Why you should check every clause of the employment contract before signing

A written employment contract clearly sets out the rights and obligations of the employer and the employee, reminds both parties to fulfil their contractual duties, and helps prevent labour disputes. The Labour Department has therefore published an “Employment Contract Sample” for employers and employees to refer to when drawing up a written contract. The sample mainly covers the statutory rights and protections an employee is entitled to under the Employment Ordinance, but it is for reference only and does not replace case-specific legal advice; the exact eligibility and details must still be determined with reference to the original text of the Employment Ordinance or the Labour Department’s Concise Guide to the Employment Ordinance.

First confirm whether the contract is a “continuous contract”

The Employment Ordinance applies to all employees, but does not apply to certain specified persons (such as those defined under the Contracts for Employment Outside Hong Kong Ordinance). All covered employees, regardless of hours worked, enjoy basic protection such as payment of wages, restrictions on wage deductions and the grant of statutory holidays.

To enjoy further benefits, the key is whether a “continuous contract” is formed. Under the current rules, an employee who has been employed by the same employer continuously for 4 weeks or more and works at least 18 hours each week is regarded as employed under a “continuous contract”, commonly known as the “418” requirement. Employees who meet this requirement are entitled to statutory holiday pay, paid annual leave, sickness allowance, maternity/paternity leave, severance payment and long service payment, among others.

The Labour Advisory Board has reached a consensus to relax the “418” requirement to a total of 68 hours or more worked within any 4 consecutive weeks (the “468” requirement). This amendment has not yet come into force and the legislative process is still ongoing.

Check the pay structure and wage deduction limits against the sample

The employment contract should clearly state the wage and employment record particulars, including wages and the notice period required to terminate the contract. Any employee employed under a continuous contract is entitled to at least one rest day in every period of 7 days.

The Employment Ordinance restricts wage deductions. An employer may only deduct wages in the circumstances permitted by the Ordinance, for example, at the employee’s written request, to pay contributions to a retirement scheme, a provident fund scheme or a departure fund on the employee’s behalf; or, under an attachment of earnings order issued by a court, to deduct maintenance payments the employee has not yet paid. Any contract term that diminishes the rights conferred on an employee by the Employment Ordinance is void.

Check working hours, rest days and leave entitlements

Regarding sick leave, an employee employed under a continuous contract who meets all three eligibility criteria is entitled to sickness allowance: the sick leave is not less than 4 consecutive days, the employee has accumulated sufficient paid sick leave, and the employee can produce a proper medical certificate. Paid sick leave is divided into Category 1 (maximum accumulation of 36 days) and Category 2 (maximum accumulation of 84 days). During the first 12 months of employment, an employee accrues 2 days of paid sick leave for each completed month of service, and thereafter 4 days for each completed month, and the total accumulated at any time must not exceed 120 days. The daily amount of sickness allowance is equal to four-fifths of the average daily wages over the 12 months preceding the sick leave.

Except where an employee is summarily dismissed for serious misconduct, an employer must not dismiss the employee while the employee is taking paid sick leave; a conviction for breaching this carries a maximum fine of HK$100,000. An employer who fails to pay sickness allowance without reasonable excuse is liable on conviction to a maximum fine of HK$50,000.

Check termination and notice period clauses

When terminating a contract, the party giving notice must give the other party an appropriate notice period or payment in lieu of notice. During the first month of a probation period, no notice period or payment in lieu of notice is required; after the first month of probation, where the contract specifies a period it applies (but not less than 7 days), and where none is specified not less than 7 days’ notice is required. For a continuous contract without a probation period or where probation has been completed, where the contract specifies a period it applies (but not less than 1 month), and where none is specified not less than 1 month’s notice is required.

On termination, payments the employer should make include: any unpaid wages, payment in lieu of untaken annual leave, the proportionate part of any unpaid year-end gratuity, long service payment or severance payment (where applicable), and any other amounts specified in the contract. Except for severance payment, the employer must pay the termination compensation no later than 7 days after the termination date or the due date; severance payment must be paid within 2 months after receipt of the written demand. An employer who wilfully and without reasonable excuse fails to pay on time is liable on conviction to a maximum fine of HK$350,000 and imprisonment for 3 years.

In addition, an employer must not dismiss an employee in statutory circumstances such as pregnancy or while the employee is taking paid sick leave.

