Employment Contract Drafting

Employment Contract Drafting | Bestar

Hong Kong Employment Contract Drafting Guide

In the fast-paced business environment of Hong Kong, a "standard" employment contract is often a liability in disguise. Whether you are a startup hiring your first employee or an MNC restructuring your workforce, precision in drafting is the difference between a seamless exit and a costly labor tribunal case.

This guide explores the essentials of Hong Kong employment contract drafting.

Why Hong Kong Contracts Require Local Precision

Hong Kong’s labor market is governed primarily by the Employment Ordinance (Cap. 57). While the city is known for its "pro-business" stance, the courts are strict regarding statutory protections that cannot be "contracted out."

1. Mandatory Statutory Benefits

Even if a contract is silent on these points, the Employment Ordinance mandates:

• Rest Days: At least one rest day in every period of seven days.

  
  

• Statutory Holidays: 14 days (as of 2026), increasing incrementally to 17 by 2030.

  
  

• Paid Annual Leave: Scaling from 7 to 14 days based on length of service.

  
  

• Sickness Allowance: Paid at 4/5ths of the average daily wages.

2. The "Continuous Contract" Rule (4-18)

In HK, an employee who works for the same employer for 4 weeks or more, with at least 18 hours each week, is considered under a continuous contract. This triggers a suite of benefits that "gig" or "casual" contracts often try—and fail—to bypass.

Critical Clauses for Robust Drafting

To ensure your contracts are enforceable and protect your IP, focus on these five pillars:

Clause Type	Key Consideration	Risk of Omission
Probation Period	Usually 1–3 months; notice period is 0 days in the first month.	Inflexibility in early-stage termination.
Notice Period	Must be at least 7 days (after probation).	Sudden "walk-outs" without handover.
Restrictive Covenants	Must be "reasonable" in duration and geography to be enforceable.	Loss of clients to a departing staff member.
MPF Contributions	Mandatory Provident Fund compliance is a legal requirement.	Criminal liability and heavy fines.
Intellectual Property	Explicitly state that work created "in the course of employment" belongs to the firm.	Ownership disputes over code, designs, or strategy.

Best Practices for Employers

1. Written vs. Oral: While oral contracts are legal in HK, they are a nightmare to prove. Always provide a written "Statement of Particulars."

   
   

2. Language: Contracts can be in English, Chinese, or both. If bilingual, specify which version prevails in case of a discrepancy.

   
   

3. Variable Pay: Clearly define "Wages." In HK, this often includes commissions and bonuses, which impacts the calculation of holiday and sickness pay.

   
   

Pro-Tip: Since the abolition of the MPF offsetting mechanism, employers can no longer use their MPF contributions to offset statutory severance or long-service payments. Ensure your financial forecasting accounts for this change.

Checklist of the specific Documents and Information you Need to Gather before Drafting a Contract in Hong Kong

To draft a compliant and robust employment contract in Hong Kong—especially with the significant legislative changes taking effect on January 18, 2026—you need to gather specific data points.

Under Section 44 of the Employment Ordinance, employers are legally required to inform employees of their conditions of employment before work begins. Use this checklist to ensure you have all the necessary components.

1. Essential Employee Personal Data

• [ ] Full Legal Name: As it appears on their HKID or Passport.

• [ ] HKID / Passport Number: To verify the right to work in Hong Kong.

• [ ] Residential Address: For official notices and tax filings.

• [ ] Visa Status: If the candidate is not a Hong Kong permanent resident, ensure you have a copy of their valid work visa (e.g., GEP or ASMTP).

2. Remuneration & Benefits (The "Financial Core")

• [ ] Basic Salary: Amount and currency (usually HKD).

• [ ] Wage Period: Usually monthly (must be paid within 7 days of period end).

• [ ] Allowances: Housing, transportation, or cost-of-living adjustments.

• [ ] End-of-Year Payment: Specify if the employee is entitled to a "13th month" or double pay.

• [ ] Commission/Bonus Structures: Define if these are discretionary or contractual.

• [ ] MPF Scheme Details: Confirm the MPF provider and contribution rates (standard is 5%, capped at $1,500).

3. Working Hours & The "468 Rule" (New for 2026)

• [ ] Working Hours: Start/end times and total hours per week.

• [ ] Continuous Contract Status: Identify if the role hits the new 417/468 threshold.

  Note: As of Jan 18, 2026, an employee is under a "Continuous Contract" if they work 68 hours over 4 weeks, regardless of whether they hit 18 hours every single week.

• [ ] Overtime (OT) Policy: Is OT paid, or is it "Time Off in Lieu" (TOIL)?

• [ ] Rest Days: Identify which day is the mandatory weekly rest day (usually Sunday).

4. Leave & Statutory Entitlements

• [ ] Annual Leave: Must be at least 7 days (statutory), but many firms offer 14–22 days.

• [ ] Statutory Holidays: Ensure you are tracking the 15 days mandated for 2026 (including Easter Monday).

• [ ] Sick Leave: Define the process for submitting medical certificates for sickness allowance (4/5ths pay).

5. Termination & Protection Clauses

• [ ] Probation Period: Usually 1 to 3 months.

• [ ] Notice Period: Must be at least 7 days after the first month of probation.

• [ ] Payment in Lieu of Notice: Specify the formula for "buying out" the notice period.

• [ ] Restrictive Covenants: Non-compete or non-solicitation clauses (must be reasonable to be enforceable).

