How to Manage Your Payroll and Other Hong Kong Employer Obligations

Lorenzo Guillermo

Description

How to Manage Your Payroll and Other Hong Kong Employer Obligations
https://fastlanepro.hk/payroll-services/
At FastLane, we understand that financials can be the trickiest element to manage when scaling your business. Do you feel too busy to manage your financials, and would like access to all your numbers at any given moment? Xero cloud accounting software is the world-leading cloud accounting software that allows you to review the financial performance of your company anytime, anywhere.
Payroll services in Hong Kong

Informations

• Publié par: guillermolorenzobarrios
• Publié le: 21 novembre 2020
• Nombre de lectures: 4
• Langue: English

Extrait

FastLane Group ‘ Together We Build Better Business ’

How to Manage Your Payroll and Other Hong Kong Employer Obligations

FastLane Group IHow to Manage your Payroll and Other Hong Kong Employer Obligations

About FastLane

The Fastlane Group was founded in 2013 as an accountancy and advisory irm that combines innovation and technology to expert professional services within the SME market, with a particular focus on Entrepreneurs, Startups, Fast Growing Technology Companies, Startup Angel Investors and Venture Capitalists. The Fastlane Group provides best in class service for businesses wishing to launch and operate in Hong Kong, ensuring they maintain thatinancial and compliance needs as regulated in Hong Kong.

Ofering a diverse range of professional services including accountancy, auditing, company formation and payroll management and HR advisory assistance, the Fastlane Group is able to provide a holistic and comprehensive suite of services for our clients.

Download This eBook is available to download as a free PDF at:

fastlanepro.hk/ebook

Get in Touch

For more information or to contact FastLane Group on Company Formation, please email:

[e-mail]

The Fastlane Group currently supports over 500 companies and is experiencing rapid growth with business partners and supporting networks.

Our Mission We strive to establish a secure and rewarding partnership with our customers to enable successful business operations within the SME market in Hong Kong.

We facilitate and introduce our customers to cutting edge technologies across a suite of professional services, allowing the autonomy to build eIcient and efective organizations.

We are a business builder, professional advisor and accountant.

Or make a request to [e-mail] to download a copy.

Disclaimer

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

FastLane Group I How to Manage your Payroll and Other Hong Kong Employer Obligations

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Contents

Payroll

What is Payroll?

How is Hong Kong Payroll Performed?

Mandatory Provident Fund (”MPF”)

Online Payroll Software

Payroll Outsourcing Services

Employer Obligations

Reporting Obligations

Liability for Compensation for Work Injury and Occupational Disease

Employment Contracts

Leave Entitlements

Rest Days

Statutory Holidays

Paid Annual Leave

Sick Leave

Maternity / Paternity Leave

Professional Employer Organisations

What is a PEO?

How Do PEO’s Work?

What Are The %eneȴts of Using a PEO"

FAQ

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FastLane Group IHow to Manage your Payroll and Other Hong Kong Employer Obligations 1 Payroll

Business owners, regardless of the size of their business, must know how to manage their payroll process and records. Proper management of a payroll process will not only ensure that their employee wages are accurate, but will also help maintain com- pliance with Hong Kong’s various employment regulations.

In this eBook, we look to provide guidance on the Hong Kong payroll process and other employer obligations, and how a Hong Kong company can best manage these matters.

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Click here or scan the code below for our blog “ Cloud Payroll: How Cloud Strategy Helps Businesses”

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What is Payroll?

Payroll refers to the list of employees that receive compensation from their employer for their services rendered. It also refers to the total compensation that employees are entitled to receive during their employment.

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Payroll

How is Hong Kong Payroll Performed?

In Hong Kong, payroll is typically processed on a monthly basis according to the terms set in the employees employment contract. To determine an employee’s total compen- sation, various factors are often taken into consideration. This includes the number of hours an employee has worked in a set time period, their beneȴts or payment arrange- ments.

An average payroll takes more than a few days to process. Utilizing accurate and current payroll data can signiȴcantly reduce the payroll processing time, especially for large and complex payrolls. To help facilitate efficiency, organizations may beneȴt from engaging a professional service ȴrm to assist in their monthly payroll calculations.

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Mandatory Provident Fund (“MPF”)

MPF’s are compulsory retirement sche- mes / pension funds that are created by the Hong Kong government and are provided by approved private organisa- tions. MPF’s are a key aspect of Hong Kong payroll calculations and are guided by the Mandatory Provident Fund Sche- mes Ordinance (“MPFSO”)

In accordance with the MPFSO, Hong Kong employees and their employers are required to make monthly contributions to the employee’s MPF scheme, making MPF calculations a key component of payroll calculations. MPF payments are made in accordance to an individual’s salary and period of employment.

Payroll

Click here or scan the code tosee the Payroll and & MPF services we offer

MPF’s are only intended to cover individuals who are either employed in or are from Hong Kong. To the extent that an employee is working outside of Hong Kong, they may be covered under the MPF system if they can provide sufficient evidence of a connection between themselves and Hong Kong.

