Hiring your first employee in Hong Kong? Congratulations, and welcome to payroll.

The good news is that Hong Kong keeps this simpler than most countries. There's no monthly tax withholding to run, which removes a whole layer of complexity. The catch is that the setup steps carry real deadlines from the moment someone starts.

Here's the sequence, in order, from offer letter to first pay run.

Step one: get the terms in writing

Payroll starts with a proper employment contract.

It needs to state the salary, how often you pay, working hours, leave entitlement and the notice period. Anything vague at this stage turns into a payroll dispute later, usually at the worst possible time.

Decide your pay cycle now too. Monthly is standard in Hong Kong, and wages have to be paid within seven days of the end of the wage period. Pick a fixed pay date and build everything around it.

Step two: enrol them in an MPF scheme

This is the deadline that catches new employers out.

You have to enrol a new employee in a Mandatory Provident Fund scheme within 60 days of their employment starting. Miss it and you're into backdated contributions and possible penalties.

If this is your first hire, there's a step before that: you need an employer account with an MPF trustee. So choose your scheme, register as a participating employer, then enrol staff as they join.

Don't leave this late

I've seen founders leave the trustee registration until week seven and turn a straightforward admin task into a scramble. Setting up the employer account takes time. Do it while you're recruiting, not after someone has started.

Step three: tell the IRD

New employees get reported to the Inland Revenue Department on Form IR56E, filed within three months of their start date.

It tells the IRD who you've hired, when, and what you're paying them, which feeds into their salaries tax records. From then on that person appears on your annual employer's return.

Worth repeating: there's no monthly tax withholding in Hong Kong. Nothing gets deducted for tax during the pay run itself.

Step four: set up your records

Hong Kong employers are legally required to keep proper wage and employment records.

For each employee you need, at minimum:

  • Personal details
  • Wage records for every pay period
  • Leave taken and leave accrued
  • MPF contribution history

Keep them current rather than reconstructing them later, because every filing you make from here runs off this data.

Spreadsheets are fine at one or two staff. Past that, payroll software or an outsourced provider stops small errors quietly compounding month after month.

Step five: run the first cycle

The monthly run is a repeatable checklist once it's set up.

  1. Calculate gross pay, including any overtime or commission
  2. Deduct the employee's 5% MPF contribution
  3. Pay the net amount on your fixed pay date
  4. Issue a payslip showing the breakdown
  5. Pay both MPF contributions, employer and employee, to the trustee

For monthly-paid staff, that MPF contribution day is the 10th of the following month. Put it in your calendar permanently, because late contributions attract surcharges.

Step six: diarise the annual bits

Two things matter every year.

The employer's return, BIR56A with IR56B forms, is issued around the start of April and has to be filed within one month.

And when somebody leaves, you file IR56F within a month of their last day. If they're leaving Hong Kong altogether, you notify the IRD in advance and hold their final payments until you're cleared to release them.

A client learned that last rule the hard way when a departing employee flew out before the paperwork was done. Sorting it out took considerably more correspondence than the original form would have.

The mistakes that come up again and again

  • Missing the 60-day MPF enrolment window
  • Paying salaries out of a personal account instead of the company account
  • Not issuing payslips, so any dispute becomes one person's word against another's
  • Forgetting that a director paying themselves a salary follows exactly the same reporting rules

Every one of those is cheap to prevent and genuinely annoying to fix.

The short version

Setting up payroll in Hong Kong is a one-time sequence. Contract, MPF enrolment, IRD notification, records, then a repeatable monthly cycle.

Get it right at the first hire and everyone after that is routine. And if you'd rather never think about contribution days again, this is one of the easiest things to hand over completely.

Common questions

What are the steps to set up payroll in Hong Kong?

Put the 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 your wage records, then run a fixed monthly pay cycle.

When must a new employee join an MPF scheme?

Within 60 days of starting. You need to already be registered with an MPF trustee to do it.

Do I deduct tax from salaries?

No. There's no PAYE withholding in Hong Kong. You deduct the employee's 5% MPF contribution and report their income to the IRD once a year.

When are MPF contributions due?

For monthly-paid employees, by the 10th of the following month. Late contributions attract surcharges.

What do I file when someone leaves?

IR56F, within one month of their last day. If they're leaving Hong Kong, notify the IRD in advance and hold final payments until cleared.

Do directors' salaries go through payroll?

Yes. A director paid a salary or fee is reported exactly like any other employee, including on the annual employer's return.

J

Written by Jan Chow

Jan runs Hong Kong Jan, a small corporate services practice in Central. She has spent her whole career setting up companies across Hong Kong, China, Taiwan and Southeast Asia. These days she looks after founders herself, so you are never talking to a call centre. More about Jan.