How is Payroll Calculated in Hong Kong?
In Hong Kong, payroll is governed primarily by the Employment Ordinance (Cap. 57), the Inland Revenue Ordinance (Cap. 112), and the Mandatory Provident Fund Schemes Ordinance (Cap. 485). Wages are almost always paid monthly. A feature that surprises many overseas employers is that Hong Kong operates no pay-as-you-earn (PAYE) withholding for salaries tax: employers do not deduct income tax from each pay run. Instead, the employer's payroll deductions are essentially limited to the employee's MPF contribution, and each employee settles their own salaries tax directly with the Inland Revenue Department (IRD) after assessment.
Net pay: from gross salary to take-home
Because salaries tax is not withheld at source, an employee's net (take-home) pay is simply the gross salary minus the mandatory MPF contribution (and any agreed voluntary deductions). In simplified terms:
Net pay = Gross salary − Employee MPF (5%, capped at HK$1,500/month)Payment of wages
Under the Employment Ordinance, wages become due on the last day of the wage period and must be paid as soon as practicable, and in any case within seven days after the end of that period. The wage period is presumed to be one month unless the contract states otherwise. On termination, outstanding wages must generally be paid within seven days of the end of the contract. Late payment can attract interest and, for serious cases, criminal penalties.
No withholding — with two exceptions
Although there is no routine PAYE, an employer must withhold money and notify the IRD in two situations: when an employee who is about to leave Hong Kong for good, and in response to a recovery notice where the IRD directs the employer to pay over money owed by a defaulting employee. Outside these cases, tax is a matter between the employee and the IRD.
Salaries Tax
Hong Kong charges salaries tax on income arising in or derived from a Hong Kong employment, office, or pension. The year of assessment runs from 1 April to 31 March. Tax is calculated as the lower of two figures: net chargeable income at progressive rates (2% to 17%), or net total income at the standard rate. This means high earners never pay more than the standard-rate cap, while most employees benefit from the low progressive bands and generous allowances.
Progressive tax brackets (2024/25)
Progressive rates apply to net chargeable income — that is, assessable income after deductions and personal allowances. Each rate applies only to the slice of income within its band.
Net chargeable income (HK$ per year)
Tax rate
Net chargeable income (HK$ per year)
Tax rate
First 50,000
2%
Next 50,000
6%
Next 50,000
10%
Next 50,000
14%
Remainder
17%
Standard rate (two-tiered from 2024/25)
The alternative computation applies the standard rate to net total income (assessable income after deductions, but before personal allowances). From the 2024/25 year of assessment, the standard rate is two-tiered: 15% on the first HK$5 million of net income and 16% on the portion above HK$5 million. In earlier years a single 15% standard rate applied. The taxpayer pays whichever of the progressive or standard computations produces the lower tax.
Allowances (2024/25)
Personal allowances reduce net chargeable income before the progressive rates apply. The most common allowances for the 2024/25 year are:
- Basic allowance: HK$132,000 for a single taxpayer
- Married person's allowance: HK$264,000 (where a couple elects joint assessment or one spouse has no chargeable income)
- Child allowance: HK$130,000 per child, plus an additional HK$130,000 in the year the child is born
- Dependent parent, grandparent, brother/sister, and single-parent allowances, each subject to their own conditions and amounts
Deductions such as MPF mandatory contributions, approved charitable donations, home loan interest, and self-education expenses are given on top of these allowances, subject to statutory caps.
Mandatory Provident Fund (MPF)
The Mandatory Provident Fund (MPF) is Hong Kong's compulsory, privately managed retirement savings system, and it is effectively the only ongoing statutory payroll levy on employers. For most employees aged 18 to 64, both the employer and the employee contribute 5% of the employee's relevant income each. Contributions are calculated only within income limits: employees earning below the minimum are exempt from the employee share (the employer still pays), and income above the maximum does not increase the contribution.
Employers must enrol new employees in an MPF scheme within the first 60 days of employment and remit both shares by the statutory contribution day (generally the 10th of the following month).