What is Considered a Sufficient Connection to Hong Kong?

A Hong Kong resident employed in Hong Kong by a company engaging in business in Hong Kong to conduct work outside Hong Kong for a limited period should generally be considered as having a sufficient connection to the city. Such examples include aircraft crews and pilots, cross-boundary lorry drivers and professionals on overseas assignments.

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FastLane Group IHow to Manage your Payroll and Other Hong Kong Employer Obligations

What are Employers Obligations Under the MPF Scheme?

Employers have a range of obligations they must meet to ensure that they are properly supporting their employees MPF schemes. Firstly, they must complete the one-time obligation of assisting their employees in opening MPF accounts. After, they must meet ongoing obligations of remitting contributions to their employees MPF schemes once every contribution period (generally the wage period).

Employers and employees are each required to make regular mandatory contributions of 5% of the employee’s relevant income to an MPF scheme, subject to relevant income levels. For a monthly-paid employee, the minimum and maximum relevant income levels are HKD 7,100 and HKD 30,000 respectively.

Ȇflelevant incomeȇ, as deȴned by Hong Kongȇs Mandatory Provident Fund Schemes Authority (“MPFA”), refers to all monetary payments paid or payable by an employer to an employee. Such payments include wages, salary, leave pay, fees, commissions, bonuses, gratuities, perquisites or allowances as outlined under Chapter 57 of the Hong Kong Employment Ordinance.

Payroll

To make payments to their employees, emplo- yers are required to calculate their employee’s relevant income and the amount of mandatory contribution that must be made for each contribution period. The employer must then deduct the calculated amount from their employee’s income and remit that sum to their MPF account.

Employers can claim tax deductions on their mandatory MPF contributions if the contribu- ted amount does not exceed 15% of their employees’ total emoluments.

Employee obligations

Employees do not face as many compliance obligations as their employers do. However, it is vital for employees to ensure that they make the regular mandatory contribution of 5% of their relevant income to their relevant scheme as mentioned above.

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Are There Exemptions Under an MPF Scheme?

Not all employees working in Hong Kong must be enrolled under an MPF scheme. Expatriates residing in Hong Kong for employment purpo- ses can obtain permission to be exempted by the Hong Kong Government. Permission can only be granted if the employee in question is either a member of an overseas retirement scheme, or will reside in Hong Kong for a period of 13 months or less.

Non-compliance

In the event an employer fails to adhere to their MPF obligations, the Mandatory Provident Fund Schemes Authority (“MPFA”) will issue the employer with a “surcharge notice”. This notice will impose a 5% surcharge on default contri- butions and the surcharge received will go entirely to the employee’s MPF account.

Defaulting on contributions is a criminal offence and the defaulter is liable to a maxi- mum penalty of a HKD 450,000 ȴne and imprisonment for four years. The MPFA can also impose a ȴnancial penalty of HKD 5,000 or 10% of the default amount, whichever is greater, on the defaulting employer.

Click here or Scan the code for our blog “Hong Kong MPF Contribution Rules and Regulations”

Payroll

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FastLane Group IHow to Manage your Payroll and Other Hong Kong Employer Obligations

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Online Payroll Software

Many businesses typically utilize manual payroll processes whereby manual payroll calculations are performed each day. Unfortu- nately, this traditional approach is no longer the most efficient way for a company to manage their payroll as the process is time consuming and susceptible to calculation errors. As with any business, the penalty for incurring such mistakes can be very costly.

Online payroll software introduces an efficient alternative to traditional manual processes. Utilizing cloud-based technology, third party softwares are made available to their users over the internet.

In recent years, such software has seen increased adoption and has become the foundation for how businesses operate. Such applications can range from accounting tools like Xero to payroll focused tools such as Talenox and Gpayroll. Because of develop- ments in cloud strategy, businesses are now able to access IT infrastructure that they previously would not be able to afford.

How Does an Online Payroll Software Work?

Regardless of the application, online payroll softwares will follow the below process:

1. Users will visit the website of the online payroll software and will log into their secure portal

2. Users will enter their employee’s work hours and leave information for the relevant time period

3. Payroll and MPF is calculated automatically in the portal and quickly processed

4. Payroll records and slips are made as instructed and speciȴed by the users

5. Payroll reports and tax ȴling information calculated will become available for the users

Payroll

Check out FastLane’s partners of online payroll tools, Gpayroll and Talenox!

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How Online Payroll Software can Improve the Payroll Process

As previously mentioned, cloud-based online payroll tools such as Talenox and GPayroll grant users the ability to move their payroll process online. Transitioning to an online payroll tool allows businesses to enjoy the following beneȴts:

Cost Advantages

Users who subscribe to an online payroll software will enjoy up-to-date versions of the software at all times and will not be required to incur the extra costs commonly associated with system upgrades commonly found in traditional payroll softwares.

