【Salary Bonuses】2024 Hong Kong Salary Bonus Guide: Double Pay, Performance Bonuses, Legal Rights

Types of Bonuses in Hong Kong

Double Pay

Generally defined as an additional month''''s salary paid to employees on top of their regular monthly wages, also known as the "13th month salary." It''''s typically distributed before Chinese New Year, though some employers may pay it before New Year or Christmas.

Performance-Based Bonuses

Performance-based incentives have become increasingly common, with approximately 62% of employers offering such bonuses. These payments are typically tied to individual or company performance metrics and vary in amount based on achievement levels. It''''s usually distributed at year-end, hence called "year-end bonus."

Discretionary Bonuses

These bonuses depend on factors such as company profitability or individual performance. While labeled as discretionary, employers must exercise their discretion rationally and in good faith, maintaining transparency in decision-making processes.

Gratuity Bonus

A gratuity bonus is typically a contractual payment made to employees, often specified in their employment contract as a percentage of their basic salary for completing a fixed period of service. Like other forms of bonuses, gratuity bonuses are considered taxable income in Hong Kong and must be reported for tax purposes. This type of bonus is commonly found in fixed-term contracts and serves as both a retention tool and a reward for completed service.

End-of-Year Payment

As defined under the Employment Ordinance, this refers to payments specified in employment contracts to be paid annually, including double pay, 13th month salary, and year-end bonuses, but excluding gratuitous payments or those at the employer''''s discretion.

These regulations apply to employees under continuous contracts where the employment contract (verbal or written, express or implied) stipulates end-of-year payment entitlement.

For employment contracts established after June 27, 1997, unless otherwise stated in writing, any annual payment or bonus is presumed to be non-gratuitous and non-discretionary.

The amount of end-of-year payment should be either specified in the employment contract or, if not specified, calculated as the average monthly wage earned by the employee in the 12 months preceding the payment due date. For employment periods less than 12 months, calculations are based on the shorter period.

Payment dates should be:

• On the date specified in the employment contract
• If not specified, payment should be made on or within 7 days after the end of the payment period
• If an employee is dismissed before the payment period ends, payment should be made on or within 7 days of contract termination
• For profit-based payments, payment should be made within 7 days of profit calculation completion

Employers who willfully and without reasonable excuse fail to pay end-of-year payments can be prosecuted and fined up to HK$50,000 upon conviction.

Bonus and Double Pay Calculation Methods

According to the Employment Ordinance, the distribution of bonuses and double pay is at the employer''''s discretion and is not legally mandated. Employers have the right to decide whether to distribute bonuses and their amounts. Unless the contract explicitly states the calculation method and conditions for bonus distribution, the bonus amount typically depends on company performance and employee work performance, thus there is no fixed amount.

Double Pay Calculation Method

Double pay is generally considered an extra month''''s salary and is usually explicitly stated in the contract. If the contract mentions double pay, it must be paid according to the contracted amount.

If an employee resigns or is dismissed before double pay distribution, the amount needs to be calculated proportionally. For example, if an employee''''s monthly salary is $15,000 and they worked for 90 days (out of 365 days) in the payment period, the calculation would be: $15,000 x (90/365) = $3,699 Therefore, this employee''''s double pay portion for that year would be $3,699.

Legal Framework and Implications: Contractual vs. Discretionary Nature

Under Hong Kong''''s Employment Ordinance, bonuses are presumed to be contractual unless explicitly stated otherwise in the employment contract. Courts examine not just the bonus scheme''''s label but also its actual operation and context when determining its nature.

FAQ About Bonuses and Double Pay

Are employers required to give year-end double pay to employees?

The Employment Ordinance does not explicitly require employers to pay end-of-year payments, including double pay and bonuses.

An employee''''s entitlement to end-of-year payments depends on the agreement between employer and employee. If the employer includes this payment in the employment terms, they must fulfill this contractual obligation to pay the end-of-year payment.

If an employee resigns during or before the end of the payment period, must the employer provide proportional end-of-year payment?

Unless otherwise specified in the contract, employees who resign before the end of the payment period are not entitled to proportional end-of-year payments.

The payment period should be specified in the employment contract; if not specified, it is calculated according to the lunar calendar year.

Can you still receive double pay if you resign?

The months when bonuses and double pay are distributed typically see peak resignation periods. However, employees should note that since the Employment Ordinance doesn''''t explicitly specify eligibility for double pay upon year-end resignation, everything depends on the employment contract. Some contracts may state that employees who voluntarily leave before the end of the payment period forfeit their rights to bonuses and double pay. In other words, if employees resign before receiving their double pay, the company may not distribute any bonus or double pay.

What if an employee is dismissed before the end of the payment period - are they eligible for proportional end-of-year payment?

Employees who have been employed under a continuous contract for at least 3 months within a payment period and are dismissed by their employer (except for summary dismissal due to serious misconduct) are eligible for proportional end-of-year payment.

If there was an explicitly agreed probation period, when calculating whether an employee qualifies for partial end-of-year payment, the probation period (up to 3 months) cannot be included. However, if eligible, the entire employment period (including probation) must be included when calculating the partial end-of-year payment amount.

How is double pay calculated for employment less than one year?

Under the Employment Ordinance, end-of-year payment refers to contractually specified annual payments, including double pay, 13th month salary, year-end bonuses, etc., but excludes gratuitous payments or those at the employer''''s discretion.

The end-of-year payment amount is generally specified in the employment contract by both parties. If not specified, it''''s calculated based on the employee''''s average monthly wages in the 12 months preceding the "payment due date." For employment periods less than 12 months, calculations are based on the shorter period.

Employees employed under a continuous contract for at least 3 months within a payment period are eligible for proportional end-of-year payment if they:

• Continue employment after the payment period ends; or
• Are dismissed by the employer (except for summary dismissal due to serious misconduct)

When do companies distribute bonuses and double pay?

Hong Kong companies primarily follow four types of fiscal years:

Do bonuses and double pay need to be reported for tax purposes?

Yes, according to Hong Kong tax regulations, all income from employment, including bonuses, double pay, allowances, and commissions, must be declared and are subject to salaries tax. Therefore, bonuses and double pay must be reported and included in total income.

Additionally, bonuses and double pay are subject to MPF deductions, as these allowances are considered income for the payment period. This means the bonus and double pay amount you receive has already had the 5% mandatory MPF contribution deducted.

Note that when filing taxes, you must report the total income before MPF deductions, not the actual amount received.

The following types of income are taxable:

• Bonuses and double pay
• Commissions and rebates
• Payment in lieu of leave
• Contract gratuities
• Payment in lieu of notice after April 1, 2012

最新專訪片︰
【Office豪華旅行團】安永會計重視多元和企業社會責任 培養包容性的企業文化