How to prepare an employment contract?

Key Takeaways

• An employment contract must clearly state core terms like wages and notice periods, and any clause reducing statutory rights is automatically void.
• A solid contract outlines essentials such as duties, working hours, probation, and year‑end payments.
• Employers can safeguard their company by adding reasonable restrictions like non-compete clauses.
• Any agreed contract change must be documented in writing and provided to the employee to stay compliant and transparent.

Once you finished incorporating a Hong Kong company, the next challenge will be looking for talent to hire. While hiring seems like the hardest part, drafting the perfect employment contract is equally challenging. An employment contract caters to both the employee and the employer, providing a sense of security and protection. While you can ask our company incorporation team to provide you with a standard template, you can also draft one by taking notes from this article. 

This article will tackle the overview of an employment contract and how to prepare it.

What is an employment Contract?

An employment contract is an important agreement between the employer and the employee. It serves as a safeguard for both parties, as stated in the Employment Ordinance. An employment contract is signed by both parties involved in the agreement. While most contracts can just be verbal agreements, most Hong Kong companies tend to seek company secretary services to ensure the employment contract is prepared with utmost clarity, efficiency, and properly documented. Below are some of the most important parts of the Employment Ordinance, including employment contract drafting. 

Under section 44 of the Employment Ordinance, the employer must inform the employee of the conditions of employment, including but not limited to wages, i.e., wage rate, overtime rate, and any allowances, wage period, length of notice required to terminate the contract, and end-of-year payment and the payment period.

Under section 70 of the Employment Ordinance, any term of an employment contract that purports to extinguish or reduce any right or protection conferred to an employee by the Ordinance shall have no legal effect. In other words, even if an employee signs and agrees to the terms, the terms will be considered invalid.

Key items to include in an employment contract

Although it is not mandatory to prepare a written employment contract in Hong Kong, it is always safer for both parties to have a signed and sealed contract for stronger security and protection on both sides. Under section 44 of the Employment Ordinance, the employer must inform the employee of the conditions of employment, including but not limited to:

• Position and Responsibilities: This informs the position of the employee and the responsibilities he will have to handle once he takes up the role. 
• Working Hours: The contract should specify how many working hours the employee has to fulfill. This should also include the overtime agreements, lunch breaks, and resting time. 
• Salary: This includes the amount of payment the employee will receive monthly, including allowances and bonuses they may receive.
• Termination Notice: This contains the information on the termination notice of an employee and how much advance notice the employee should be given. 
• Benefits and Leaves: This includes all benefits to which an employee is entitled, as well as the number of leaves and bonuses received upon contract fulfillment.
• Probation: If probation is included, this must be placed in the employment contract to specify the probationary period of the employee.
• Terms of Contract Termination: This should inform the employee of the clauses of the termination, and whether there will be an extra payment due to premature severance. 
• Confidentiality: Only included if the role includes handling some highly confidential company information. 

Employers may also include reasonable restrictions when preparing an employment contract in Hong Kong, such as non-complete clauses which can protect business interests during a dispute. The Employment Ordinance does not strictly distinguish between categories such as part-time, permanent, or temporary employees. The contract wording must be clearly defined, making sure the nature of the relationship between the parties is clear. 

To ensure valid and legally compliant agreements, employers should always cross-reference their drafts with the Labour Department’s resources, specifically the “Using Written Employment Contract” booklet and the “Sample Employment Contract.” Consulting these official guides ensures that all terms are in sync with current legal requirements.

Changes to employment contract during employment

If you have to make any change to the conditions of employment, you should explain the proposed change to your employees. We recommend that you conduct a consultation with employees if you have to change the material terms of the contract. If both parties agree to the change, the employer must give a copy of the written amendment to the employee upon receipt of a written request. For details, please see section 45 of the Employment Ordinance.

While GSHK does not provide legal advice, our staff will be happy to share our business experience. Alternatively, you can contact a practicing solicitor for independent legal advice.

*Note: GSHK is not an employment agency. We specialize in Hong Kong Company Formation and accounting services. However, we understand non-local customers may require comprehensive guidance and support. Hence, we’d be happy to answer any of your questions so you can focus on developing your business.

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