Hong Kong has long been a location that attracts expatriate (expat) talent from around the world. And the wider you can cast your talent net, the more chance you’ll have of creating the best possible team for your Hong Kong-based business.
But how do you attract these skilled expats in the first place? And how do you retain these people and keep them engaged and on board with your long-term business objectives?
One key way is to offer an attractive package of employee benefits – a package that makes the move overseas as smooth as possible and gives potential talent the greatest incentive to join your growing team.
Why Hong Kong?
Hong Kong has long been a trade centre and financial hub. Attractive expat packages, and the associated fringe benefits, are nothing new – in fact, they’re seen as an essential sweetener for many expats looking for their ideal job in Asia.
Expat packages are seen as a mandatory part of the benefit to the employee and have historically been very broad in Hong Kong. The standard of living is high and Hong Kong has low tax rates, both for business taxes and income tax.
- Corporation tax is charged at the low rates of 16.5% for incorporated companies and 15% for unincorporated businesses.
- Personal income tax is charged between 2% and 17%, with a standard rate of 15% – an extremely favourable rate for most expats
So there’s less of a tax burden for your business when setting up here and your expat’s salary goes further, already sweetening the deal and making Hong Kong a business destination of choice for many in the start-up world.
Meeting the letter of the law
If you’re on the lookout for new talent, you’ll want to offer new starters the most attractive expat package possible. But it makes sense to ensure you’ve done all that the law allows you to – and that’s about knowing what’s possible in Hong Kong, what’s beneficial for employees, and (vitally) what the rules and regulations are around employee benefits and their tax implications.
There are various laws and compliance requirements around employee benefits in Hong Kong, but we’ve distilled these down for you, so you can see at a glance where these are benefits that may work for you and your team.
1. Remuneration and salary
In a start-up or emerging business, payroll is often one of your biggest expenses and ongoing overheads. But although a larger payroll obviously eats into your cash flow
and potential profit, it’s worth taking the initial cut in order to offer the most attractive salaries and benefits to your expat employees.
When the advantages of your business’s expat package are as beneficial as possible to the employee, that’s a huge boost to your ability to attract and retain the key skilled talent you need – especially in Hong Kong where this can prove difficult.
So, calculate a salary and package that the business can afford, but make sure this package offers a very positive benefit to any interested expats.
2. Housing allowance
One of the most common benefits offered to expats is a housing allowance – money that goes towards paying for their rent or accommodation while in Hong Kong.
The key benefit of a housing allowance is that the ‘housing’ element of the employee’s salary is not taxed directly. Instead, the benefit is assumed to be between 4-10% of the salary, excluding the housing allowance. That reduces the income tax liability for your employee and means there’s more take-home pay in their bank account each month – even though you’re providing assistance with their housing costs.
The allowance can be paid in a number of ways, either as a reimbursement to the employee or directly to the landlord/letting agent. It’s important here to think about the liability and ongoing financial commitment of the company at this point.
As the expats employer, it’s the company’s responsibility to keep receipts for the housing allowance paid and to have copies of the lease and associated paperwork for audit purposes. If you’re using a cloud-based finance system, such as Xero online accounting, it’s very simple to digitise and save all these receipts and legal documents in the cloud – so there’s no last-minute panic when it comes to audit time.
Housing allowance is one simple and straightforward way to help an employee reduce their tax, and one that won’t eat too heavily into your admin time with the right systems and experience.
3. Some others benefits to consider
A market-leading salary, combined with the tax efficiency and financial assistance of a housing allowance, will provide the foundations for a very attractive package. But there are other benefits you can explore to tailor this expat package to the precise needs of your employees.
- Car allowance – Helping to reduce an expat’s transport costs is one additional benefit to consider. As long as the car in question is owned by the company and the employee’s private costs (such as fuel) aren’t paid for, the car itself isn’t taxable.
- Payment of utilities – Covering the cost of utility bills can be a perk for employees, reducing their overheads and increasing their disposable income. The utility contracts and bills must be in the name of the employer, and if that condition is met then there’s no chargeable benefit for the employee.
- Relocation allowance and furniture allowance – Uprooting yourself (and possibly your whole family) to move to a new country can be expensive. Offering financial help with relocation and the purchase of furniture and fixtures is one option for reducing this expense. Relocation and furniture allowances are a somewhat grey area, but it is possible to provide some benefits here.
Making your business as attractive as possible
Any business is only as good as the team behind it, so finding and retaining the best people is a vital part of any long-term growth plan. With the most effective use of employee benefits and allowances, it’s possible to create expat packages that make your business stand out from the crowd.
The key things are to:
- Research your talent market and make sure your salaries and benefits reflect what competitors are offering.
- Look for the simplest and most cost-effective ways to add benefit in your expat packages.
- Make sure your employee contracts reflect all the details of their package, and that you have the back office processes in place to ensure you’re compliant.
- Regularly review and assess your employee benefits to make sure you retain those all-important key staff members and stay competitive.
If all this sounds like a distraction from you actually developing and running your business, why not outsource the administration of your employee benefits.
Come and talk to us here at Stepping Stone and see how we can lighten the admin load.