How to Manage Overseas Employees in Hong Kong? Does MPF Still Apply?
10 minute read
The world we live in today is more connected than ever before. Geographical boundaries do not apply as much to doing business, as there are more and more international companies across the globe. In addition, many companies hire marketers, writers, and developers from abroad to cut expenses and get solid results. However, one has to be careful when choosing employees from overseas, as many claim to have skills they often don’t. Also, you have to be careful when it comes to the legal side of hiring and managing overseas employees.
So, how can you hire and manage overseas employees in Hong Kong? Are you required to pay taxes or not? Does MPF apply? You will find out the answers to these questions in the article that follows below.
- Why do companies want to hire overseas employees?
- What do you need to consider after hiring your employee?
Why do companies want to hire overseas employees?
A number of companies hire foreigners nowadays. This trend is great due to a number of reasons, which are not limited only to diversity and a multicultural environment.
In some cases, companies can’t find the right skillset in the local talent pool, which is a huge problem. On the other hand, foreign workers come from countries where different skills and strategies may be taught. They may come with specific skills that are rare in the region. As a result, many higher-level employees end up working abroad. For example, if a region lacks financial advisors that specialize in international trade, it is only reasonable to seek that kind of talent abroad.
Understand foreign clients better
The people you hire from abroad will allow you to better understand foreigners. In other words, if a company is doing business globally, this can only have a good effect on your business operations. The people you hired that are not from your home country obviously know clients from their home countries better than you.
Additionally, you as a leader will develop skills that you can use to understand consumers all over the globe. And there is no doubt that understanding your customers or potential target market is very important in the world of business. Knowing what they need, their pain points and their interests will allow you to target them better.
A bigger talent pool
When you start looking for professionals at the international level, you are actually tapping into a huge talent pool. There are many foreigners who know how great Hong Kong is and they are more than willing to immigrate. Luckily for them, all they need to do is secure a job.
On top of that, foreign workers are generally more open-minded when looking for a job since one of their main priorities is to make a living and support themselves in the region.
Once a foreign employee has been hired, the whole workplace gets to experience new perspectives and ideologies. These are often different from everyone else’s and they are also what inspire local employees to expand their creativity and explore new ways of thinking.
Seeing that creativity leads to more effective work and improved performance, the effort to hire foreign talent could bring greater results than what you might expect.
Diversity at the office
When foreigners come to work along with the locals, they bring their own education, training, and experiences that are unique to them and their homeland. They are equipped with perspectives and habits that are different from those of the local workforce. As a result, when you hire globally, you contribute to the environment of open-minded people. And that is always good for business.
What do you need to consider after hiring your employee?
Human resources laws and procedures in Hong Kong are easy to understand and quite convenient. However, if you are considering hiring people from abroad, there are some things you need to know. Finding the right person and agreeing on terms is one part of the story. However, it is also important to understand all legal regulations and procedures just to avoid unnecessary problems.
The region of Hong Kong requires that employers give preference to local talent. Therefore, foreign applicants come in second. However, foreigners that possess specific skills, experience, and knowledge that is not readily available in Hong Kong are allowed and most welcome to try and land a job in the region. To work and live legally in Hong Kong, a foreigner must have a valid work visa. Employers have the responsibility of applying for a work visa on behalf of the candidate. Once it gets approved, the employee may start their new job.
To make the whole process go smoothly, it is advised that you consider the following issues:
- The region’s labor laws that have a binding effect on both the employer and employees
- Legal boundaries and guidelines for hiring local and foreign workers in Hong Kong (the priority rule was already mentioned)
- Common practices and expectations in the hiring process
- Specific recruitment guidelines of Hong Kong
We differentiate between two main categories of employees:
- Skilled professionals, including software engineers, R&D specialists, and doctors. They are issued an Employment Visa.
- Semi-skilled professionals including technicians are issued a visa under Supplementary Labor Scheme.
In order to comply with the Employment Ordinance , which is the main legislation in Hong Kong, as an employer you have to provide:
- Paid annual leave
- Paid sick leave
- Paid maternity and paternity leave
- A minimum notice of termination and a right to make a payment instead of notice
The Employment Ordinance applies to all employees working in Hong Kong. This means that both the locals and the foreigners are subject to it. It is worth noting that there are other mandatory laws that apply to individuals working in Hong Kong. These apply regardless of the contractual choice of law provisions in the contract.
