Benefits and Compensation in Hong Kong

Employee benefits refer to the additional perks and incentives offered to employees. There is a range of employee benefits that a company offers its employees, which include leaves, bonuses, health insurance, etc. 

The main objective of providing employee benefits is to cover all the additional expenses employees might incur while delivering their responsibilities. However, the benefits are not just limited to this. These benefits also aim to motivate employees to stay happy in the company. The quality of the employee benefits also reduces employee turnover in an organization. 

When crafting the benefits and compensation policy in Hong Kong, you must ensure that you adhere to all the existing labor laws in the country. While you must include the benefits mandated by labor laws, you must also provide the employees with supplementary benefits. The supplementary benefits are not industry-specific and are provided at the employer’s discretion. 

Compensation Laws in Hong Kong

The benefits and compensation policy in Hong Kong is created after carefully considering all the labor laws and government policies. Some compensation laws in Hong Kong include the following:

• Per the Employees’ Compensation Ordinance, Chapter 282, an employer must compensate the employee who sustains injuries arising from the employment. This also holds if the employee suffers from any occupational diseases. 
• An employer must hold a legitimate insurance policy to meet obligations under the Workers’ Compensation Ordinance and at common law for work-related accidents to his employees.
• Per the Employment Ordinance Cap 57 EO, all employers must guarantee certain minimum employee benefits. These include paid annual and sick leaves, maternity and paternity leaves, and termination notice.
• Per the Mandatory Provident Fund Schemes Ordinance Cap 485 MPFSO, all employers must enroll their employees in a mandatory provident fund scheme and make monthly contributions.

How to Develop an Employee Benefits Program for Employees in Hong Kong?

You must follow all the steps below to create a compensation and benefits policy in Hong Kong:

Step 1: Fix a budget and create an objective

• Start with finalizing a budget to draft employee compensation and benefits in Hong Kong.
• Create a budget and liaise with different stakeholders to get the budget approved.
• Once the budget is approved, you must decide on the objectives you want to achieve with the benefits plan.
• The objectives of the benefits and compensation policy in Hong Kong should comply with the country’s labor laws.

Step 2: Find the industry standards and gauge the employees’ expectations

• To ensure that you provide the right benefits to your employees, you must understand the employee benefits in Hong Kong that other employers offer. 
• Once you have other companies’ data, try understanding your employees’ expectations. 
• You can create and float an internal survey to collect the data to understand employees’ expectations. 

Step 3: Add flexibility to the plan

• Employees working in an organization have varied needs. Therefore, to meet these needs, you must have a certain degree of flexibility in your compensation plan. 
• The compensation package in Hong Kong can be made flexible by separately calculating the elements of the compensation structure. 
• Also, you must inform each employee how to use these benefits.

Step 4: Share the first draft with different stakeholders

• Once you are ready with the first draft, contact the stakeholders and try collecting their feedback. 
• The benefits plan must also outline how the employees can avail of these benefits. 
• After feedback from the stakeholders, analyze and incorporate them into the plan.

Step 5: Analyze

• Check all the elements of worker’s compensation in Hong Kong carefully before launching the benefits plan. 
• You should review the plan thoroughly and ensure it remains relevant in the different environments where the business functions. 
• You must also test the plan in different business environments before you launch it. 

Moreover, identify any potential plan flaws and fix them as necessary. Also, it would be best to create an algorithm to evaluate how well the plan has been implemented.

Types of Guaranteed Benefits in Hong Kong

A few mandatory employee benefits are offered to all employees in Hong Kong. These benefits include the following:

Minimum wage

• The minimum wage in Hong Kong is HK$37.5 per hour. All companies must pay a salary that is at least equal to the minimum wage. 
• However, the minimum wage in Hong Kong will increase to HK$40 per hour from 1 May 2023 onwards. 

Working hours and overtime

• Employees work at least 9 hours daily from 9 am to 6 pm. There are no labor laws on the maximum hours an employee can work in Hong Kong. 
• No overtime pay regulations are typically specified in employment or collective bargaining agreements.
• Any employee aged between 15 to 18 years must work a maximum of 48 hours per week. 

Paid leaves

• Employees who have completed their first three months in the organization are entitled to paid annual leaves. 
• All the regular employees can take an annual paid leave of 7 days.
• However, the number of paid leaves increases by one for every additional year of employment. 
• The employees reach their maximum limit of annual leaves, i.e., 14 days during their 9th year of employment. 