• [ ] IP Ownership: Expressly state that all work created belongs to the employer.

Critical Compliance Check

Before you finalize the draft, verify your Employees’ Compensation Insurance (ECI). In Hong Kong, it is a criminal offense to employ anyone (including part-timers) without a valid insurance policy to cover work-related injuries.

Fees

When it comes to Hong Kong employment contract drafting, Bestar provides a transparent, tiered fee structure that allows businesses to scale from basic statutory compliance to complex, executive-level documentation.

As of early 2026, here is the breakdown of the investment required for Bestar’s HR and legal drafting services.

1. Employment Contract & HR Setup Fees

Bestar offers these services as part of a specialized HR compliance package or on a per-project basis.

Service Level	Fee (HKD)	Ideal For
Standard Drafting	$4,500 – $8,000	Small businesses needing a "Continuous Contract" (468 Rule) compliant template.
Bespoke Executive Contract	$10,000 – $30,000+	Senior roles requiring non-compete, non-solicitation, and complex bonus structures.
HR Compliance Audit	$6,000 – $15,000	Reviewing existing contracts to align with 2026 legislative changes (e.g., MPF offsetting).
Employment Agency Setup	$8,000 – $20,000	Comprehensive licensing and operational drafting for recruitment firms.

2. Ongoing Payroll & HR Maintenance

Many clients pair contract drafting with monthly management to ensure the terms (like commission or sick pay) are calculated correctly under the Employment Ordinance.

• Monthly Payroll Processing: $60 – $120 per employee (tiered based on headcount).

  
  

• One-Time Payroll Setup: Starting from $6,000 (system configuration and MPF registration).

  
  

• Year-End Tax Filing (IR56B): $300 – $350 per employee for annual IRD reporting.

  
  

• Ad-Hoc Requests: $50 per employee for processing irregular payments like performance bonuses.

3. Mandatory Government & Compliance Costs

When drafting your budget, remember these external fees that are separate from Bestar’s professional charges:

• Business Registration Certificate (BRC): $2,150 per year (standard rate for 2026).

  
  

• Work Visa Application (GEP/ASMTP): $230 per application (government fee).

  
  

• Employees’ Compensation Insurance (ECI): Varies by industry risk, but mandatory for all staff.

  
  

• MPF Contribution: 5% of relevant income (capped at $1,500/month per employee).

  
  

Important Note: Bestar is known for "No Hidden Fees." However, complex legal review for specialized industries (like SFC-regulated finance or medical sectors) may move from a flat fee to an hourly rate ranging from $700 to $2,000 per hour depending on the seniority of the consultant involved.

Optimize Your HR Budget

Choosing a package often results in a 15–20% saving compared to booking individual drafting and filing services separately.

What is... or How to...

How do I terminate an employee in HK without notice?

Answer: Only through 'Payment in Lieu' or 'Summary Dismissal' for gross misconduct.

How can we help?

Drafting an enforceable contract requires balancing the Employment Ordinance with your specific business needs.

How can Bestar help

In the competitive landscape of Hong Kong, an "enforceable" contract is no longer just about basic compliance—it is a strategic document that shields your business from the aggressive regulatory shifts of 2026.

Bestar serves as a bridge between the rigid requirements of the Employment Ordinance (Cap. 57) and the fluid needs of modern enterprises. Here is how we help you navigate this balance:

1. Navigating the 2026 "417/468 Rule"

As of January 18, 2026, the old "4-18" rule has been replaced. Employees now qualify for full statutory benefits if they work 68 hours over any 4-week period.

• How Bestar Helps: We audit your current part-time and casual rosters to identify "hidden" continuous contracts. We draft specific clauses that track and manage hours to prevent accidental triggers or ensure total compliance if the threshold is met.

2. Eliminating MPF Offsetting Risks

With the recent abolition of the MPF offsetting mechanism, employers can no longer use their MPF contributions to pay for severance or long-service payments.

• How Bestar Helps: Bestar integrates clear financial language into your contracts that separates statutory termination pay from MPF obligations, ensuring your balance sheet is protected against double-dipping claims.

3. Protecting IP & Restrictive Covenants

In a global hub like Hong Kong, talent mobility is high. Standard templates often fail to protect "Trade Secrets" effectively.

• How Bestar Helps: We draft bespoke restrictive covenants (non-compete/non-solicitation) that are "reasonable" in the eyes of the High Court—balancing the duration and geographic scope so they are actually enforceable rather than being struck down as a "restraint of trade."

4. Industry-Specific Customization

A fintech executive requires different safeguards than an F&B manager.

• How Bestar Helps: 

  
  

  • For Finance: Incorporating SFC licensing requirements and clawback provisions for bonuses.

  • For Tech: Specialized IP assignment clauses for code and proprietary algorithms.

  • For Retail: Managing the 15 statutory holidays (including the newly added Easter Monday) and variable commission structures.

Bestar’s 3-Step Drafting Process

Step	Action	Business Outcome
Audit	Review of current offer letters and unwritten "handshake" agreements.	Identifies "back-pay" liabilities before they reach the Labour Tribunal.
Localize	Translation and adaptation for HK law (Bilingual English/Chinese).	Ensures clarity for both local staff and international stakeholders.
Future-Proof	Integration of 2026/2030 statutory holiday and MPF updates.	No need for contract re-drafting every year as laws evolve.

Ready to secure your workforce?

Bestar ensures your contracts are not just pieces of paper, but robust legal assets that foster trust while minimizing liability.

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