Employer of Record in Hong Kong

Hiring employees in Hong Kong for 2025 offers several avenues, each with distinct legal and operational implications. Understanding these options is crucial for businesses looking to expand into this dynamic market, ensuring compliance with local labor laws, taxation, and administrative requirements. While direct employment involves establishing a local presence, other solutions provide greater flexibility and speed to market.

For companies seeking to engage talent in Hong Kong, the primary methods include:

• Establishing a local entity: This involves incorporating a company in Hong Kong, registering with relevant government bodies, and directly managing all aspects of employment, including payroll, benefits, and HR compliance.
• Utilizing an Employer of Record (EOR): Services like Rivermate allow companies to hire employees in Hong Kong without setting up their own legal entity. The EOR acts as the legal employer, handling all local employment responsibilities.
• Hiring independent contractors: Engaging individuals as independent contractors in Hong Kong bypasses direct employment obligations, though companies must ensure the relationship genuinely meets contractor criteria to avoid misclassification risks.

How an EOR Works in Hong Kong

An Employer of Record (EOR) serves as a third-party organization that legally employs your staff in Hong Kong on your behalf, while you retain full control over their day-to-day work and management. The EOR handles the intricate administrative and legal aspects of employment, including:

• Payroll processing and ensuring timely salary payments.
• Tax withholdings and remittances to the Hong Kong Inland Revenue Department.
• Mandatory Provident Fund (MPF) contributions and administration.
• Compliance with Hong Kong labor laws, including employment contracts, working hours, leave entitlements, and termination procedures.
• Registration with local authorities.
• Provision of statutory benefits, such as sick leave, annual leave, and maternity/paternity leave.
• Handling of employment-related insurance.

Benefits of Using an EOR in Hong Kong

For companies aiming to hire in Hong Kong without the complexities of establishing a local entity, an EOR offers significant advantages:

• Rapid market entry: Hire employees quickly, often within days, bypassing lengthy entity setup processes.
• Reduced compliance burden: Delegate the responsibility for understanding and adhering to Hong Kong's complex labor laws and tax regulations to experts.
• Cost efficiency: Avoid the significant financial investment and ongoing operational costs associated with forming and maintaining a local legal entity.
• Mitigated risk: Minimize legal and financial risks associated with non-compliance, misclassification, or incorrect payroll administration.
• Focus on core business: Free up internal resources from administrative tasks, allowing your team to concentrate on strategic objectives and employee management.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Hong Kong includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Hong Kong.

Hong Kong's tax system is simple, with no sales tax or VAT, relying mainly on profits tax, salaries tax, and property tax. Employers are required to contribute 5% of employee relevant income to the Mandatory Provident Fund (MPF), capped at HKD 1,500 monthly, for both employer and employee. Employers must also withhold salaries tax based on progressive rates or a standard rate, and remit it to the Inland Revenue Department (IRD).

Employees can claim deductions such as a HKD 132,000 basic allowance, HKD 264,000 married allowance, HKD 130,000 per child, and others like home loan interest and MPF contributions (up to HKD 18,000 annually). Employers file annual remuneration returns (Form IR56B), with deadlines typically in April or May, while individual tax returns are due around May or June. Salaries tax is paid in two installments.

Foreign workers' tax obligations depend on residency status, with potential exemptions for short-term stay and benefits under Double Taxation Agreements (DTAs). Foreign companies are subject to profits tax on Hong Kong-sourced profits, with rates varying for corporations and unincorporated entities.

Hong Kong's salary landscape in 2025 is characterized by significant variation across industries, with finance, technology, and professional services offering higher compensation. Typical salary ranges for key roles are as follows:

The statutory minimum wage remains HKD 40 per hour, applicable to most employees, with periodic reviews every two years. Compensation packages often include bonuses such as a 13th-month pay, performance bonuses, and allowances for housing, transportation, and meals, alongside comprehensive health benefits. Salaries are typically paid monthly via bank transfer, with mandatory MPF contributions of 5% each from employer and employee, capped at HKD 1,500.

Salary trends forecast continued growth driven by high demand for tech talent, rising living costs, and a focus on skills-based pay. Employers should stay aligned with these trends to attract and retain top talent effectively.

Hong Kong's employment ordinance mandates specific leave entitlements to safeguard employee well-being. Employees gain paid annual leave after 12 months of continuous employment, with minimum days increasing with tenure:

Public holidays total 17 annually, with provisions for substitution if they fall on Sundays. Employers may require work on holidays but must give 48 hours' notice and offer an alternative holiday or extra pay.

Sick leave is paid at 80% of wages, with accrual based on employment duration: 2 days/month in the first year, 4 days/month thereafter, capped at 120 days. Female employees are entitled to 14 weeks of maternity leave, paid at 80% of wages, provided they have at least 40 weeks of employment before delivery. Male employees receive 5 days of paternity leave under similar conditions. Employers may also offer additional leave types like bereavement, study, or sabbatical leave, but these are not legally mandated.

