Hire employees in Hong Kong using an Employer of Record

Hong Kong requires 14-month salaries, double pay bonuses, and mandatory provident fund contributions. Miss this and you'll owe back payments plus penalties when employees find out. The Employment Ordinance doesn't give you much wiggle room here.

Most companies discover these requirements after they've already made job offers. Then comes the scramble to understand statutory holidays (there are 17 of them), gratuity payments for long-term employees, and the fact that probation periods can't exceed three months by law.

You've got three ways to hire in Hong Kong legally, and each comes with different costs and headaches.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Companies Registry filing, business registration, MPF scheme setup, IRD registration
• Makes sense when: Hiring 15+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (up to €50,000), back taxes, MPF contributions
• Makes sense when: Short projects (< 6 months), specialized consulting
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-20 employees, testing markets, multi-country teams

If you're hiring 1-8 people, entity setup costs more than 4-5 years of EOR fees ($179/month = $2,148/year per employee). An EOR like Hire with Columbus handles employment contracts, 14-month salary calculations, MPF contributions, statutory holiday pay, and all the compliance updates that happen throughout the year.

Example: Hiring 2 people = $358/month vs €25,000+ entity setup plus €10,000/year maintenance. The math is pretty clear.

Ready to hire in Hong Kong without the compliance headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Hong Kong, and the costs couldn't be more different. Here's what each approach actually looks like in practice.

How can you hire in Hong Kong?

Most companies jump straight to thinking about contract types, but the real decision is how you'll legally employ someone in the first place. Let's break down your options with real numbers.

Setting up your own Hong Kong entity

You're looking at HK$15,000-25,000 just to get started, plus 4-6 months of paperwork before you can hire anyone. Then there's ongoing compliance - annual returns, audit requirements, MPF registration, and local HR infrastructure.

This makes sense if you're planning to hire 20+ people long-term or need a permanent market presence. But for most companies testing the waters? It's overkill and expensive overkill at that.

Hiring contractors or freelancers

Fast and flexible, sure. But Hong Kong's Inland Revenue Department doesn't mess around with misclassification. If your "contractor" works set hours, uses company equipment, or follows detailed instructions, you're risking back taxes, penalties, and mandatory benefits payments.

The real kicker? You can't integrate contractors into your team the way you need for core roles. They're genuinely independent, which limits how much control you have over their work.

Using an employer of record (our recommendation)

Here's where it gets interesting. Hire with Columbus becomes the legal employer in Hong Kong while you manage the day-to-day work. Your employee gets a proper employment contract, full benefits, and legal protection. You get to hire in 2-3 days instead of months.

At $179/month per employee, you're looking at $895 for a five-person team versus HK$25,000+ just to set up an entity. The math is pretty clear.

Employment contract types in Hong Kong

Once you've sorted out the legal structure, you need to pick the right contract type. Hong Kong recognizes several employment arrangements, each with different rules and protections.

Permanent employment contracts

This is your standard full-time employment agreement with no fixed end date. Perfect for core team members you want to keep long-term. Employees get full statutory benefits, including annual leave, sick leave, and severance pay after certain periods.

The Employment Ordinance kicks in immediately for basic protections, but many benefits (like severance) require continuous employment periods. Most companies use permanent contracts for roles they expect to last more than a year.

Fixed-term contracts

These have a specific end date, usually for project work or temporary coverage. Here's what gets tricky - if you renew a fixed-term contract or the employee works beyond the end date, Hong Kong law may treat it as permanent employment.

You can't use fixed-term contracts to avoid permanent employee rights. If the role is ongoing and the work is permanent, the contract should be permanent too. The Labour Department takes a dim view of companies trying to game the system.

Part-time employment

Part-time employees get the same statutory protections as full-time workers, just pro-rated. Someone working 20 hours per week gets half the annual leave entitlement, for example.

The key threshold is the "4-1-18" rule - employees working at least 4 hours per day, 1 day per week, for 4 consecutive weeks get full Employment Ordinance protection. Below that, they're still entitled to basic rights like wages and safe working conditions.

