Developing a competitive benefits plan for your business growth can help your company stand out in the labor market. When developing a Hong Kong employee benefits plan, you must consider compliance requirements and market standards to build a competitive business.
Hong Kong benefits
A developed benefits plan is key to employee recruitment and retention. These provisions are also vital for your business’s compliance. Hong Kong’s labor regulations describe minimum benefit provisions for employees under the law.
When designing a benefits plan, an employer must consider these regulations and the standards set in the local labor market. Most employers choose to provide supplemental benefits beyond the legally required ones. Additional benefits will make your plan competitive with other companies in your industry, leading more candidates to apply for your open positions.
Possible supplemental benefits include:
- Holiday bonuses
- Tuition reimbursements
- Rewards programs
- Transportation stipends
- Dental care insurance
- Telecommuting opportunities
Guaranteed benefits in Hong Kong
As an employer, it’s your responsibility to understand the labor regulations in Hong Kong and develop a benefits plan that recognizes them. Many guaranteed benefits apply to employees that work at least 18 hours a week for a period of at least 4 weeks (“continuous contract”) The guaranteed benefits described in the employment laws include:
- Paid annual leave, sick days, and holidays
- Provident fund contributions
- Paid parental leave
An employee is entitled to paid annual leave after serving a period of 12 months in a continuous contract. An employee’s entitlement to paid annual leave increases progressively from 7 days to a maximum of 14 days according to their length of service:
- 1 year of service – 7 days of paid annual leave
- 2 years of service – 7 days of paid annual leave
- 3 years of service – 8 days of paid annual leave
- 4 years of service – 9 days of paid annual leave
- 5 years of service – 10 days of paid annual leave
- 6 years of service – 11 days of paid annual leave
- 7 years of service – 12 days of paid annual leave
- 8 years of service – 13 days of paid annual leave
- 9 or more years of service – 14 days of paid annual leave
Developing a Hong Kong benefits package
When you’re ready to develop your benefits plan, you’ll need to find a balance between your company’s financial abilities and the benefits your workers want from their employer. This 3-step process can be helpful in creating a benefits package.
1. Consider company resources.
Keeping benefits expenses within a certain percentage of the company’s earnings will ensure you don’t overextend your company resources. Evaluate the company income and determine what you’re willing to spend on benefits. During this stage, an employer should also consider its goals and how the benefits it offers can contribute to them.
2. Research employee needs.
Workers will consider benefits offerings when applying to a company, so it’s in your best interest to research their needs. You might survey employees in your area or look into benefits offerings from companies similar to yours. It’s important to note that employee expectations will vary depending on location and industry.
3. Develop the employee benefits plan.
With all the information collected, you can move into the creation stage. Reference employee research and financial evaluation to strike a balance between your workers’ needs and your resources. Factor in the required benefits first and distribute your remaining funds to supplemental benefits.
Average cost of benefits
Benefits costs vary widely between different companies depending on size, revenue, and the extent of their benefits. Companies should evaluate their earnings and set a percentage aside for benefits. They can build a plan around that percentage, and the budget will grow as revenue does.
How to calculate employee benefits
For provisions like annual leave and holidays, employees should earn the standard wages they would make during working hours. This calculation may factor into a salary or involve an hourly rate. As for pension funds, employers match the employee contribution at 5%.
Hong Kong also allows for payment in place of annual leave. In this scenario, an employee will earn their wages for a working day and receive the same amount as a vacation payment.
How are employee benefits taxed in Hong Kong?
The taxation laws in Hong Kong designate most benefits as forms of taxable income, including:
- Holiday and leave pay
- Education benefits
- Allowances and bonuses
- Stock awards
- Pensions and retirement benefits
The only benefits considered nontaxable are injury compensation payments and severance pay covered under the Employment Ordinance.
Employee health benefits
In Hong Kong, healthcare is virtually affordable for all Hong Kong citizens. However, this accessibility means there are often long wait times for care at all public institutions in the country.
While it’s not required, most employers will offer private medical insurance coverage or a monthly medical allowance to offset the wait times. They may also choose to provide dental and health-check coverage, which does not exist within the free healthcare system.
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