Hong Kong employers must provide statutory benefits including 13 public holidays, paid annual leave (7–14 days), sick leave (paid at four-fifths of wages), 14 weeks of maternity leave, 5 days of paternity leave, MPF contributions (5% of relevant income with a cap of HKD 1,500/month), workers' compensation insurance, and severance or long service payments. These mandatory benefits form the baseline for employee entitlements.

Beyond legal requirements, many companies offer optional benefits such as supplemental health, dental, vision, life, and disability insurance, along with wellness programs, flexible work arrangements, professional development, housing or transportation allowances, and stock options. Employers often enhance benefits to attract talent, especially in larger firms and competitive sectors like finance and tech.

Employers should align their benefits with market expectations, especially in competitive industries, to enhance employee satisfaction and retention.

Employment agreements in Hong Kong are vital for defining the rights and obligations of employers and employees, ensuring compliance with the Employment Ordinance. They typically fall into two categories: fixed-term contracts, which specify a set duration, and indefinite contracts, which continue until terminated. Essential clauses include details on parties, job scope, start date, working hours, remuneration, place of work, leave entitlements, termination procedures, probation periods, confidentiality, and governing law.

Probation periods usually last 1-3 months, with shorter notice requirements during this phase (minimum 7 days if over one month). Upon successful completion, employment is confirmed. Confidentiality and non-compete clauses are enforceable if reasonable, with courts scrutinizing their scope and duration. Contract modifications require mutual agreement and written documentation, while termination must follow contractual or statutory notice periods, with severance pay applicable in redundancy cases.

Remote work in Hong Kong is growing, driven by technology and work-life balance demands. While no specific remote work legislation exists, existing laws like the Employment Ordinance, Occupational Safety and Health Ordinance, Data Protection Ordinance, and Work Injury Compensation Ordinance apply, ensuring employee rights, safety, data security, and injury coverage for remote workers.

Employers are adopting various flexible arrangements to attract talent, including remote work, flextime, compressed workweeks, job sharing, and part-time roles. These options help improve productivity and employee satisfaction while complying with legal requirements.

Employers in Hong Kong must follow specific legal requirements for employee termination to avoid disputes. Notice periods vary based on service length and contractual terms, with a minimum of one month for employees with over three months of service. Employers can opt for payment in lieu of notice, covering the employee's salary during the notice period. Severance pay applies to employees with at least 24 months of continuous employment, calculated as (Monthly Wage x 2/3) x Years of Service, with a wage cap of HKD 22,500 as of 2025. Employers can offset severance obligations using MPF contributions.

Terminations can be with or without cause. With cause reasons include misconduct, poor performance, or breach of contract, requiring proper documentation and clear communication. Without cause terminations require adherence to notice or payment in lieu, along with procedural steps like written notices, final payments, and exit interviews. Employees are protected against wrongful dismissal on grounds of unfairness, discrimination, or retaliation, with claims handled by the Labour Tribunal, which can order reinstatement or compensation.

Hong Kong's economy supports a robust environment for freelancing and independent contracting, driven by companies' need for flexible talent and individuals' desire for autonomy. Employers must understand the legal, contractual, and tax frameworks to effectively engage independent contractors. The distinction between employees and contractors is based on the relationship's substance, not just contractual labels, with misclassification leading to potential liabilities. Key tests for classification include control, integration, economic reality, mutuality of obligation, and ownership of tools. A well-drafted contract should clarify the scope of work, payment terms, relationship status, and IP rights to mitigate risks.

Independent contractors in Hong Kong are subject to Profits Tax and must manage their own tax affairs, including registering with the Inland Revenue Department and filing annual returns. Tax rates for 2024/2025 are 8.25% for the first HKD 2 million of profits and 16.5% beyond that for corporations, with slightly lower rates for unincorporated businesses. Contractors must also enroll in an MPF scheme. Recommended insurances include professional indemnity and public liability. Independent contractors are prevalent in industries like technology, creative services, consulting, finance, media, and education, offering businesses specialized skills and flexibility.

Hong Kong's work permit system primarily revolves around the Employment Visa, which is essential for foreign professionals with skills or experience valuable to the region. Applicants must secure a job offer from a Hong Kong employer, and each visa type has specific eligibility criteria and documentation requirements. Other options include Investment and Training Visas, catering to entrepreneurs and trainees respectively.

Key visa types and their features:

The application process involves submitting relevant documentation, demonstrating the applicant’s value to Hong Kong’s economy, and complying with local regulations. Staying compliant ensures legal employment and smooth operation for employers hiring foreign staff.