Anatomy of an Employment Contract

Before Hiring, We Need To Know How to Prepare Employment Contract.

A. Basics of Employment Contract

You are basically free to negotiate with your employees the terms of the contract, as long as it complies to the Employment Ordinance.

Nevertheless, any contract provision that aims at reducing employees' rights that are otherwise allowed under the Employment Ordinance, the contract provision will be deemed as void.

In general, the contract should include:

1. Commencement Date or Effective Date of Employment - if the contract period is not stated, the contract will be treated as monthly renewable in general.

2. Wages, Wage Period, and Rest Day

3. Statutory holiday vs Public holiday

4. Length of Notice Required to Terminate the Contract; and

5. End of Year Payment - Arrangement of End-of-Year Payment Must Be Clearly Stated in Employment Contract

Making reference to the sample contract of Labour Department, we can also cover the following in the employment contract in order to protect the interest of both employee and employer:

1. Probation
2. Place of work
3. Working hours
4. Meal break
5. Arrangement of overtime payment
6. Arrangement of Annual Leave, Maternity Leave, Sick Leave
7. Retirement scheme, MPF arrangement
8. Arrangement at typhoon and rainstorm

On the other hand, depending on the industry we belong to we can also cover the following in the provision of termination of employment:

1. Confidentiality agreement with respect to company's information
2. Non-compete agreement that restricts employees from joining competitors within a limited period

B. Is It Necessary to Put the Employment Contract in Writing?

If the contract is not in writing but your employee requests contract information, you are required to provide the relevant information in writing.

C. Record of Employment

According to Section 49A of Employment Ordinance, the proper record should be kept for at least 12 months regarding the following items. It also gives us a sense of what should have been clearly stated in the original employment contract:

1. Name and identity card number
2. Date of commencement of employment
3. Job title
4. Wages paid in respect of each wage period
5. Wage period
6. Total number of hours worked in each wage period
7. Periods of annual leave, sick leave, maternity leave, paternity leave and holidays entitled and taken, together with details of payments made in respect of such periods
8. Amount of end-of-year payment and the period to which it relates (if applicable)
9. Period of notice required for termination of contract
10. Date of termination of employment (if applicable)

Reference from Labour Department:

Link to Employment Ordinance

Sample Employment Contract