Payroll management in Hong Kong involves more than just paying employees on time — it requires precision, following rules, and working within one of Asia’s most organized labor and tax systems.
No matter if you handle payroll by hand use HR software, or hire someone else to do it, you must get every sum and due date right. If you miss even one rule, you might face fines or lose your employees’ trust.
This guide offers a complete look at payroll management in Hong Kong covering legal needs, tax issues, and smart ways to work for 2024 and beyond.
What Does Payroll Management Mean?
Payroll management involves calculating, distributing, and recording employee pay for a specific period — while following Hong Kong’s Employment Ordinance (EO) and Inland Revenue Ordinance (IRO). To manage payroll management you need to be aware of the HR and payroll processes taken over in Hong Kong.
This ongoing process includes:
- Employee Information Management: Gathering and keeping up-to-date employee records (personal data, job titles, MPF enrollment, etc.).
- Time Tracking: Logging attendance, overtime, and days off often through online HR or time-tracking tools.
- Payroll Calculation: Working out gross and net pay, including extras, overtime, and sales bonuses.
- Deductions & Contributions: Figuring out required items like MPF payments, income tax, and work perks.
- Payment Processing: Sending out pay via bank transfer, pay cards, or paper checks.
- Reporting & Recordkeeping: Keeping payroll files for audits and government reports.
- Compliance Management: Making sure all payroll tasks follow the Employment Ordinance, MPF regulations, and data privacy laws.
Payroll management in Hong Kong makes sure employees get paid , with the right MPF deductions and taxes taken out. It also ensures salaries are paid on time and follows local labor laws.
Getting To Grips With Hong Kong’s Payroll Rules
Hong Kong has a clear and employee-friendly legal system, with payroll mainly controlled by:
- Employment Ordinance (EO) – Sets rules for wages working hours, rest days, holidays, and job termination.
- Mandatory Provident Fund (MPF) Ordinance – Deals with retirement savings for all employees aged 18–64 who qualify.
- Inland Revenue Ordinance (IRO) – Controls tax reporting and what employers must do.
- Personal Data (Privacy) Ordinance (PDPO) – Protects data and keeps it private.
The Employment Ordinance (EO)
This forms the core of Hong Kong’s labor law. It lays out:
- Paying wages on time (within 7 days after each pay period).
- Rest days and public holidays.
- Time off benefits (yearly, sick, maternity, and paternity leave).
- Rules for ending employment and severance payments.
Not following these rules can lead to fines legal battles, or damage to your reputation.
Refer To Our Blog: Top 10 Payroll Mistakes to Avoid In Hong Kong
Taxes in Payroll Management: Key Points to Consider for 2024
Hong Kong’s simple and straightforward low-tax system gives employers a big edge, but it’s crucial to grasp payroll-related taxes.
Employers must precisely calculate the tax deductions based on employees ‘salaries with relevant documents such as salary statements and tax returns. It is beneficial to monitor the tax deadlines to avoid penalties.
The salary tax rates for the period from 1 April 2023 to 31 March 2024 by the IRD (Inland Revenue Department) are mentioned below.
Key Tax Types To Consider in Payroll Management in HK
1. Income Tax
Employees in Hong Kong face taxes at a stepped rate from 2% to 17%, or a flat 15% – whichever leads to less tax.
Things that get taxed:
- Regular pay
- Extra money like bonuses and sales cuts
- Money for housing or travel
- Benefits from the employer
Employees turn in yearly tax forms to the Inland Revenue Department (IRD), while employers must report pay on Form IR56B each April.
2. Profits Tax (for Employers)
Companies pay tax on their profits after deductions:
| Type of Business | First HK$2M Profits | Remaining Profits |
| Corporations | 8.25% | 16.5% |
| Unincorporated Businesses | 7.5% | 15% |
Only one entity in each corporate group can use the two-tiered rate.
3. Property Tax
Your business pays a flat 15% property tax on net assessable value after a standard 20% deduction if it earns rental income.
4. MPF (Mandatory Provident Fund) Contributions
Employers and employees each put 5% of the employee’s relevant income into MPF , with a cap of HK$1,500 for each party.
Companies need to sign up new employees for an MPF plan within 60 days of their start date.
Tip: Pick payroll software that figures out MPF payments on its own and links up with the MPFA website to cut out mistakes.
