate.
- Licenses or permits: Depending on your industry, you may need to obtain other permits specific to your industry before you begin hiring someone in Hong Kong.
You can avoid these legal requirements if you instead partner with an employer of record for your Hong Kong employees. This saves you from having to be legally established in Hong Kong, and it also takes the responsibilities of legal employment compliance and payroll off of your company.
Steps to Hiring in Hong Kong
There are five basic steps to the hiring process in Hong Kong, from advertising your job to onboarding new employees.
1. Post Job Ad
Create a job ad that describes the position and the type of candidate you’re looking for. You can post your job ads in English, Cantonese, or both. If you’re looking for a multilingual candidate who can help connect your business with diverse markets, make sure you specify that in your job ad.
You can post your job ad in various places online for Hong Kongers to see. In addition to private job search sites, you should also consider posting your ad on the Interactive Employment Service, a feature from the Labor Department.
2. Screen Candidates
You can build questionnaires or skills tests into your application process to help you to screen applicants. The Hong Kong government emphasizes the importance of making all of your hiring practices in Hong Kong, including screening questions or tests, non-discriminatory in nature. This means you should refrain from any screening methods that could put people at a disadvantage because of factors like their race, sex, or familial status.
You can also use software or a hiring agency to help with this step and deliver a shortlist of the most qualified candidates to you.
3. Interview Top Candidates
Once you have come up with a list of the most qualified candidates, you can begin to interview these candidates. As with screening, make sure you don’t include any interview questions that could be discriminatory. Interviews in Hong Kong, including format and the types of questions asked, typically mirror the interview process in western countries. You can conduct interviews at your office in Hong Kong if you are establishing a physical presence there.
If you are only interested in hiring remote employees in Hong Kong, you may instead choose to conduct interviews virtually. When you schedule these phone or video interviews, make sure you consider the possible time difference between your location and Hong Kong Time (HKT). For example, Hong Kong is seven hours ahead of London, so a British company may want to schedule interviews for early morning so they coincide with the latter part of the workday in Hong Kong.
4. Create an Employer Agreement Contract
When you’ve decided which candidates are the best fit for your company, you should send them a formal job offer and share the contract with them that specifies their job duties and the terms of their employment. A written employment contract is not required in Hong Kong, but it is highly recommended to ensure you and your employee are on the same page.
Your contract should factor in all the labor requirements for Hong Kong, but you can go beyond these requirements to offer more generous vacation leave or a supplemental health policy, which is not required but is customary for many businesses in Hong Kong.
5. Onboard Your New Hire
Once an employee has signed their contract, you can begin the onboarding process. Because you don’t have to arrange for tax withholding or health insurance withholding, onboarding may be a bit simpler for Hong Kong employees than employees in other countries. However, there will still be a good deal of paperwork, including internal paperwork for your company. Working with an employer of record who handles onboarding can eliminate this step for your company.
You must also make sure you send in an IR56E form to the IRD within three months of your new employee’s start date. This form notifies the IRD that you have hired a new employee, so you must send one in each time you expand your team or replace someone.
Use Globalization Partners as Your Professional Employment Organization in Hong Kong
We hope this guide has provided some insight into how to hire in Hong Kong. If we could provide just one tip for hiring in Hong Kong, it would be to simplify the process for yourself by working with a global PEO like Globalization Partners.
With a presence in 187 countries, we have the expertise you need to expand your company internationally. You still find your new hires and they work for your company, but we serve as the employer of record, handling onboarding, payroll, and legal compliance so you don’t have to spend time and energy on these tasks. Contact us today to learn more about Globalization Partners can help you start hiring employees in Hong Kong or other countries where you want to expand.