Probationary periods

You can include a probationary period in any contract type, but it can't exceed one month for the first month's statutory protections. During probation, you can terminate with one day's notice or payment in lieu.

After probation ends, normal notice periods apply - one month for the first two years, then longer periods based on tenure.

When you work with Hire with Columbus, we handle all the contract drafting and ensure you're using the right type for each role. No guessing about compliance or worrying about misclassification - we've got the local expertise to get it right from day one.

How does payroll and taxation work?

Your €60,000 employee in Hong Kong actually costs €69,300 per year once you add mandatory contributions. The good news? Hong Kong has one of the world's simplest tax systems with relatively low rates.

But don't let "simple" fool you into thinking you can wing it. Miss a Mandatory Provident Fund (MPF) deadline and you're looking at penalties of 5% per month on outstanding contributions.

Hong Kong tax brackets

Hong Kong uses a progressive salaries tax system with rates that'll make your European employees pretty happy. Here's the breakdown for 2025:

There's also a standard rate of 15% that applies to the whole income if it results in lower tax. Most employees earning over HKD 600,000 (€76,923) annually will pay the standard rate instead.

Mandatory employer contributions

Hong Kong keeps social security simple with just one mandatory scheme - the MPF. Here's what you're paying:

MPF contributions:

• Both you and your employee contribute 5% of monthly income
• Contributions capped at HKD 1,500 per month each (about €192)
• Employees earning less than HKD 7,100 per month are exempt from contributions
• You still pay your 5% even if the employee is exempt

Long Service Payment: This one's tricky. You don't pay monthly contributions, but you need to set aside funds for potential long service payments or severance. Many employers buy insurance or create reserves for this.

Payment schedule and bonuses

Hong Kong employees expect monthly salary payments, typically at the end of each month. Unlike many Asian countries, there's no mandatory 13th or 14th month bonus - but many companies offer discretionary year-end bonuses.

Key payment dates:

• Salary: Last working day of each month
• MPF contributions: Due by the 10th of the following month
• Annual leave pay: Must be paid before leave is taken

Double pay tradition: While not legally required, many Hong Kong employers pay "double pay" - an extra month's salary before Chinese New Year. It's so common that employees often expect it, especially in local companies.

Total employment cost example

Let's break down what a €60,000 annual salary actually costs you in Hong Kong:

Employee earning €60,000 (HKD 468,000) annually:

• Base salary: €60,000
• Employer MPF contributions: €1,800 (5% of salary, capped)
• Long service payment reserve: €900 (estimated 1.5% annually)
• Mandatory insurance premiums: €600
• Total annual cost: €63,300

Higher earner at €100,000 (HKD 780,000) annually:

• Base salary: €100,000
• Employer MPF contributions: €2,300 (capped at HKD 1,500/month)
• Long service payment reserve: €1,500
• Mandatory insurance: €800
• Total annual cost: €104,600

The percentage overhead decreases for higher earners because MPF contributions are capped.

Payroll cycle and deadlines

Hong Kong's payroll calendar is refreshingly straightforward compared to other jurisdictions. Here's what you need to track:

Monthly deadlines:

• Salary payment: Last working day of the month
• MPF contributions: 10th of following month
• MPF returns submission: 10th of following month

Annual obligations:

• Employer's return (IR56B): Within 1 month of year-end
• Individual employee returns (IR56B): Within 3 months of employee leaving
• Salaries tax returns: Issued around May, due in August

Quarterly requirements:

• Business registration fee: Due annually but can be paid quarterly
• Provisional salaries tax: Paid in January and May

Common payroll mistakes to avoid

We see the same errors repeatedly when companies try to handle Hong Kong payroll themselves:

MPF calculation errors: The monthly cap catches everyone. You can't just multiply annual salary by 5% - you need to calculate monthly and apply the HKD 1,500 cap each month. An employee earning HKD 600,000 annually pays HKD 18,000 in MPF, not HKD 30,000.

Missing the 10th: MPF contributions and returns are due by the 10th of the following month. Miss this and penalties start immediately at 5% per month. No grace period, no warnings.