Greater control over costs can also be achieved because users can subscribe to varying pricing plans to suit their business needs. By conside- ring the number of users and employees who will utilize the online payroll software, businesses can adjust the functionality of the software as their businesses further develop.

Increased Efficiency

Online payroll tools typically provide their users with the ability to utilize electronic payslips, allowing employers the luxury of saving time and money usually associated with managing and distributing hard-copy payslips.

Manual data entry is a payroll related task notorious for being a time-consuming endeavor. However, online payroll tools allow users to download templates where they can upload and consolidate all of their company’s employee and payroll related information. These templates have been designed around the concept of efficiency and ease of use. The consolidated

Greater Focus on Core Areas of Business

Online payroll software lets companies automate their payroll calculations and the payments made to their employees, tax authorities and any third parties and reduce processing manpower.

Improved Financial Control

Payroll

As dictated by Hong Kong Company Law, it is the employers responsibility to ensure that their statutory ȴlings, such as MPF and year-end tax ȴlings, are submitted punctually and without error. Companies who discover errors in their statutory ȴlings must dedicate additional resources to remedy these inaccuracies. Fortunately, online payroll softwares provides auto-regulatory compliance features. Such features provide users with frequent compliance updates and also automatically implemented during payroll processing. These systems can simplify the steps employers must take to ensure that they are aware of, and can act accordingly to, any new legislative developments in respect of compliance matters.

What to Look for in an Online Payroll Software?

When identifying an online payroll software to use, careful consideration must be made on the key features provided. Typically, an online software must provide payroll calculation functions and statutory reporting features. Popular online payroll softwares such as Talenox and Gpayroll allow users to enjoy additional useful functions such as different types of leave entitlement settings, online leave request and approval and company wide leave calendar.

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FastLane Group IHow to Manage your Payroll and Other Hong Kong Employer Obligations

1.4

Payroll Outsourcing Services

Payroll outsourcing services have gained popularity in recent years as it allows compa- nies to enjoy quality services by professional payroll ȴrms at competitive rates and allows the in-house HR personnel to focus on activi- ties such as recruitment, compensation reviewand training.

Benefits to Outsourcing Payroll

Much like online payroll tools, outsourcing a payroll process to a professional payroll ȴrm can allow a business to concentrate on their core business activities. This frees up human resources and accounting personnel to work more on strategic tasks that could ultimately affect your bottom line. flepetitive tasks will no longer require hours being taken away from a company’s key management. Employers only need to make contact with their outsourced payroll specialist by approving the pay-run for each pay period.

According to Talenox, an online payroll softwa- re company, your staffs knowledge on local tax and labour laws are one of the key considera- tions to be made when deciding whether to utilize a professional payroll ȴrm. Outsourcing to a professional payroll specialist well versed in local regulations can reduce the risk of non-compliance and provide a greater peace of mind. Conȴdentiality may also play a role when it is preferred that personal records, salary and other payroll details not be disclo- sed to internal staff members.

Payroll

Click here or Scan the code for our blog “How HR Software Systems Can Improve Your Payroll Process”

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FastLane Group IHow to Manage your Payroll and Other Hong Kong Employer Obligations

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Employer Obligations

When building a team and managing staff, Hong Kong companies have various employer obligations that they must adhere to. These obligations are dictated and governed by various ordinances and can broadly be catego- rized into the categories below.

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Reporting Obligations

When a Hong Kong company has hired an employee, they must notify the Hong Kong Inland Revenue Department (“IRD”) within three months of the staffȇs employment. Upon termination of a staff, sufficient notice per the employment contract must be given (though no less than seven days is common). Hong Kong employers are also required to maintain proper records of their employee’s wage and employment history, and all relevant accounting and payroll records must be maintained for at least seven years. In addition, employers must report remuneration paid to employees on an annual basis.

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Liability for Compensation for Work Injury and Occupational Disease

Under Hong Kong’s Employees’ Compensation Ordinance (“ECO”), no employer shall employ any employee unless the company has an insurance policy in place to cover any potential injuries or liabilities incurred in respect of all their employees. Employers who fail to comply with the ECO to secure an insurance cover are liable to a maximum ȴne of HKD 100,000 and imprisonment for two years.

Employer Obligations

According to the Hong Kong Labour Depart- ment, employers should follow the minimum insurance cover when taking out employees’ compensation insurance:

As it is the employer’s responsibility to ensure that adequate coverage is available for their employees’, it is recommended to notify an insurer when developments or issues arise. Unlike ECI which is mandatory in Hong Kong, health insurance is not. The decision on whether or not to provide employees with health insurance lies with the employer. Despite not being mandatory, the vast majority of Hong Kong businesses provide health insurance to their employees, though the level and extent of the coverage varies greatly. Health insurance plans can be purchased for a group of individuals from providers. Hong Kong health insurance schemes generally provide coverage for the following categories:

Hospital / Inpatient

Outpatient

Dental

Worldwide evacuation

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