Hiring your first employee in Hong Kong?
Congratulations, and welcome to payroll. The good news is that Hong Kong keeps it simpler than most places. The catch is that the setup steps have real deadlines attached from day one.
Here is the sequence to follow, in order, from offer letter to first pay run.
Step 1: Get the Employment Terms in Writing
Payroll starts with a clear employment contract.
It should state the salary, pay frequency, working hours, leave entitlement, and notice period. Ambiguity here becomes a payroll dispute later.
Decide your pay cycle now as well. Monthly is standard in Hong Kong, and wages must be paid within seven days of the end of the wage period. Set a fixed pay date and build everything around it.
Step 2: Enrol the Employee in an MPF Scheme
This is the deadline that catches new employers.
You must enrol a new employee in a Mandatory Provident Fund scheme within 60 days of employment starting. Miss it and you are into backdated contributions and possible penalties.
If this is your first hire, you first need an employer account with an MPF trustee. Choose the scheme, register as a participating employer, then enrol staff as they join. We have seen founders leave trustee registration until week seven and turn a simple task into a scramble.
Step 3: Notify the IRD of the New Hire
New employees are reported to the Inland Revenue Department on Form IR56E.
File it within three months of the employment start date. It tells the IRD who you hired, when, and at what pay, which feeds their salaries tax records.
From then on, the employee appears on your annual employer’s return. Remember there is no monthly tax withholding in Hong Kong, so nothing else needs deducting for tax during the pay run.
Step 4: Set Up Your Payroll Records
Hong Kong employers are required to keep proper wage and employment records.
At minimum, maintain for each employee their personal details, wage records for each period, leave taken and accrued, and MPF contribution history. Keep records current, because they feed every filing you will make later.
Spreadsheets work at one or two staff. Beyond that, payroll software or an outsourced provider stops small errors compounding month after month.
Step 5: Run the First Pay Cycle
The monthly run itself is a repeatable checklist.
Calculate gross pay including any overtime or commission, deduct the employee’s 5% MPF contribution, and pay the net amount on your fixed pay date. Issue a payslip showing the breakdown.
Then pay both MPF contributions, employer and employee portions, to the trustee by the contribution day, which for monthly-paid staff is the 10th of the following month. Put that date in your calendar permanently.
Step 6: Diarise the Annual Obligations
Two dates matter every year.
The employer’s return (BIR56A with IR56B forms) is issued around the start of April and must be filed within one month. When an employee leaves, file IR56F within a month of their last day, and if they are leaving Hong Kong, notify the IRD in advance and withhold final payments until cleared.
One client learned the leaver rules the hard way when a departing employee flew out before the paperwork was done. The cleanup involved far more correspondence than the original form.
Common Setup Mistakes to Avoid
The same errors appear again and again:
- Missing the 60-day MPF enrolment window
- Paying salaries from a personal account instead of the company account
- No payslips, so disputes become word against word
- Forgetting that directors paying themselves a salary follow the same reporting rules
Every one of these is cheap to prevent and expensive to fix.
Final Thoughts
Setting up payroll in Hong Kong is a one-time sequence: contract, MPF enrolment, IRD notification, records, then a repeatable monthly cycle.
Get the sequence right at the first hire and every later hire is routine. If you would rather never think about contribution days again, this is one of the easiest functions to hand over.
Hiring in Hong Kong and want payroll set up properly?
ABLE Hong Kong sets up and runs payroll, MPF, and employer filings for growing companies. Book a free consultation and start compliant from day one.
Frequently Asked Questions
What are the steps to set up payroll in Hong Kong?
Put employment terms in writing, enrol the employee in an MPF scheme within 60 days, file Form IR56E with the IRD within three months, set up wage records, then run a fixed monthly pay cycle.
When must a new employee join an MPF scheme?
Within 60 days of starting employment. The employer must already be registered with an MPF trustee to do this.
Do I deduct tax from employee salaries in Hong Kong?
No. There is no PAYE withholding. You deduct only the employee’s 5% MPF contribution and report income to the IRD annually.
When are MPF contributions due each month?
For monthly-paid employees, by the 10th day of the following month. Late contributions attract surcharges.
What form do I file when an employee leaves?
IR56F, within one month of the last day of employment. If the employee is leaving Hong Kong, notify the IRD in advance and hold final payments until cleared.
Do directors’ salaries go through payroll too?
Yes. A director paid a salary or fee is reported like any employee, including on the annual employer’s return.