If your company transfers you to Hong Kong or you are being employed from abroad, you should seek professional advice on the structure of your contract structure. This is especially important from the point of view of taxations as there are several perfectly legal ways in which the overall tax burden can be minimised.
It is usually better to have employers meet all ancillary costs rather than pay cash equivalents. For this reason many overseas contracts include a range of non-cash benefits. For example, if your moving expenses are paid for by the employer directly, this is better than being paid the cost of the move an extra on top of salary, as this would then be taxable as income. Overseas contracts also can include private health cover, dental insurance, periodic and/or end-of-service bonuses. Taxable allowances include payments for child education and travel to and from home.
If your job involves extensive business travel, you may be able to claim time apportionment of income for your work outside of Hong Kong. This means you are only taxed for the time when you are actually in the city. This is only possible when your employer is incorporated outside Hong Kong and your employment contract has been negotiated, signed and executed outside of the territory.
Foreigners looking for work when in Hong Kong or switching jobs locally are normally only offered a local contract. Besides offering a salary, local contracts may also offer accommodation and education allowances.
Civil service contracts, including those for teachers, are usually offered on a two-year fixed-term basis with an option to renew. Company contracts are normally on a month-by-month basis, though this can be stated differently in the contract.
A good guide to legal aspects of a local contract can be found at www.labour.gov.hk. A typical local Hong Kong contract should include the following points:
- Extra payments: End-of-year payments should be stated in the contract – a ‘thirteenth month’ discretionary payment is common in Hong Kong at Christmas or Chinese New Year.
- Annual leave: An individual employed for at least 3 consecutive months is entitled to holiday pay.
- Maternity leave and pay: Companies are bound to provide 10 weeks’ maternity leave for employees who have been in continuous employment for 40 weeks. Maternity pay is 80% of the employee’s normal wages.
In April 2013 the Hong Kong government increased the minimum wage by 7%, from HK$28 (US$3.61) to HK$30 (US$3.87) per hour. The minimum wage applies to all employees, except live-in domestic helpers, student interns, and work experience students during a period of exempt student employment. Foreign domestic workers must be paid at least HK$3,580/month as established by government regulation.