Payroll in Hong Kong: employer costs, taxes & compliance (2026)

Running payroll in Hong Kong means handling a monthly salary cycle where both you and your employee each contribute to the Mandatory Provident Fund, the territory's retirement savings scheme. There is no income tax withholding obligation on the employer side in the way most countries require it. Employees file and settle their own salaries tax directly. Your job each cycle is to calculate gross pay, deduct the employee's pension contribution, add your own contribution on top, and pay the net salary on time.

Hong Kong is relatively straightforward compared to many markets, but the details still trip up foreign employers who are new to the territory. This guide covers what payroll actually costs you as an employer, how the pay cycle works in practice, what leave entitlements feed into your payroll runs, and how termination affects your final payment obligations.

The gap between what an employee earns and what they cost you is narrower in Hong Kong than in many other places. Your mandatory contribution sits at a flat five percent of the employee's gross salary, paid on top of whatever you have agreed to pay them. So if you budget for a salary, add roughly a twentieth on top to get closer to your true monthly cost. That is a modest employer burden by most standards, and the table below shows the exact rates and caps.

Because employees handle their own salaries tax, you are not carrying a tax withholding obligation that inflates your administrative cost. The overall tax wedge, meaning the total gap between what you spend and what the employee takes home after all deductions, stays relatively tight. What you see in the cost table is largely what you get, with few hidden layers of social charges to worry about.

Pay runs in Hong Kong are monthly. There is no statutory requirement for a thirteenth-month payment, so if you see one in an employment contract it is a negotiated benefit, not a legal obligation. From a payroll operations standpoint, your monthly checklist is straightforward: calculate gross salary, apply the employee's pension deduction, pay the net amount, and separately remit both contributions to the pension scheme. Hong Kong also sets a statutory minimum wage floor, so any manual or hourly workers on your books need to be checked against that before each run.

Leave accruals feed directly into payroll when employees are absent or when you reach termination. Employees are entitled to ten days of annual leave, which accrues with length of service, and there are fifteen public holidays in the calendar year. Maternity leave runs to fourteen weeks and paternity leave to one week, both of which require you to track and pay during the absence. At termination, notice runs to roughly four weeks and severance is calculated on a per-year-of-service basis. Both notice pay and any outstanding severance sit in the final payroll run, so getting those figures right before you process the last payment matters.

If you do not have a Hong Kong legal entity yet, you cannot run local payroll yourself, and that is usually the first reason companies look at an employer of record. Even if you do have an entity, keeping up with contribution rate changes, managing pension remittances on time, and handling the paperwork in both English and Chinese can add up quickly for a small HR or finance team. A global payroll provider or EOR takes those operational tasks off your plate and reduces the risk of a missed filing or a miscalculated contribution, which is worth weighing against the service cost, especially for a small headcount.