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Minimum Wages

The Minimum Wage Ordinance of Hong Kong establishes a statutory minimum wage (SMW) regime aimed at striking an appropriate balance between forestalling excessively low wages and minimising the loss of low-paid jobs while sustaining Hong Kong’s economic growth and competitiveness. SMW provides a wage floor to protect grassroots employees.

SMW has come into force since May 1, 2011. Concurrently, the monetary cap on the requirement of employers keeping records of the total number of hours worked by employees is also revised to $15,300 per month.

[tips title="Did You Know"]SMW is expressed as an hourly rate. In essence, wages payable to an employee in respect of any wage period should be no less than the SMW rate on average for the total number of hours worked.[/tips]

The major provisions of the Minimum Wage Ordinance - e.g. definition of wages - are aligned as closely as possible with those of the Employment Ordinance to ensure consistency and effective enforcement, avoid confusion to employers and employees and minimise the compliance cost for employers.

On February 2, 2021, the Hong Kong government announced that the SMW rate will remain at HK$37.50 per hour, which was adopted in May 2019. The prevailing SMW rate will continue to apply until April 30, 2023 and the next round of review will be conducted in October 2022.

Other payroll obligations

Unlike most countries, individual income tax, or salaries tax as it is known in Hong Kong, is not withheld by the employer. Instead, individuals need to pay their tax themselves.

As such, there are only two administrative requirements applicable to employers in Hong Kong.

Keeping payroll records

Employers need to keep records of the following information concerning their employees:

  • Personal details;
  • Nature of employment: full time or part time;
  • Position;
  • Amount of cash remuneration, non-cash remuneration and other fringe benefits;
  • Contributions to the Mandatory Provident Fund or its equivalent;
  • Amendments to the terms of the employment contract; and
  • Period of employment.

The IRD needs to be informed of:

  • Changes in the employee’s particulars (change of residential address, marital status, etc.);
  • Changes in the terms of employment; and
  • The Hong Kong Identity Card No. of the employee.

Reporting remuneration paid to an employee

On April 1 every year, the IRD will issue a document called the Employer’s Return to companies. Within one month of receiving the Employer’s Return, the company needs to complete it and lodge with the IRD even if it does not hire any employee, the business has not commenced, or the business has ceased. If a company has employed persons who meet the conditions for such a return to be filed but the company has not received the Employer’s Return by mid April, it should request the IRD to issue a return.

Companies are required to report the below employees on the Employer’s Return:

  • Unmarried individuals that are paid an annual income of HK$132,000 or more for the year of assessment 2021/22;
  • Married individuals (regardless of amount);
  • Part time staff (regardless of amount); and
  • Directors (regardless of amount).

Employees are defined as:

  • Persons employed by a Hong Kong company, including:
    • Part time and full time staff;
    • Hong Kong and non-Hong Kong residents;
    • Persons who provide services for the company in or outside Hong Kong; and
  • Employees assigned or seconded to a Hong Kong company by its overseas holding company

When the company hires a new employee, it needs to inform the Inland Revenue Department within three months if the company anticipates that the employee is likely to be chargeable to salaries tax.

[tips title="Important Tip"]When an employee is terminated, the company needs to file the Employer’s Return one month before the date of termination.[/tips]

When an employee leaves Hong Kong permanently or for a substantial period of time, the employer needs to:

  • Ascertain from the employee their expected date of departure;
  • File two copies of the Employer’s Return one month before the expected date of departure; and
  • Withhold all amounts due to be paid to the employee (including salaries, commission, bonus, reimbursement of rent/expense, money or money’s worth included) from the date of filing the Employer’s Return until the employee has made tax clearance and can produce to the employer a “letter of release” issued by the Inland Revenue Department.

Below we listed some tax forms that are required by the Inland Revenue Department under specific situation for your easy reference:

Statutory Obligation of an Employer to Report Remuneration Paid to an Employee

Employment condition

Tax form to complete

Statutory period for notification

Notes

Commencement of employment

IR56E

Within 3 months

Both IR56E & IR56B are required for the commencement year

Still under employment as at March 31

IR56B

Within 1 month

Must be submitted annually together with a BIR56A

Cessation of employment

IR56F

Not later than 1 month before cessation

IR56B for the cessation year is not required

Departure from Hong Kong

IR56G

Not later than 1 month before departure and withhold money from tax clearance

IR56B for the cessation year is not required

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