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' right that otherwise allowed under Employment Ordinance, the contract provision will be deemed as void.
In general, the contract should include:
Commencement Date or Effective Date of Employement - if contract period is not stated, the contract will be treated as monthly renewable in general.
Wages, Wage Period and Rest Day
Statutory holiday vs Public holiday
Length of Notice Required to Terminate the Contract; and
End of Year Payment - Arrangement of End-of-Year Payment Must Be Clearly Stated in Employment Contract
Please be reminded that for employment with its contract made after 27 June 1997, employer is not allowed to, solely at its discretion, determine whether to pay the end-of-year payment or alter the amount of payment, unless it is specified in the employment contract that the employer has such right.
If it is not specified in the contract, the average monthly wages earned by your employees in the 12-month period preceding the day the end-of-year payment is due should be payable to the employees.
Please refer to Section 11A of Employment Ordinance for details on End-Of-Year-Payment.
Making reference to sample contract of Labour Department, we can also cover the following in the employment contract in order to protect interest of both employee and employer:
- Place of work
- Working hours
- Meal break
- Arrangement of overtime payment
- Arrangement of Annual Leave, Maternity Leave, Sick Leave
- Retirement scheme, MPF arrangement
- Arrangement at typhoon and rainstorm
On the other hand, depending on 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 employee 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 for contract information, you are required to provide the relevant information in writing.
C. Record of Employment
According to the Section 49A of Employment Ordinance, proper record should be kept for at least 12 months regarding the following items. It also gives us a sense on what should have been clearly stated in the original employment contract:
- Name and identity card number
- Date of commencement of employment
- Job title
- Wages paid in respect of each wage period
- Wage period
- Total number of hours worked in each wage period
- 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
- Amount of end of year payment and the period to which it relates (if applicable)
- Period of notice required for termination of contract
- Date of termination of employment (if applicable)
We need the historical record of wages and leaves to calculate the statutory entitled salary.
On the other hand, number of hours worked is a key component to determine if the minimum wage requirement is fulfilled.
You need HR system like Backstage to help you keep track all these records.
Failure to keep records properly may be subject to a fine of $10,000 upon conviction.