How to run international payroll for employees in Hong Kong (2025)

Navigating the complexities of international payroll can be daunting, especially when dealing with the unique legal and cultural landscape of Hong Kong. From understanding the Mandatory Provident Fund (MPF) system to complying with employment ordinances, a clear understanding of Hong Kong's payroll system is vital. This guide will walk you through the process, making it easier to manage your Hong Kong-based employees' payroll effectively and compliantly.

Step #1: Decide whether or not to create your own entity in Hong Kong or use an employer of record (EOR)

As a business expanding into Hong Kong, you'll have to decide between setting up your own legal entity or using an employer of record (EOR).

When, why, and how do companies use an EOR? 

Companies often turn to an employer of record (EOR) when they're hiring in a new country but don't have a registered entity there. EORs serve as a legal entity that hires employees on your behalf, ensuring compliance with local labor laws and regulations. They manage payroll, taxes, and other HR responsibilities, allowing you to focus on your business. Companies typically choose an EOR when they want to quickly establish a presence in a new market without the hassle of setting up a legal entity.

When, why, and how do companies create their own entity?

Setting up your own entity gives you more direct control over your employees, but it also involves navigating Hong Kong's local regulations, taxation, and employment laws, which can be complex and time-consuming.

Companies usually establish their own legal entity when they plan to have a significant, long-term presence in a foreign country. Creating an entity in Hong Kong involves registration with the Companies Registry, opening a bank account, and obtaining a Business Registration Certificate. This process provides more control over operations and employees but also requires navigating Hong Kong's employment laws, tax system, and more.

Step #2: Pick a global payroll software solution

First, it’s vital to understand the two kinds of international payroll solutions: global payroll processors and global payroll aggregators. You can learn about both in our guide.

• Global payroll processors process your payroll, transmit funds, and calculate and file taxes in every country through their own software. They allow you to pay your international employees just as easily as your local employees: together in a single pay run.

• Global payroll aggregators aggregate local payroll providers in every country and manually transmit your payroll files to them.

Step #3: Determine your workers’ employment status

Identifying whether your workers in Hong Kong are employees or independent contractors is a crucial part of the payroll process. The distinction impacts how you withhold and pay taxes, along with what benefits and rights are granted to the worker. Hong Kong law has specific definitions for these categories, and misclassification can lead to legal complications. It's recommended that you seek legal counsel to ensure the correct classification of your workers.

Step #4: Capture your new hires’ Hong Kong payroll information

You’ve decided whether to use an EOR or your own entity, picked a payroll solution, and ensured that your employees are correctly classified. But before you can run payroll, you'll need to collect essential information from your new hires. This includes:

• The employee’s full name

• Hong Kong Identity Card number (HKID)

• Bank account details for salary deposit

• Details of their Mandatory Provident Fund (MPF) scheme

• Marital status and family members (for tax purposes)

This data is crucial for ensuring accurate and timely payment, as well as compliance with Hong Kong's employment and tax regulations.

Step #5: Choose to pay in your local currency or in Hong Kong Dollars (HKD)

When paying your employees in Hong Kong, you can choose to do so in your local currency or in Hong Kong Dollars (HKD). However, paying in HKD may be more beneficial for your employees due to exchange rate stability and ease of use locally. If you choose to pay in your local currency, ensure your employees are aware and agree to it, as exchange rate fluctuations might affect their take-home pay.

Step #6: Run payroll

Now it's time to run payroll. Ensure that you are aware of Hong Kong's specific payroll regulations. This includes adhering to the Minimum Wage Ordinance, understanding the statutory benefits such as sick leave, annual leave, maternity leave, and paternity leave, and complying with the Mandatory Provident Fund Schemes Ordinance (MPFSO). Make sure all payments, deductions, and contributions are made accurately and on time to avoid penalties.

Step #7: File your taxes in Hong Kong annually

In Hong Kong, employers are required to file taxes annually on behalf of their employees. This involves preparing and submitting an Employer's Return to the Inland Revenue Department (IRD), where you report the remuneration paid to each employee during the year of assessment. Also, be aware of the various tax deductions and allowances available for employees, as these can affect the amount of tax payable.

When filing taxes as an employer in Hong Kong, you will need the following information:

• Company’s Business Registration Number

• Employee’s personal details including Hong Kong Identity Card number

• Details of the employee's income, including salaries, bonuses, and allowances

• Contributions made to the employee's Mandatory Provident Fund (MPF)

Frequently asked questions about running payroll in Hong Kong

Rippling and its affiliates do not provide tax, legal, or accounting advice. 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 related activities or transactions.