Country Spotlight: Payroll in Hong Kong

Hong Kong is a vibrant global hub known for its impressive skyline, bustling markets, and unique blend of Eastern and Western culture. Along with its international appeal, Hong Kong is home to a highly skilled workforce and a dynamic business environment. For companies expanding into this thriving region, understanding payroll regulations is key to staying compliant and supporting employee well-being. From income tax structures and MPF contributions to minimum wage rules and detailed leave entitlements, this guide walks you through the essentials of managing payroll smoothly in Hong Kong.

Workweek and Working Hours

Hong Kong does not prescribe strict limits on overtime, but employers must ensure that overall compensation continues to meet minimum wage requirements. The statutory minimum wage has been revised to HKD 42.1 per hour, effective 01 May 2025.
Employers must also comply with data retention rules. Records such as employee details, income statements, and MPF contributions must be kept for periods ranging from six months to seven years, depending on the type of information. Additional requirements apply under the Personal Data (Privacy) Ordinance, which mandates that personal data should not be retained longer than necessary.

Occupational safety rules also play an important role in maintaining safe work environments. Penalties have increased significantly since April 28, 2023, with fines ranging from HKD 10,000 to HKD 400,000 and the possibility of imprisonment for serious violations. 

Payroll Structure

Hong Kong’s payroll framework includes both income tax obligations and mandatory contributions.

Employees may fall under two tax calculation methods.
Under the two-tiered standard rate system, individuals are taxed at 15 percent on the first HKD 5,000,000 of net income and 16 percent on income above that.
Under the progressive rate method, tax varies from 2 percent to 17 percent based on net chargeable income.

Employers must contribute 5 percent to the Mandatory Provident Fund, with taxable income capped at HKD 30,000 monthly. Employees make an equivalent contribution.

Tax concessions also apply. Effective April 19, 2023, individuals are eligible for a full tax reduction capped at HKD 6,000 per case, and child allowances have increased from HKD 120,000 to HKD 130,000 for the 2023 to 2024 assessment year.

Hong Kong employees are typically paid monthly, and wages must be released within seven days after the agreed due date. A 13th-month bonus is customary during Lunar New Year or at year's end.

Leave and Benefits

Employees in Hong Kong receive a variety of statutory leave entitlements. 

Public holidays include 12 statutory days and 5 general holidays, covering cultural, religious, and national observances such as Lunar New Year, Ching Ming Festival, Labor Day, and the day after Christmas.

Sick leave entitlements depend on accumulated paid sickness days. Employees accrue two paid days per month during their first 12 months, and four paid days per month thereafter, up to a limit of 120 days. Sick leave must be supported by a medical certificate and must span at least four consecutive days to qualify for paid allowance, which is calculated at 80 percent of average daily wages.

Maternity leave lasts 14 weeks, beginning two to four weeks before the expected due date. Eligibility requires 40 weeks of continuous employment immediately before leave begins, with maternity pay set at 80 percent of average daily wages.
Paternity leave follows similar eligibility requirements and is also paid at 80 percent of average daily wages.

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Termination and Severance

Employment in Hong Kong may be terminated for business reasons, personal reasons, or employee misconduct. Termination must be provided in writing and delivered in person.

Notice periods depend on the employment stage.
During the first month of probation, no notice is required. After the first month, the notice period must be at least seven days unless a different agreement has been made. Without any agreement, the minimum notice period after probation is one month.

Severance pay is calculated based on years of service.
Monthly rated employees receive two-thirds of their last month’s wages, capped at HKD 15,000, multiplied by years of service.
Daily or piece-rated employees may calculate severance using 18 days of wages from any 18 chosen working days in the last 30 days or two-thirds of HKD 22,500, whichever is lower, multiplied by years of service.

Key Payroll Takeaway

Hong Kong provides a highly skilled workforce, a strategic global location, and a business-friendly environment. While the region offers strong opportunities for growth, employers must stay aware of tax structures, MPF rules, leave entitlements, compensation guidelines, and data retention laws. Companies expanding into Hong Kong can benefit greatly from understanding and following local payroll and labor regulations, helping them build trust and maintain smooth operations in a competitive market.

Conclusion

Hong Kong continues to stand out as a major center for finance, commerce, and international trade. Its multilingual talent pool, modern infrastructure, and global connectivity make it attractive for businesses looking to expand in Asia. Although regulatory details such as income tax variations, strict data requirements, and employment protections add complexity, the region’s structured labor system and efficient processes support long-term stability. For organizations operating in Hong Kong, staying compliant with payroll, benefits, and statutory rules is essential to fostering strong employee relationships and achieving sustainable growth in the region.

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