Updated: Aug 26, 2021
A written employment contract reminds both employers and employees of their obligations, helps avoid possible disputes and sets out clearly the rights and benefits of both parties.
The employment contract covers the major entitlements and protection enjoyed by employees under the EO.
Preparing an employment contract
Employers and employees are free to negotiate and agree on the terms and conditions of employment provided that these terms are complied with the provisions of the Employment Ordinance (EO) and the Minimum Wage Ordinance (MWO).
Under the EO, if an employer enters into a written employment contract with an employee, he shall provide a copy of the employment contract to his employee. An employer should also consult his employee and obtain his consent before making any subsequent change to the terms of the employment contract.
Any term of an employment contract which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by the EO or the MWO shall be void.
1. Working Hours
If the statutory minimum wage (SMW) applies to an employee and the wages payable to the employee in respect of the wage period are less than the amount specified in the Ninth Schedule of the MWO, the employer must keep a record setting out the total number of hours (including any part of an hour) that are worked by the employee in that wage period.
2. Meal Break
When an employee’s meal break also falls under the circumstances of hours worked as specified in MWO, such meal break is hours worked for computing minimum wage.
3. Rest Days
An employee employed under a continuous contract is entitled to not less than 1 rest day in every period of 7 days.
A continuous contract of employment means an employment contract under which an employee works continuously for the same employer for 4 weeks or more, with at least 18 hours in each week.
Wages shall become due on the expiry of the last day of the wage period and shall be paid as soon as practicable but in any case not later than 7 days thereafter.
According to the MWO, wages payable to an employee in respect of any wage period should not be less than the amount of the total number of hours worked during the wage period multiply by the SMW rate.
5. Overtime Compensation
Employers and employees may work out the agreed contents of the terms on overtime compensation having regards to the operational needs of different sectors and occupations.
Any overtime hour which falls within the definition of “hours worked” as stated in MWO, or is regarded as hours worked by the employee under his employment contract or with the agreement of the employer, should be included in computing the minimum wage for a wage period.
All employees, irrespective of their length of service and hours of work, should be granted statutory holidays. An employee is entitled to paid statutory holidays after he has been employed under a continuous contract for a period of 3 months.
7. Paid Annual Leave
An employee working under continuous contract for not less than 12 months is entitled to paid annual leave. The number of days ranges from 7 to 14 days depending on the employee’s length of service.
Paid annual leave to which an employee is entitled under the EO shall be granted by his employer and be taken by the employee within the period of 12 months immediately after the expiry of the relevant leave year.
Annual leave entitlement is in addition to the rest days, statutory holidays, maternity leave and paternity leave under the EO.
An employee is entitled to pro rata annual leave pay upon termination of the employment contract if he has been employed under a continuous contract for a period of not less than 3 months in the leave year, other than for reason of summary dismissal due to the employee’s serious misconduct.
An employer may choose to grant annual leave to his employees according to the rules of their companies provided that such leave will not be less than the requirement stipulated in the EO. Employers should specify the leave entitlement in the contract for each employee.
8. Maternity Leave Pay
A female employee employed under a continuous contract immediately before the commencement of her maternity leave and having given notice of pregnancy and her intention to take maternity leave to the employer is entitled to a continuous period of 142 weeks’ maternity leave.
A female employee is entitled to maternity leave pay if –
(a) she has been employed under a continuous contract for not less than 40 weeks immediately before the commencement of scheduled maternity leave;
(b) she has given notice of pregnancy and her intention to take maternity leave to her employer; and
(c) she has produced a medical certificate specifying the expected date of confinement if so required by her employer.
9. Paternity Leave Pay
A male employee is entitled to 5 days’ paternity leave for each confinement of his spouse/partner if –
(a) he is the father of a new-born child or a father-to-be;
(b) he has been employed under a continuous contract; and
(c) he has given the required notification to the employer.
A male employee is entitled to paternity leave pay if he has been employed under a continuous contract for not less than 40 weeks immediately before the day of paternity leave and has provided the required document to the employer.
10. Sickness Allowance
An employee can accumulate paid sickness days at the rate of 2 paid sickness days for each completed month under a continuous contract during the first 12 months of employment, and 4 paid sickness days thereafter. Paid sickness days can be accumulated up to a maximum of 120 days.
