Employment status in Hong Kong

The different categories of worker

A worker may perform work for a business in two ways, as an:

• employee under a contract of employment (or contract of service), or
• independent contractor (IC) under an independent contractor arrangement (eg a consultancy agreement, a freelance contract, and a contract for services.

Distinguishing the categories

A number of tests have been used historically to determine whether a worker is an employee or an IC. Today, no single test is used and courts and tribunals will have regard to a range of different factors, both objective and subjective (ie how the parties see themselves). Generally, no single factor will be determinative - it is a matter of weighing the various features and asking whether the “overall impression” is of employment or of an IC relationship. Factors include, but are not limited to, whether a worker is “part and parcel” of the business’s organisation, whether he/she receives wages/salary and employment benefits, whether he/she is under a company pension scheme, the degree of control he/she has over his/her work, whether he/she is prohibited from working for others, whether he/she provides his/her own equipment, whether he/she is able to subcontract the work out and the degree of financial risk he/she takes.

How the worker and the business understand their relationship (as an employment or IC relationship) may also be relevant to determining the status of the worker. However, it will not be decisive and there have been many cases where a court has determined (for example) that a worker is in fact an employee even though the parties thought otherwise.

Legal consequences of the distinction

Employees have certain statutory rights and entitlements under the Employment Ordinance (EO) which do not apply to ICs, including paid statutory holidays and annual leave, severance or long service payments, sick pay, maternity/paternity leave, rest days. Employees also have some protection against dismissal.

Employees also generally have a right to be enrolled by the employer in a Mandatory Provident Fund Scheme. ICs, on the other hand, must enrol themselves in such a scheme and have no right to company contributions.

Employers must maintain certain records in relation to their employees. An employer must also inform the Inland Revenue Department of the commencement and termination of employment, file annual returns on employees’ remuneration and take out insurance to cover liabilities for employees’ work injuries.

Employees and ICs are in the same position in relation to anti-discrimination protections on grounds of sex, pregnancy, marital status, family status, race and disability.

Employers’ liability

An employer is generally not liable for the negligence of an independent contractor, but is vicariously liable for the negligence of its employee where the tort which caused the injury was committed by the employee in the course of employment.

Categories of employee

An employee’s rights under the EO will vary depending upon whether he/she is employed under a “continuous contract”.

An employee engaged under a ‘continuous contract’ of employment may (subject to minimum length of service requirements of at least 18 hours in each of the previous four or more weeks) be entitled to rest days, paid sick leave, paid statutory holidays, annual leave, and maternity leave under the EO. The onus of proving that it is not a continuous contract is on the employer.

"Fixed term" contracts, which are contracts which end on a particular date or completion of a task, are used in Hong Kong although it is not expressly defined in the EO. Failure to renew a fixed term contract on expiry is treated as a dismissal in determining statutory severance or long service pay. It does not prevent an employee from being engaged under a continuous contract under the EO.

There is no distinction between part-time and full-time workers, other than to the extent there is a distinction between workers who are under a "continuous contract".

Directors and senior managers

A company director is an office-holder of the company and not, without more, an employee. However, if a court is (as discussed above) of the “overall impression” that the director is an employee, he/she will be regarded as such. For directors to be considered an employee, it is ordinarily sufficient that he/she is engaged under a contract of employment.

Non-executive directors will rarely be regarded as employees. In the event of termination of a directorship, procedures have to be followed to remove the individual from the office of director.

Other categories of workers

Workers to which the Minimum Wage Ordinance is not applicable include domestic workers, apprenticeship registered under the Apprenticeship Ordinance, student interns, and work experience students during a period of exempt student employment of up to 59 days.

Agency workers will have an IC or employment relationship with the agency, but no contractual relationship with the business. It is possible - but rare - that an implied contract of employment will come to exist between the agency worker and the business (sometimes called "co-employment" or "joint employment" as the agency worker may be concurrently the employee of the agency and the business). In these circumstances, the business will have the same duties and obligations to the agency worker as towards its other employees.

Further information on employment status in Hong Kong is available here.