Employment Spotlight: Hong Kong Labor Law Highlights

Hong Kong continues to be a favorable destination target for foreign businesses looking to expand into Asia. Despite its small size geographically, Hong Kong was ranked as the world’s 7^th largest trading entity. For 2018 as a whole, Hong Kong’s GDP grew by 3% in real terms.

It measures as one of the top five easiest places on the planet to do business by the World Bank. 

As to the unemployment rate, it stood 2.8% for three months and ended in February 2019. This is the lowest level in 20 years.

The following provides a look at Hong Kong’s labor dynamic and discusses current realities with respect to foreign employment.

Hong Kong Applies ILO Conventions to its Labor Standards

Hong Kong protects employees’ rights, benefits, and occupational safety and health through an extensive labor legislation program. Hong Kong is also consistent in its application of relevant international labor best practices and recommendations as local circumstances allow. Notably, the government has incorporated the forty-one International Labor Organization (ILO) Conventions and Recommendations.

Hong Kong’s Labor Department has focused efforts on the following labor priorities:

• Promoting harmonious labor relations among employers and employees, and resolving disputes. The Labor Department handled 55 labor disputes and almost 16,000 claims resulting in a 70% successful resolution rate.
• Stepping up enforcement against employer wage offenses. Specific initiatives include: focusing on breaches of minimum wage provisions, educational efforts to remind employers of their statutory obligation to pay wages on time, encouraging employees to lodge claims promptly and to come forward as prosecution witnesses.
• Building good people management practices by organizing exhibitions, seminars, and talks to promote employer-employee communication and cooperation.
• Expanding safety-at-work initiatives including urging contractors to implement accident prevention and safety management systems on construction sites and to participate in site safety training.

Labor Shortages in Hong Kong’s Construction Industry

Like its Asian neighbors, Hong Kong is dealing with chronic labor shortages – particularly in the construction industry. Hong Kong Development Bureau statistics indicate that last year’s annual gross value of construction work from all sectors reached over 158 billion HK$ (approximately $20.2 billion USD), indicating unusually significant investment in capital and labor. A recent report by the Construction Industry Council (CIC) estimates that an additional 10,000 to 15,000 construction workers will be required over the next four years to satisfy industry demand. The CIC also suggests that improving worker training; particularly apprenticeship programs and vocational school training, can help with the labor shortage. Until then, the project delays and cost overruns that are impacting public sector projects will continue. This pain, however, provides needed motivation to prioritize and develop favorable labor plans.

In 1974, Hong Kong opened its borders to foreign nurses, nannies, and maids. By the end of 2015, Hong Kong had over 340,000 foreign domestic workers. Today, over half of this segment still comes from the Philippines, while another 44% is from Indonesia. Domestic worker employers must provide food, board, travel to Hong Kong, and wages of at least HK$4,310 ($556) a month. This reality begs the questions: Is importing foreign laborers a viable solution?

Hong Kong issued more than 41 592 visas to foreign workers in 2018

According to Hong Kong’s Immigration Department, 41 592work visas were issued to foreigners working or investing there. A breakdown of these visas is as follows:

An additional 35 117 visas were issued to foreigners under the Capital Investment Entrant Scheme.

Today, all non-Hong Kong residents wanting to work in Hong Kong will require a Hong Kong work visa. The Immigration Department usually examines several key areas before authorizing a work visa:

• Level of education background (graduate degree and above is preferred)
• Whether the applicant possesses experiences deemed in “short supply” in Hong Kong
• Whether a reasonable salary level ($40,000 per year or higher) will be had
• How beneficial the individual is to Hong Kong’s economy, trade, and industry
• If a local or resident worker could have filled the position
• Level to which the expatriate can provide ancillary benefit the local workforce (e.g. training, language, teaching, etc.)

The most common way a Western executive will work in Hong Kong is via an internal transfer within a multi-national company operating in Hong Kong. Whether the leader is being transferred to Hong Kong or is an overseas hire from a Hong Kong company – the employer will have to submit a Hong Kong work visa application and supporting documentation. The employer may also need to disclose a copy of the local posted job advertisement and CVs of domestic candidates who were rejected for the advertised position.

In Hong Kong, work visas are typically granted for a period of 6 to 12 months. Extensions are generally given in two-year increments until the worker has accrued seven consecutive years of employment. At that point, workers can apply for Permanent Residency. This means the employee no longer needs to be sponsored for a Hong Kong visa. For this, the approval process generally takes 6 to 8 weeks from when the visa application was submitted.

Hong Kong’s Employment Ordinance

The purpose of the Employment Ordinance is:

“To provide for the protection of the wages of employees, to regulate general conditions of employment and employment agencies, and for matters connected therewith.”

In Hong Kong, all employment terms are governed by, and subjected to, an employment contract, and relevant local law.

The following highlights important provisions in the Employment Ordinance related to all imported employees.

• Employers are required to enter into an employment contract with all employees.
• Employment is restricted to the sponsoring employer at the place of employment as specified in the contract. Employees are not permitted to work for other employers or in a different location for the same employer without the written approval of Immigration.
• Wages are due monthly unless otherwise stated in the employment contract. Payment must be made no later than 7 days after the end of the month to a bank account in Hong Kong by electronic transfer. Employers are required to provide employees with details of their earnings every month.
• Employees are entitled to overtime pay in accordance with the contract.
• Employers and employees will contribute to the Mandatory Provident Fund Scheme subject to the Mandatory Provident Fund Schemes Ordinance.
• Employers importing labor under the Supplementary Labor Scheme are required to pay a levy under the Employees Retraining Ordinance.
• Expenses for passage to and from Hong Kong on commencement, termination, or expiry of the contract, visa fees, subsequent visa extension fees, and medical examination fees should be paid by the employer.
• Employers must provide employees with at least 1 rest day per week, 12 statutory holidays as defined, and paid annual leave in accordance with the Employment Ordinance.
• Free medical care is required to be provided by employers for all employees who suffer from illness or injury, whether it is attributable to employment or not.
• Employers are liable for paying compensation to employees injured on the job according to the Employees’ Compensation Ordinance. Employers must also take out a work injury insurance policy for all employees under the Ordinance.
• Employers are required to provide employees with furnished accommodation in compliance with the standards stipulated in the Schedule to the standard employment contract. Free accommodation may be provided by an employer. However, if it is so stipulated in the employment contract, employers may deduct an amount not exceeding 10% of normal wages or the actual cost of accommodation, whichever is less.
• Employers may terminate the contract prior to its expiry by giving the employee due notice in writing or payment in lieu of notice as stipulated in the employment contract.
• Any worker admitted for employment in Hong Kong for a period of more than six months is required to register for a Hong Kong Identity Card.

Interested in the expansion? Our Hong Kong office is ready to help you soar.

At Blueback Global, we know the ins and outs of labor laws in Hong Kong. We have maintained a local office presence since 2015 and have built a deep network of business, supplier, and governmental agency relationships. We also remain connected with leading employment agencies to help companies navigate labor shortage concerns in select industries.

Our team is available to answer any questions on expansion or labor concerns in Hong Kong. Let us help you mitigate trial and error costs, risks, and complexities associated with new market expansion.