Forgetting about departing employees: You need to file IR56B forms within one month when an employee leaves. The Inland Revenue Department doesn't mess around with late filings - penalties start at HKD 1,200.

Annual leave timing: You must pay annual leave before it's taken, not after. This trips up companies used to paying leave with regular salary.

Setting up compliant payroll

Running payroll properly in Hong Kong means registering with multiple agencies and maintaining ongoing compliance:

Required registrations:

• Inland Revenue Department (for salaries tax)
• MPF scheme provider
• Labour Department (for employment records)
• Workers' compensation insurance

Monthly admin burden:

• Calculate and remit MPF contributions
• File MPF member contribution summaries
• Process salary payments and tax calculations
• Maintain detailed employment records

Cost of DIY payroll:

• Local accounting firm: €800-1,200/month for basic payroll
• MPF administration: €50-80 per employee monthly
• Compliance software: €300-500/month
• HR expertise for complex situations: €60,000+ annual salary

With Hire with Columbus, you get compliant Hong Kong payroll for $179/month per employee. We handle MPF registrations, monthly contributions, tax filings, and all the compliance headaches that come with Hong Kong employment law.

We'll set up your employees with appropriate MPF schemes, ensure all contributions are paid on time, and handle the annual tax filing requirements. Your employees get paid correctly and on time, while you focus on growing your business instead of wrestling with Hong Kong bureaucracy.

What benefits and leave are required?

You'll pay salary 14 times a year in Hong Kong, not 12. The extra payments come from mandatory double pay (13th month) and statutory holiday pay. Beyond that, Hong Kong keeps benefit requirements fairly straightforward, but the details matter more than you'd think.

Annual leave

Hong Kong employees get 7 days minimum annual leave after 12 months of employment. That's it. Just one week to start.

The leave increases by one day each year until it hits 14 days maximum after seven years. So someone who's been with you for three years gets 9 days total.

The catch: unused leave must be paid out when someone quits or gets terminated. No "use it or lose it" policies allowed. At current salary rates, that payout can add up quickly if people aren't taking their time off.

Annual leave progression:

• Year 1: 7 days
• Year 2: 8 days
• Year 3: 9 days
• Years 7+: 14 days (maximum)

Sick leave

Employees get 2 paid sick days per month worked, up to 120 days total per year. The first 4 days in any sick leave period are unpaid. After that, you pay 80% of their average daily wages.

No doctor's note required for the first 3 consecutive sick days. Beyond that, they need medical certification from a registered doctor or Chinese medicine practitioner.

The math works like this: someone who's worked 6 months has accumulated 12 paid sick days. If they take 5 days off sick, the first 4 days are unpaid, and you pay 80% salary for day 5.

Maternity and paternity leave

Maternity leave: 14 weeks at 80% pay, starting no earlier than 2-4 weeks before the due date. The mother chooses when to start the leave within that window.

Paternity leave: 5 days at 80% pay, taken within 53 weeks of the birth. Fathers can split this up. Take 2 days after birth, then 3 days later when needed.

You pay the full salary and claim reimbursement from the government later. The reimbursement covers 80% up to a monthly cap of HK$39,500 (about $5,050 USD) in 2025.

Public holidays 2025

Hong Kong has 12 statutory holidays where you either give employees the day off or pay double wages if they work.

Mandatory Provident Fund (MPF)

Both employer and employee contribute 5% of monthly salary to the MPF, Hong Kong's pension system. Contributions are capped at HK$1,500 per month each (based on maximum relevant income of HK$30,000).

Employees earning less than HK$7,100 per month are exempt from contributing, but you still pay the employer portion. The money gets invested in approved funds chosen by the employee.

You must register with an MPF provider and make contributions by the 10th of each month. Late payments incur a 5% surcharge.

Mandatory double pay

The 13th month payment is required. It equals one month's salary and gets paid before Chinese New Year or when employment ends. This isn't a bonus. It's a legal requirement equivalent to 8.33% of annual salary.