Monthly MPF contributions at a glance
Contributions apply to relevant income between HK$7,100 and HK$30,000 per month. Below HK$7,100 the employee is exempt from the employee 5% (the employer still pays 5%); above HK$30,000 the mandatory contribution is capped at HK$1,500 each side. In March 2026 the MPFA consulted on raising the minimum to HK$10,500 and the maximum to HK$40,000 per month — always confirm the limits in force for the contribution period you are running.
Contributor
Employee
Rate
5%
Monthly amount
Up to HK$1,500
Contributor
Employer
Rate
5%
Monthly amount
Up to HK$1,500
Employer's Return & Statutory Filing
Even though there is no monthly tax withholding, employers carry important reporting duties. The IRD relies on the employer to report each employee's remuneration through the annual Employer's Return and a set of event-based IR56 forms. Missing these deadlines exposes the company to penalties, so most employers automate the calendar below.
Key employer filings and deadlines
BIR56A + IR56B
Annual Employer's Return. BIR56A is issued by the IRD on the first working day of April; the employer files it with an IR56B for each employee within one month (normally by early May).
IR56E
New-hire notification. Filed within three months of a new employee's commencement date.
IR56F
Cessation notification for an employee who leaves or dies, filed not later than one month before the date of cessation.
IR56G
Notification for an employee about to leave Hong Kong for good, filed one month before departure. The employer must also withhold all payments until the employee produces a tax clearance letter.
BIR56A + IR56B
Annual Employer's Return. BIR56A is issued by the IRD on the first working day of April; the employer files it with an IR56B for each employee within one month (normally by early May).
IR56E
New-hire notification. Filed within three months of a new employee's commencement date.
IR56F
Cessation notification for an employee who leaves or dies, filed not later than one month before the date of cessation.
IR56G
Notification for an employee about to leave Hong Kong for good, filed one month before departure. The employer must also withhold all payments until the employee produces a tax clearance letter.
Provisional & final salaries tax
Employees, not employers, pay salaries tax directly. After filing an individual tax return, the taxpayer receives an assessment that combines the final tax for the year just ended with a provisional tax for the coming year, estimated on the prior year's income. Payment is usually made in two instalments (broadly around January and April). The provisional tax paid is then credited against the next year's final liability. Employers do not remit this, but should make staff aware of it — especially new arrivals unfamiliar with the system.
Payslips & Record-Keeping
Good payroll records are both a compliance requirement and the backbone of an accurate Employer's Return. Hong Kong law sets clear expectations for the wage and employment records an employer must keep.
Wage and employment records
Under the Employment Ordinance, an employer must keep wage and employment records covering each employee's wages, wage period, and other prescribed particulars, and retain them for the period of employment plus a further six months after the employee leaves. Separately, the Inland Revenue Ordinance requires business records to be kept for at least seven years. In practice, employers issue a monthly payslip itemising gross pay, MPF deducted, and net pay, and retain payroll registers to support the annual IR56B filing.
Hong Kong Payroll Processing
Because payroll in Hong Kong ties together the Inland Revenue Department (salaries tax and IR56 filings), the MPFA (Mandatory Provident Fund enrolment and contributions), and the Employment Ordinance (wages, wage records, and payslips), many companies outsource processing to a local expert or an Employer of Record. A specialist provider can enrol employees in MPF, run the monthly cycle, prepare the annual Employer's Return and event-based IR56 forms, and keep the business compliant as rates and thresholds change.
How can Glints help you?
You can streamline your company's payroll in Hong Kong by outsourcing to Glints, your expert PEO and EOR solution. With our payroll expertise across Asia, we ensure compliance with Hong Kong's Employment Ordinance, Inland Revenue Ordinance, and MPF Schemes Ordinance, and handle salary calculations, MPF contributions, and IR56 reporting — delivering smooth and efficient payroll management for your business.
Book a schedule with our team to discover how we can manage payroll and tax for your team in Hong Kong.
