Hiring your first employee means adding payroll to your growing list of responsibilities. Hong Kong has many regulations and requirements covering payroll. Understanding the must-do’s helps you get your payroll done right every time. Payroll software makes the task easier because your employees get their wages on time. And, you only need to set up the complex processes once.
Required Payroll Records
As soon as you hire your first employee, you become responsible for taxes. When you have employees, you need to keep certain payroll records based on Inland Revenue Department requirements. You’ll need to keep those payroll records for at least seven years, which is the minimum requirement in Hong Kong. Each employee record needs the following info:
- Personal details, including name, address, marital status, and identity card or passport number and place of issue
- Type of employment, which is either full-time or part-time
- Position within the company
- Cash remuneration
- Other benefits, such as quarters, share award, and share option
- Contributions from you and the employee to the Mandatory Provident Fund or similar funds
- Details about the employee’s contract
- Amount of time employed with your company
You also need to let the IRD know if any of this information changes. For example, sometimes a new employee might not have a Hong Kong identity card when you first hire them. When the employee gets their ID card, it’s your job to let the IRD know the number.
Documents You Need to Submit
IRD requires you to fill out forms each year. You have one month to submit form BIR56A, Employer’s Return after you receive it. The purpose of the form is to report the amount you pay each employee for the year. It’s required even if you don’t hire an employee. Closing your business? You still need to complete the form. If you don’t receive it, you might ask the IRD for another copy.
Not sure whom to include on the form? The IRD requires you to include employees who meet the following criteria:
- Single with at least $132,000 in annual income
- Part-time employee
You may need to submit other documents to the IRD periodically. The forms cover changes in employees’ statuses. Each form has a required time frame. It’s usually best to finish the forms as soon as you know they’re necessary. Those forms include:
- IR56E to report a new hire within three months of the hire date
- IR56F to report a termination one month before the last day of employment
- IR56G to report an employee leaving Hong Kong for an extended period of time
MPF and ORSO Deductions
Mandatory provident fund and occupational retirement contributions add a twist to your payroll setup. You’re legally required to enrol all of your new employees in your company’s selected MPF scheme. Each new employee fills out the enrolment form. You submit it to the trustee for your company’s scheme.
Ready to do some math? You need to calculate 5% of each employee’s income. That amount is your required contribution to the employee’s MPF. The employee has to put in the same amount. ORSO schemes are voluntary. You can set up this retirement benefit option for your company and set the rules for the scheme.
Who doesn’t love holiday? In Hong Kong, your full-time employees automatically get 12 statutory holidays each year. After a year of continuous employment, your employees get seven more days of paid leave. The extra leave gradually increases the longer the employee stays with you. It maxes out at nine years, when employees get 14 days of extra paid leave. Employees can accept payment instead of taking days off for anything more than 10 days per year. Say the employee maxes out with 14 days. That employee can take 10 days of holiday. They then can take a payment for the remaining four days.
Keeping Track of Payroll
You stay busy enough using your business prowess to run your company. How can you fit payroll into that workload? You don’t need a finance degree to keep it all straight. Apps and software programs take the guesswork out of Hong Kong payroll requirements.
Gpayroll is a fully automated online payroll system that handles all the calculations for you. It can even create payslips, pay your employees, and submit MPF for you. Worried about regulation changes? Gpayroll regularly updates its system to stay up-to-date with regulations. You know your payroll records meet the latest standards even if you don’t have time to keep up with the regulation changes. Plus, it works with your QuickBooks account. That means your payroll expenses automatically go into your accounting processes. It saves you a lot of time since you don’t have to manually key in the information.
Hong Kong payroll requirements aren’t especially complicated. Keeping accurate records from the start can help you avoid problems with the IRD down the road. With the help of apps and easily integrated software, you can keep your payroll straight and have time to run your business.