- Minimum Wage Ordinance (MWO) states the minimum wage in the region.
- Personal Data (Privacy) Ordinance (PDPO) regulates an employer’s collection, use, and disclosure of an employee’s sensitive details.
- Mandatory Provident Fund Schemes Ordinance (MPFSO) requires employers to enroll employees in Hong Kong in a Mandatory Provident Fund Scheme.
- Occupational Retirement Schemes Ordinance (ORSO) establishes a registration system and provides for the regulations of certain voluntary retirement schemes.
- Occupational Safety and Health Ordinance (OSHO) is related to safety and health in the workplace.
- Sex Discrimination Ordinance, Disability Discrimination Ordinance, Family Status Discrimination Ordinance, and Race Discrimination Ordinance legislate against certain types of discrimination.
Hong Kong is a diverse place where many nationalities live together happily. The procedures are well-defined, bureaucracy is minimal, and almost every person speaks English. Still, it would be wise to give your future employees a word of advice about moving to Hong Kong.
- Shipping personal items and household goods is free, no tariffs or duties are imposed. But, they should make sure that they have the right paperwork to collect their items once they have been cleared by Customs.
- There is no limit when it comes to the amount of currency they are bringing.
- When it comes to housing, the island is densely packed, so getting accommodation can be a proper competition.
- When it comes to healthcare, they should know that Hong Kong’s system is accessible and affordable. The government provides public services at low-cost for all residents (expats included). If they want more extensive coverage, they can look into private health insurance options.
- Moving on to their banking options. Fortunately, starting a bank account in Hong Kong is quite easy and straightforward. There are plenty of banks to choose from and many of their services are available in English.The visa status they hold does not affect the options. Even as a non-resident, they are able to choose a good bank account. However, they have to open the account in person.
- Tax rates in Hong Kong are fairly low and the system offers a number of allowances and deductions that they do not need to provide unless specifically inquired.
- Finally, the diverse demographic picture in Hong Kong guarantees that they will have a pleasant time. However, this comes at a price. The cost of living in Hong Kong is one of the highest in the world. They should count that in once they start laying out their monthly and yearly budget.
The basic principle of MPF (the Mandatory Provident Fund) relies on the coverage of people employed in or from Hong Kong. An employee working outside Hong Kong may be covered by the MPF System if there is sufficient connection between the employee and the region of Hong Kong.
An individual employed from Hong Kong by a company engaging in business in Hong Kong to work outside of the region for a limited period should generally be considered as sufficiently connected to Hong Kong. Hence, the employer has to enroll the employee in an MPF scheme and make regular MPF contributions for them.
For instance, an engineer employed from Hong Kong by the Hong Kong representative office of a company incorporated in the PRC to supervise a project in Beijing needs to be covered by the MPF System. Furthermore, a person employed in Hong Kong that is working outside Hong Kong on a temporary basis is also covered by the MPF System. These individuals are often pilots, crew members, truck drivers, and so on.
If you want to know more about the external employment service and the laws regarding overseas employment, know that Hong Kong has specific conditions that need to be met. The Employment Agencies Administration provides external employment services and administers the Contracts for Employment Outside Hong Kong Ordinance. This ordinance governs the conditions of employment to local employees working outside Hong Kong for overseas employers.
These are the most important points:
- The terms of employment for manual employees and non-manual employees with monthly wages not exceeding HKD 20,000 employed by foreign employers going outside Hong Kong for employment has to be clearly laid down in a written contract. The contract has to be attested by the Commissioner for Labor before the employee’s departure from Hong Kong. Specifics that have to be included in such contracts are prescribed.
- The Employment Agencies Administration provides external employment service. It assists both parties in drawing up the contract and in resolving any disputes if they should arise. It also conducts contract reading sessions to ensure that an employee understands the terms of the contract before attestation
It is clear that international hires bring a lot to the table. The benefits are there and no one can deny their value. A diverse workplace is a workplace of the future. The company’s bottom line is improved when there are employees with different cultural backgrounds, nationalities, and languages. So, as an employer, you should invest in this kind of workforce.
Reap maximum rewards by having a multicultural work environment. After all, Hong Kong is a multi-cultural region and it is only natural to foster this kind of environment at your office too.