Playing By the Rules: Best Ways to Handle Payroll
To get payroll right in Hong Kong, companies must follow the law in a few key areas:
1. Job Agreements
Each employee should get a written agreement that spells out:
- Pay rate and when they’ll get paid
- Extra pay for overtime and bonuses
- Days off and holiday time
- How to end the job and how much notice to give
These agreements need to match EO rules and change when company policies or laws do.
2. Paying Employees & Keeping Records
Employers have these obligations:
- Give employees their pay within 7 days after each pay period ends.
- Keep payroll and job records for at least 7 years.
- Track details of time off extra hours, and rewards.
Not following these rules can lead to penalties up to HK$100,000 under EO rules.
3. Tax Reports & Due Dates
Employers must submit:
- IR56B Form (Yearly Employer Report) – Shows total pay for all employees.
- IR56E/F/G Forms – For staff who start, quit, or leave the country.
- Yearly Profits Tax Report – The company files this with the IRD.
Deadline Tip: Companies need to submit returns one month after issue. E-filing businesses might get one more month to file.
4. Data Security & Confidentiality
Payroll data has names, salaries, bank details, and HKIDs, so keeping data securty is crucial.
Employers need to follow the Personal Data (Privacy) Ordinance (PDPO) by:
- Using payroll software with encryption.
- Giving data access to allowed staff.
- Backing up data often.
- Getting third-party providers to sign secrecy agreements.
Hong Kong employers must guard employee payroll data under the PDPO through encryption limited access, and safe storage.
Challenges of Payroll Management in Hong Kong
Hong Kong’s payroll system looks simple but gets tricky in real life. Employers often struggle with:
- Laws that keep changing (like minimum wage and MPF rules).
- Mistakes when typing in data that break the rules.
- Dealing with employees from other countries and their tax stuff.
- Too much paperwork from all the forms they have to file.
This is why many companies now use automated programs or hire outside help to make sure they follow the rules and avoid problems.
How Payroll Software Makes Things Easier
Today’s payroll systems (like Info-Tech Payroll Software) make compliance a breeze by automating:
- MPF calculations and contributions
- Salary, allowance, and bonus computations
- Leave, attendance, and overtime tracking
- Payslip generation and secure employee access
- IR56 forms and statutory reports
A digital payroll system helps you cut down on time, boost accuracy, and be ready for audits throughout the year.
Check Out Info-Tech Payroll Software
Summary Table: Key Payroll Elements in Hong Kong
| Element | Requirement | Legal Reference |
| Wage Payment | Within 7 days post-pay period | Employment Ordinance (EO) |
| MPF Contributions | 5% each (Employer & Employee) | MPF Ordinance |
| Tax Reporting | Annual IR56B + employee forms | Inland Revenue Ordinance (IRO) |
| Record Retention | 7 years minimum | EO & IRO |
| Data Protection | Encrypt employee data | PDPO |
Final Thoughts
To manage payroll in Hong Kong, you need to be accurate and consistent. But don’t worry, it’s not as hard as it sounds. When you understand the Employment Ordinance, MPF rules, and tax laws, you can follow all the rules. This way, you’ll keep your employees happy and pay them on time.
Choosing a cloud-based payroll solution has a positive impact on compliance, helps you avoid fines, and allows your HR team to focus on important tasks.
📞 Want to make payroll easier in Hong Kong? Get in touch with Info-Tech Hong Kong at +852 2456 5811 or sales@info-tech.com.hk to book a free consultation today.
Frequently Asked Questions:
Do many companies in Hong Kong use payroll services?
Yes. Lots of small businesses and big companies hire outside help to handle payroll. This ensures they follow the rules, spend less on admin, and can concentrate on their main business.
How often must wages be paid in Hong Kong?
Companies need to pay wages at least once every month. They also have to make payments within 7 days after each wage period ends.
What are the MPF contribution limits for 2024?
Both the employer and employee have to contribute 5% of income. The maximum contribution is HK$1,500 per month for each party.
What tax forms must employers file?
Employers need to submit annual IR56B returns. They also have to file individual IR56E/F/G forms for employees who are new, have left, or are departing.
How can businesses ensure payroll data security?
To keep payroll data safe, businesses should use encrypted payroll software. They should also limit who can access the data. Moreover, they need to follow the rules set out in the Personal Data (Privacy) Ordinance (PDPO).