Calculate it as total wages earned in the 12 months before payment, divided by 12. If someone worked less than a full year, prorate it based on months worked.

Optional competitive benefits

Most international companies offer more than the legal minimums to attract talent:

• Medical insurance: Full private health coverage
• Additional annual leave: 15-20 days is common for senior roles
• Flexible working: Hybrid or remote work options
• Professional development: Training budgets and conference attendance
• Life insurance: 2-3x annual salary coverage
• Housing allowance: Especially for expat hires given Hong Kong's housing costs

Common benefit mistakes

Missing MPF deadlines: The 5% surcharge applies immediately on the 11th of each month. With average salaries, this adds up to hundreds of dollars per employee quickly.

Miscalculating double pay: Companies often forget to include overtime, commissions, and allowances in the calculation. Use total remuneration, not just base salary.

Sick leave record keeping: You need detailed records of sick days taken and accumulated. The Labour Department checks these during inspections and fines start at HK$50,000 for poor records.

Holiday pay confusion: If someone works a statutory holiday, they get double pay PLUS a substitute holiday. Many companies miss the substitute day requirement.

Administering these benefits correctly requires local HR expertise (HK$600,000+ annual salary), payroll software (HK$3,000+/month), and legal review (HK$50,000+/year). Risk of errors runs into six figures with Labour Department penalties.

Hire with Columbus handles all benefit administration, MPF contributions, and compliance monitoring for $179/month per employee. We calculate double pay automatically, manage sick leave accruals, and ensure you never miss an MPF deadline.

What are the compliance requirements?

Written contracts are mandatory in Hong Kong. Verbal agreements don't count and expose you to claims for back pay and benefits.

Employment contract requirements

Every employment contract in Hong Kong must be in writing and signed within 30 days of the employee's start date. Skip this deadline and you're looking at HK$10,000 fines per violation.

The contract must include specific mandatory clauses in either English or Chinese (employee's choice). Required elements include job title, duties, salary, working hours, rest days, annual leave entitlement, notice periods, and termination conditions.

You'll also need to register the employment with the Labour Department within 14 days if the employee is a foreign national. Miss this registration and face additional HK$5,000 penalties plus potential work permit complications.

Probation periods

Standard probation periods in Hong Kong run 3 months, with a maximum allowed period of 6 months. During probation, either party can terminate with just 7 days' notice or payment in lieu.

After probation ends, full employment protections kick in immediately. That means longer notice periods, severance requirements, and much stricter termination procedures.

Don't extend probation periods beyond 6 months - Hong Kong courts will void the extension and treat the employee as permanent from day one.

Working time regulations

Maximum working hours are 8 per day and 48 per week, with mandatory rest breaks of at least 30 minutes for shifts over 6 hours. Overtime must be paid at 1.5x regular rate for hours beyond the standard workweek.

You're required to maintain detailed records of all working hours, overtime, and rest periods for each employee. The Labour Department can audit these records at any time, and missing documentation results in HK$50,000 fines.

Rest days are mandatory - employees must get at least one full day off per week, and you can't require work on rest days without the employee's written consent and overtime compensation.

Notice periods by service length

Notice can be given as working notice or payment in lieu. If you choose payment in lieu, it must include salary, allowances, and the value of any benefits the employee would have received during the notice period.

Termination process

You can only terminate employees for just cause (serious misconduct, poor performance after warnings, or redundancy). Each category has specific procedural requirements that must be followed exactly.

For misconduct, you need documented warnings, investigation records, and the opportunity for the employee to respond. Performance dismissals require written performance improvement plans and reasonable time for improvement.

Redundancy requires genuine business reasons, proper consultation with affected employees, and selection based on objective criteria. The Labour Department may investigate redundancy decisions and can order reinstatement if the process was flawed.

Severance pay requirements

Severance is required for redundancy and certain contract terminations, but not for dismissals due to serious misconduct. The calculation uses average monthly salary over the last 12 months, including regular bonuses and allowances.

Data protection obligations

Hong Kong follows its own Personal Data Privacy Ordinance, which requires explicit consent for collecting and processing employee data. You must provide data protection notices in Chinese and English explaining what data you collect and how it's used.

