Transferring Employees on an Outsourcing in Hong Kong: Overview (2021)

A Q&A guide to outsourcing in Hong Kong.

This Q&A guide gives a high-level overview of the rules relating to transferring employees on an outsourcing, including structuring employee arrangements (including any notice, information and consultation obligations) and calculating redundancy pay.

Transfer by Operation of Law

1. In what circumstances (if any) are employees transferred by operation of law?

Hong Kong legislation does not specifically regulate, or provide for, the transfer of employees on initial outsourcing, change of supplier or termination of outsourcing. Employees are not transferred by operation of law in these situations.

2. If employees transfer by operation of law, what are the terms on which they do so?

Not applicable, see Question 1.

Redundancy Pay

3. How is redundancy pay calculated?

Employees are entitled to a severance payment where they have been employed for not less than 24 months under a continuous contract (that is, where the employee has been employed continuously by the same employer for four weeks in each month, with at least 18 hours worked in each week), and one of the following applies:

• The employee is made redundant.
• The employment agreement had a fixed term and it expires without being renewed by reason of redundancy.
• The employee is laid off.

Redundancy includes situations where the employer closes, has closed or intends to close their business, or where the need for the work carried out by the employee ceases or diminishes, or is expected to cease or diminish.

Lay off applies to a situation where the employee is remunerated depending on them being provided with work. An employee is considered laid off if the total number of days on which no work is provided, or no wages are paid, exceeds either:

• Half of the total number of normal working days in any four consecutive weeks.
• One third of the total number of normal working days in any 26 consecutive weeks.

Normal working days do not include rest days, annual leave and statutory holidays.

If an employee is entitled to a severance payment, the payment is equal to two thirds of their last month's wages (if paid monthly), or the wages of any 18 days out of the last 30 normal working days (if paid on a daily basis), multiplied by the number of years of service. The maximum amount of severance payment that an employee can be entitled to is HKD390,000.

Harmonisation

4. To what extent can a transferee harmonise terms and conditions of transferring employees with those of its existing workforce?

Not applicable.

Dismissals

5. To what extent can dismissals be implemented before or after the outsourcing?

There are no laws or regulations specifically governing employees' dismissal or termination in connection with the implementation of outsourcing arrangements. Employment agreements can be terminated by the usual lawful means under Hong Kong law, for example by giving notice, making payment in lieu of notice or by summary dismissal (where available).

An employee who has been employed under a continuous contract for not less than 24 months may also be entitled to remedies against unreasonable dismissal or unreasonable variation of the terms of employment if they are dismissed other than for a valid reason specified in the Employment Ordinance (Cap. 57). Valid reasons include:

• The employee's conduct.
• The employee's capabilities or qualifications.
• Redundancy or the business' genuine operational requirements.
• Statutory requirements.

(Section 32K, Employment Ordinance.)

Remedies available to the employee are orders for reinstatement or re-engagement, or awards of terminal payments.

National Restrictions

6. To what extent can particular services only be performed by a local national trained in your jurisdiction?

There are no restrictions under Hong Kong law on services that can only be performed by a local national trained in Hong Kong.

Secondment

7. In what circumstances (if any) can the parties structure the employee arrangements of an outsourcing as a secondment?

There are no specific restrictions on the secondment of employees in Hong Kong. Appropriate visas must be obtained for overseas secondees.

Information, Notice and Consultation Obligations

8. What information must the transferor or the transferee provide to the other party in relation to any employees?

Hong Kong law does not require any transfer of employee information in an outsourcing arrangement. Parties should observe the data protection principles and other requirements under the Personal Data (Privacy) Ordinance (Cap. 486) if any employee information is transferred.

9. What are the notice, information and consultation obligations that arise for the transferor and the transferee in relation to employees or employees' representatives?

There are no specific notice, information or consultation obligations required under Hong Kong law for the transfer of employees in connection with outsourcing arrangements. Parties must observe the requirements of employment laws, personal data privacy laws, and other applicable laws of Hong Kong generally.

This article is intended for your general information only. It is not intended to be nor should it be regarded as or relied upon as legal advice. You should consult a qualified legal professional before taking any action or omitting to take action in relation to matters discussed herein. This article does not create an attorney-client relationship and is not attorney advertising.

Reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com or call +44 (0)20 7542 6664.