Hong Kong Payroll and Benefits Guide
What global businesses need to know about payroll in Hong Kong
Hong Kong can be considered an economic ‘bridge’ between east and west. On one hand, nearly 60% of its exports go to China, which reassumed control of the territory from the United Kingdom in 1997. But on the other hand, the Hong Kong dollar is pegged to the value of the US dollar, and this stability has made it the ninth-most traded currency in the world.
These global trade links have made Hong Kong an internationally renowned economic and financial centre, and a prime destination for businesses looking for expansion opportunities. Services dominate the Hong Kong economy, driving more than 93% of GDP, and relatively low corporate tax rates are a major incentive for setting up an operation there.
From a payroll perspective, it’s important to note that Hong Kong’s regulations and requirements are very different from China’s, so processes that you might use in one won’t necessarily be applicable to the other. This guide covers the key facts around running payroll in Hong Kong, including the latest changes in legislation.
Getting Started
There are three main options for business set-up in Hong Kong: representative office, branch office, and registered subsidiary company. Hong Kong has no restrictions on foreign ownership for any company structure. However, regulations require every business to have at least one permanent representative resident in Hong Kong.
Start by registering a unique business name (this should not be similar to any pre-existing name, and should not mix Chinese and English words and letters). Then, after appointing directors and specifying a registered address, you can apply for company incorporation, which can be done online with the Companies Registry.
Once you have your Certificate of Incorporation, you can apply for a Business Registration Certificate from the Inland Revenue Department so that your business is registered for tax purposes.
It is not mandatory to make payments to employees or authorities from a bank account in Hong Kong, but branch offices and registered companies are expected to have corporate accounts in-country.
Employers in Hong Kong must ensure that they keep proper records of each employee’s wage and employment history, and all accounting and payroll records must be kept for at least seven years. Companies need to report remuneration paid to employees on an annual basis.
Employment Considerations
With very few exceptions, the Employment Ordinance covers all employees – full-time, temporary, or part-time. Generally, employment contract terms must satisfy the minimum entitlements of the Ordinance regarding statutory holidays, Mandatory Provident Fund payments, sick and maternity leave, and severance and long-service payments. A foreigner must have a valid work visa to be able to work in Hong Kong, so organizations must apply for a valid work visa on the employee’s behalf before he or she can commence employment.
New legislation will come into force in January 2026 that changes the threshold at which employees are considered to have a ‘continuous contract’. This will now apply to any employee that works at least 17 hours a week, or at least 68 hours over a four week period, and these employees are therefore entitled to the same benefits and entitlements as full-time employees.
There are no set limits on working hours in Hong Kong, except for employees under 19 in industrial environments – they are limited to eight hours a day and 48 per week, and can only work between 7:00 am and 7:00 pm. The general working week is 9:00 am to 6:00 pm, Monday to Friday. Similarly, there are no fixed rules around overtime hours or pay; this should be agreed upon in employment contracts or through collective bargaining.
Probation and notice periods must be defined within employment contracts. Probation generally runs between one and three months, and can be extended up to six months if necessary. The standard notice period is 30 days once probation has been passed. There is no notice period in the first month of probation, and seven days’ notice applies for the rest of the probation period.
Compensation and Severance
Hong Kong adopted an annual review mechanism for its minimum wage in 2024, with the first rate under this new mechanism taking effect on May 1, 2026. As of May 2025, the minimum wage is HKD 42.10 per hour (approx. £4.10; $5.40; €4.65). On top of this, it’s also customary to provide a range of employee benefits such as extra paid leave, private medical insurance, housing and rental allowances, and company cars.
Although there is no statutory requirement to pay the 13th-month bonus in Hong Kong, it is customary to do so, either at the end of the calendar year, or in time for Chinese New Year (late January/early February).
Employees with at least two years of service are entitled to severance pay, which runs at two-thirds of a month’s wages per year of service. For this calculation, there is a maximum cap on the monthly wage of HKD 22,500 (approx £2,200; $2,900; €2,500). Any partial years over three months are rounded up to a full year in this calculation.
Tax and Social Security in Hong Kong
Hong Kong’s equivalent of income tax is the ‘salaries tax’, which is taxed progressively. The first HKD 50,000 earned per year (approx. £4,850; $6,400; €5,550) is taxed at 2%, with higher rates of 6%, 10% and 14% kicking in after each block of HKD 50,000. The fifth and highest rate of 17% is therefore applied to all earnings over HKD 200,000 per year (approx. £19,400; $25,700; €22,200).
It’s important to note that income tax is not withheld from employees via payroll throughout the tax year; employees are required to independently file with and pay Hong Kong’s Inland Revenue Department at the end of each tax year (which runs from April 1 to March 31).
Corporation tax runs at 8.25% on the first HKD 2 million of profits each year (approx. £194,000; $257,000; €221,500), and 16.5% on everything above that. Hong Kong does not levy any VAT or goods/services tax.
Hong Kong’s main social security contribution is the Mandatory Provident Fund. Employees and employers each pay 5%, with contributions only applicable on the first HKD 30,000 earned each month (approx. £2,900; $3,850; €3,300). When employees earn less than HKD 7,100 per month (approx. £690; $910; €785), only employers have to make the contribution. Employers also have to pay employment insurance of up to 2%, varying according to the industry and level of risk involved.
Holidays and Leave
Paid leave entitlement in Hong Kong starts at seven days after one year of service, and increases by one day for each additional year. The maximum of 14 days is reached after eight full years of service.
Hong Kong is gradually increasing the number of statutory public holidays observed each year from 14 to 17. Easter Monday will be included from 2026, Good Friday from 2028 and the day following Good Friday from 2030. Holidays on Sunday generate an alternative weekday off in lieu, but those that fall on Saturdays are lost.
Maternity leave is 14 weeks and starts between two and four weeks before the due date. Paternity leave is five days, which can be used at any time within the maternity leave period. Employers cover both types of pay at 80% of salary, although they can claim the pay for the last four weeks of maternity back from social security. These types of leave are only open to employees who have at least 40 weeks of service with their current employer.
Paid sick leave is accrued in Hong Kong: two days per month for the first 12 months of service, and four days per month thereafter, with a maximum of 120 days. Sick pay runs at 80% of salary, covered by employers.
Marriage and bereavement leave is not a statutory requirement in Hong Kong, but is often provided by employers voluntarily.
Payroll in Hong Kong: A Summary
It’s interesting to note how different Hong Kong’s payroll and employment regulations are to mainland China’s – but it can pose some challenges from a compliance perspective if you’re operating in both countries. To help you keep your processes compliant and up-to-date, work with a global payroll partner that can connect you to local expertise in Hong Kong, China and all of the territories in which you operate.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.