Employee data must be stored securely with access limited to authorized personnel only. Data breaches must be reported to the Privacy Commissioner within 72 hours, with fines up to HK$1 million for serious violations.

Cross-border data transfers require additional safeguards and employee consent, especially when sending payroll or HR data to parent companies in other countries.

Common compliance mistakes

Invalid employment contracts happen when companies use generic templates without Hong Kong-specific clauses or miss the 30-day signing deadline. This voids the contract and exposes you to claims for statutory benefits from day one.

Wrong termination processes are the biggest compliance trap. Companies often skip required consultation periods, fail to document performance issues properly, or don't follow redundancy selection criteria. This leads to wrongful dismissal claims averaging HK$200,000-500,000 in settlements.

Missing mandatory registration with the Labour Department for foreign employees creates work permit complications and can result in the employee being unable to work legally while you sort out the paperwork.

Penalties for violations

Common compliance failures in Hong Kong carry these specific penalties:

• Invalid employment contract: HK$10,000 fine plus contract deemed void, requiring back payments for all statutory benefits
• Wrong termination process: HK$100,000-500,000 in wrongful dismissal compensation plus legal fees and potential reinstatement orders
• Missing mandatory clauses: Contract invalidated, employee entitled to maximum statutory benefits regardless of agreed terms
• Improper working hours documentation: HK$50,000 fine plus liability for unpaid overtime claims going back 6 years

Hire with Columbus ensures every contract includes all mandatory Hong Kong clauses, handles proper Labour Department registrations, and follows exact termination procedures to eliminate these compliance risks. Our local legal team reviews every employment action before it happens, so you never face these penalties or surprise legal costs.

What has changed recently?

Hong Kong's employment rules changed quite a bit in 2025, with new regulations that'll directly impact how you hire and manage employees.

The biggest change? Hong Kong implemented its long-awaited statutory paternity leave in January 2025. Male employees now get 5 days of paid paternity leave, up from zero. It's not groundbreaking compared to other markets, but it's a step forward for a region that's been pretty conservative on parental benefits.

Minimum wage and salary adjustments

The statutory minimum wage jumped to HK$45 per hour in May 2025, up from HK$40 in 2024. That's a 12.5% increase that caught some employers off guard, especially those with large hourly workforces.

For professional roles, you're looking at higher salary expectations across the board. Tech roles saw the biggest jumps. Software engineers now command HK$45,000-80,000 monthly for mid-level positions, compared to HK$40,000-70,000 in 2024.

New workplace harassment protections

Hong Kong expanded its anti-discrimination laws in March 2025 to include stronger workplace harassment protections. The new rules cover psychological harassment and require employers to have formal complaint procedures in place.

You'll need written policies covering harassment prevention, reporting mechanisms, and investigation procedures. Companies without proper documentation face fines up to HK$100,000 for first violations.

Mandatory Provident Fund changes

The MPF contribution ceiling increased to HK$1,800 per month in 2025, up from HK$1,500. This affects employees earning over HK$36,000 monthly. Both employer and employee contributions are capped at this new level.

This impacts your payroll calculations if you're hiring senior professionals. The good news? If you're using an EOR like Hire with Columbus, we handle these MPF adjustments automatically so you don't need to track the changing thresholds.

Digital employment contract requirements

Starting September 2025, Hong Kong requires all employment contracts to be available in digital format, even if you still provide paper copies. Employees must be able to access their contracts electronically within 48 hours of signing.

The digital copies need to include all amendments and must be stored for at least 7 years after employment ends. It's another compliance box to tick, but it's actually making contract management easier for most companies.

Work visa processing delays

This part's frustrating. Work visa processing times increased substantially in 2025. What used to take 4-6 weeks now averages 8-12 weeks for new applications. The Immigration Department cited increased application volumes and enhanced security checks.

Plan ahead if you're hiring foreign talent. Starting the visa process early isn't just smart anymore, it's essential to avoid missing your candidate's start date.