Mandatory Provident Fund (MPF) and visa clauses for non-local residents

Regarding the Mandatory Provident Fund (MPF), the Mandatory Provident Fund Schemes Authority (MPFA) is a statutory body responsible for regulating and supervising MPF schemes. If an employer is suspected of defaulting on contributions in breach of the rules, a complaint may be lodged with the MPFA; in cases of overdue contributions, the employer must pay a surcharge, which will be credited to the affected employee’s MPF account. When making a complaint, you need to provide proof of identity, the specific allegation and related supporting documents, such as the employment contract, payslips or salary cheques.

For persons permitted to come to Hong Kong under the Top Talent Pass Scheme (TTPS), the employment contract or offer letter signed by the hiring company and the applicant must state details such as the position, salary, other benefits and the employment period. A TTPS applicant need not have secured a job in Hong Kong when submitting the application, and upon approval is generally granted an initial stay of 36 months (Category A) or 24 months (Categories B and C).

Pre-signing action checklist

  • Obtain and keep a copy of the contract: if a written contract is made, the employer must give a copy of the contract to the employee for reference and safekeeping.
  • Use the Labour Department’s “Employment Contract Sample” as a baseline and check each clause covering duties, pay, working hours, leave and termination terms.
  • Compare against the statutory standards of the Employment Ordinance; any clause below the statutory entitlements is unacceptable.
  • Where details are in doubt, consult the original text of the Employment Ordinance or the Labour Department’s Concise Guide to the Employment Ordinance.
  • Where necessary, seek independent legal advice.

Frequently asked questions

Under Hong Kong’s Employment Ordinance, which employees are protected by a written contract? How is “418” calculated?

All employees covered by the Employment Ordinance enjoy basic protection; those who meet the “continuous contract” requirement enjoy additional rights. The current “418” rule: continuous employment for 4 weeks or more and at least 18 hours per week is regarded as employment under a continuous contract.

Where can I obtain the Labour Department’s “Employment Contract Sample”? Is the sample legally binding?

The Labour Department has published an “Employment Contract Sample” for employers and employees to refer to. The sample is for reference only, to assist in drawing up a written contract; it has no binding force and does not replace case-specific legal advice. For details, refer to the original text of the Employment Ordinance or the Concise Guide to the Employment Ordinance.

What items should the contract’s pay clauses contain? Can an employer deduct wages at will?

The contract should clearly state wage and employment record particulars, including wages and notice period. An employer may deduct wages only as permitted by the Ordinance, such as paying retirement or provident fund contributions on the employee’s behalf at the employee’s written request, or deducting maintenance under a court attachment of earnings order.

What are the minimum standards for statutory holidays, annual leave and sick leave? Is a contract below the statutory standard valid?

All covered employees, regardless of hours, enjoy basic protection such as statutory holidays. For sick leave, an employee under a continuous contract who takes at least 4 consecutive days of sick leave and has accumulated sufficient paid sick leave is entitled to sickness allowance, with Category 1 up to a maximum of 36 days and Category 2 up to a maximum of 84 days, and the total not exceeding 120 days. Any contract term that terminates or diminishes the rights conferred by the Employment Ordinance is void.

How should the probation period, notice period and payment in lieu of notice be agreed?

During the first month of probation, no notice period or payment in lieu of notice is required; afterwards, where the contract provides for one it applies (not less than 7 days), and where none is specified not less than 7 days applies. For a continuous contract without probation or where probation is completed, the notice period is not less than 1 month (where the contract provides otherwise it follows the contract but must not be less than 1 month).

Must MPF contributions be stated in the contract? How can I recover unpaid contributions by the employer?

If an employer fails to make MPF contributions, a complaint may be lodged with the MPFA; the MPFA will investigate, and in overdue cases the employer must pay a surcharge which is credited to the employee’s account.

When contract terms conflict with the Employment Ordinance, which bodies can I turn to for help?

Employees may refer to the Labour Department’s Concise Guide to the Employment Ordinance or the original Ordinance; for unpaid MPF contributions, a complaint may be lodged with the MPFA; claims for compensation relating to contract termination may be handled through the Labour Tribunal.

Sources and disclaimer

The facts in this article are compiled from the Labour Department’s “Employment Contract Sample” and the Concise Guide to the Employment Ordinance, the Employment Ordinance (Cap. 57 of the Laws of Hong Kong), the MPFA’s complaint guidelines, the Immigration Department’s Top Talent Pass Scheme notes, and an article by Chambers and Partners on the shift from “418” to “468” (21 January 2025). This article is compiled from public information and is for general reference only; it does not constitute case-specific legal advice. For individual circumstances, please consult an independent legal professional.