Public holidays

• In Hong Kong, employees can avail of different public holidays. However, employees choose to extend their entitlement to public holidays.  
• By 2030, the Employment Ordinance will add one new statutory holiday every two years, bringing the total number of statutory holidays from 12 to 17 days.

Sick leaves

• In the first employment year, an employee is entitled to 2 paid sick days per month. 
• Once employees complete a year with the company, they are entitled to four monthly sick leaves. 
• Before the first day of sickness, sick pay is calculated at a rate equal to 80% of the average daily earnings for the previous 12 months. 
• If they have been employed for less than a year, the calculation is based on the average wages obtained since the employee’s start date.
• Employees can accumulate sick leaves for up to 120 days at any time. 

Maternity leaves

• A pregnant employee in Hong Kong can avail of maternity leave for up to 14 weeks. However, this period can be extended to 18 weeks in case of multiple or complicated births. 
• To avail of the maternity leaves, the employee must be employed in the company for at least 40 weeks before the maternity leave period. 
• The employer pays 4/5th of the regular salary to employees on maternity leave.

Paternity leaves

• New fathers in Hong Kong can avail of paternity leave for up to 5 days after the child’s birth.  
• To avail of these leaves, the employee must work with the company for at least 40 weeks. 
• The employees receive 80% of their regular pay if they avail of their paternity leaves. 

Parental leaves

• There are no statutory rules on parental leaves in Hong Kong. However, you can discuss the same with your employer and get it incorporated into the system.

Bonus

• Annual bonuses are pretty standard in Hong Kong. Employees receive an additional month’s pay as a bonus.
• This bonus is generally given out during the Chinese New Year. 

Employee Benefits for Expatriates

Expats in Hong Kong enjoy similar benefits to the residents. Like all Hong Kong nationals, they have access to medical benefits for employees in Hong Kong. Expats also enjoy all kinds of supplemental benefits apart from mandatory benefits. Expats can receive reimbursement for their travel and fuel expenses.

Expats can also receive housing perks and food stipends. Several perks agreed upon by the company when the employment contract was signed were also available to expats. You must include a list of these benefits while drafting the employment contract for expats. 

How are Employee Benefits Taxed in Hong Kong?

Hong Kong follows a progressive taxation system where the tax rate increases with the level of income. The tax rates in Hong Kong range from 2% to 17%, where employees who earn more than HK$200,001 must pay a tax of 17% on their income. 

The total gross income of employees in Hong Kong includes the monetary value of the benefits offered to the employees. All allowances, prerequisites, and fringe benefits are taxable in Hong Kong. However, perks like Pension Ordinances are exempt from income tax. Even severance payments and extended service payments do not attract any income tax.

Restrictions for Hong Kong Benefits and Compensation

The majority of benefits and incentives are taxed in Hong Kong. You must know the value of these perks to calculate the employee’s tax burden. The employer must ensure that all tax payments are made on time to the government agencies and organizations in charge of employee social security and taxation.

Ensure your company has been officially incorporated and has the necessary business authorizations before establishing benefits and compensation in Hong Kong. Employers are expected to pay their employees at least the legal minimum wage. While creating a compensation package in Hong Kong, you must carefully consider the applicable labor laws. Before providing benefits to the employees, the benefits plan must also be evaluated.

Supplemental Benefits for Employees in Hong Kong

Employees can avail of several supplemental compensation and benefits in Hong Kong. Some popular supplemental benefits include the following:

Retirement benefits

The employees in Hong Kong can avail of certain benefits even after retirement. These benefits are paid under the SSA, MPF, and CSSA schemes. 

Bereavement leaves

Employees in Hong Kong can take a few days of bereavement leave in case of any death in their family. 

Phone bills

Several employers in Hong Kong provide phone bill reimbursements to their employees. They may also offer smartphones to their employees based on the nature of their work. 

Health insurance

While health insurance is a mandatory employee benefit, most employers might choose to get their employees covered under a private insurance policy. These policies ensure better coverage and can be extended to vision and dental insurance.

Meal allowance

Employees who stay in the office longer can avail of the perks of meal vouchers. They might also be provided with in-office lunches and dinners. 

How Multiplier Can Help with Benefits Management in Hong Kong

You must hire qualified employees while starting a firm so they may expand it and benefit the enterprise. While creating employment contracts and offering employee perks, employers must follow regional laws and ordinances. A global EOR platform like Multiplier can be used to implement this strategy.

With Multiplier, you can access specialists who know about various business-related challenges. You won’t need to create a nationwide subsidiary with the help of our experienced personnel to properly manage the workforce. You may grow your clientele and lower labor costs with our help.