An employee is entitled to sickness allowance if –
(a) the sick leave taken is not less than 4 consecutive days;
(b) the sick leave is supported by an appropriate medical certificate; and
(c) the employee has accumulated sufficient number of paid sickness days.
If a female employee is absent from work to attend medical examination in relation to her pregnancy, post confinement medical treatment, or due to miscarriage, any day on which she is absent shall be counted as sick leave. She will be entitled to sickness allowance for each day of the sick leave provided that she has accumulated paid sickness days and can produce an appropriate medical certificate (regarding an employee’s medical examination in relation to her pregnancy, may also be supported by a certificate of attendance apart from a medical certificate).
11. Termination of Employment Contract
For a continuous contract with no probation period or after probation period, the agreed length of notice for termination should not be less than 7 days. If an employment contract does not make provision for the required length or notice for its termination, the length of notice should not be less than 1 month.
If a probation period is provided, the contract of employment can be terminated without notice within the first month of probation. After the first month of probation, if the contract makes provision for the required length of notice, it should be as per the agreement, but not less than 7 days. If the contract does not make provision for the required length of notice, it should be not less than 7 days.
12. End of Year Payment
There is no requirement under the EO on provision of end of year payment, including bonus and double pay. However, if an employee employed under a continuous contract who, in accordance with a term of his contract, is entitled to an end of year payment from his employer.
If the end of year payment is of a gratuitous nature or is payable at the discretion of the employer, it must be clearly specified in the employment contract.
If the employment contract has provided for end of year payment, an employee is entitled to have pro rata end of year payment if he has been employed under a continuous contract for a period of not less than 3 months in the payment period. Except for cases where the employee is summarily dismissed due to serious misconduct or has resigned in the payment period.
Any probation period, subject to a maximum of 3 months, is excluded from the calculation of the qualifying service for pro rata end of year payment.
13. Mandatory Provident Fund Schemes
For details of the Mandatory Provident Fund Schemes, please refer to the Mandatory Provident Fund Schemes Ordinance or the homepage (http://www.mpfa.org.hk) of the Mandatory Provident Fund Schemes Authority.
14. Work Arrangements during Tropical Cyclone (Typhoon), Rainstorm Warning Signals, or “extreme conditions” as announced by the Government before Typhoon Warning Signal No. 8 is replaced with No. 3 are in force
An employer should work out prior work arrangements and contingency measures during Typhoon, rainstorm warnings or “extreme conditions” as announced by the Government before Typhoon Warning Signal No. 8 is replaced with No. 3 are in force, and state clearly the arrangements to his employees.
An employer should require only the absolutely essential staff to report for duty in adverse weather conditions. If at all possible, the employer should provide transport service for employees who are required to travel to and from workplaces when Typhoon Warning Signal No. 8 or above, Black Rainstorm Warning or “extreme conditions” as announced by the Government before Typhoon Warning Signal No. 8 is replaced with No. 3 are in force. If such service is not available, the employer may give a traveling allowance to the employees who are required to work.
Compulsory Employees' Insurance
Employers are obliged to take out employees' compensation insurance policies to protect both employers and employees.
According to Section 40 of the Employees’ Compensation Ordinance, Chapter 282 of the Laws of Hong Kong, no employers shall employ any employee in any employment unless there is in force a policy of insurance to cover their liabilities both under the Ordinance and common law for injuries at work in respect of all their employees, irrespective of the length of employment contract or working hours, full-time or part-time, permanent job or temporary employment.
When taking out an employees' compensation insurance policy, an employer should take note of the following statutory minimum insurance cover:
For employer with not more than 200 employees, the minimum insurance cover should be HK$100 million. If more than 200 employees, the minimum insurance cover should be HK$200 million.
An employer must bear the full cost of the insurance policy and shall not make any deduction from the earnings of an employee in order to defray the cost of insuring against his liability to pay compensation.
Upon taking out employees’ compensation insurance policy, an insured employer is required to display, in a conspicuous place on each of his premises where any employee is employed, a notice in both English and Chinese, showing the details of the policy. The notice form is available free of charge at all branch offices of the Employees’ Compensation Division and the Labour Inspection Division of the Labour Department.
To know more about these entitlements (such as your eligibility criteria), please enquire Bestar. Bestar assists employers and employees to draw up written employment contracts.