The rapidly growing market of Hong Kong is a great destination for multinational organizations expanding their business. But employers looking to hire in Hong Kong must deal with an increasing number of complex payroll and employment laws and regulations. Our previous blog post detailed several key areas of Hong Kong’s Employment Ordinance and the rules with which employers must comply when hiring employees in the region. This entry will focus on additional areas employers need to take into account when looking to leverage Hong Kong’s workforce.

MPF Scheme Ordinance

Like with many other markets in APAC, Hong Kong is faced with an aging population as life expectancy increases and the birth rate declines. To help avert a crisis in the future, with 28 percent of the population expected to be over 65 by 2039, Hong Kong has established a contribution scheme to support the financial security of its working population. Hong Kong’s Mandatory Provident Fund, or MPF, is a compulsory pension fund to which employees and employers contribute monthly, based on salary and period of employment. It is the employer’s obligation to ensure that each employee, aged between 18 and 65 years of age and employed under a continuous contract for at least 60 days, is enrolled in an MPF scheme.

Salaries Tax

The employer is responsible for deducting salaries tax, or income tax, from their employees. This tax is charged on an annual basis for all wages, salaries, bonuses and commissions and paid to Hong Kong’s Inland Revenue Department. The salaries tax rate is either 15 percent of assessable income after the deduction of any allowances or a progressive rate levied on assessable income. Employers must also inform the IRD of each employee’s identification, type of employment, amount of cash remuneration, non-cash benefits, contributions to an MPF fund, period of employment and other terms of the employment.

Data Privacy

With identity theft being rampant, employers must protect the personal data of both their job candidates and employees according to Hong Kong’s Personal Data (Privacy) Ordinance. The ordinance was introduced by the Office of the Privacy Commissioner for Personal Data in 1996 and is designed “to protect the privacy interest of living individuals in relation to personal data.” Employers who fail to comply with the data protection ordinance can face stiff fines and even imprisonment.

Multinational organizations have much to gain by expanding their business into Hong Kong. But in order to ensure maximum benefit and avoid serious penalties, it is crucial to understand the many aspects of the region’s payroll legislation. As governance and international regulations continue to expand, employers must recognize the major provisions of all of Hong Kong’s employment laws. And to ensure compliance, companies can benefit from working with payroll professionals experienced and up to date with all of Hong Kong’s complicated procedures.