LPA-CGR: Hong Kong’s latest legal developments under the microscope

Extension of statutory maternity leave and paternity leave: strengthening pro-family elements of the employment regulatory regime in Hong Kong

End of  2018, the government of Hong Kong announced that it will increase maternity leave from 10 to 14 weeks. Each employee entitled to the paid statutory maternity leave will be allowed to take four additional weeks paid at 80% of her average daily wages subject to a cap of HKD 36,822 per employee (such cap may be adjusted in the future). Employers will be able to apply to the government for reimbursement of the additional four weeks’ statutory maternity leave pay. The government will have to draft the legal instrument to give effect to these proposed changes and intends to introduce a bill to amend the current legislation to the Legislative Council by end of 2019.

As regards to paternity leave, the Employment (Amendment) (No.3) Ordinance 2018 comes into operation on 18 January 2019 and extends the duration of paternity leave from 3 to 5 days.

Reinstatement or re-engagement of employee after unreasonable and unlawful dismissal

Where an employee has been unreasonably and unlawfully dismissed on or after 19 October 2018 (date of entry into force of the Employment (Amendment) (No.2) Ordinance 2018) and the employee makes a claim for reinstatement or re-engagement, the Labour Tribunal may make an order for reinstatement or re-engagement without the need to secure the employer’s agreement if the Tribunal considers that such an order is appropriate and practicable. Alternatively, the Labour Tribunal may make an award of terminal payments to be payable by the employer to the employee as it considers fair and appropriate. An employee may also be awarded compensation up to a maximum of HKD 150,000. Previously, such order for reinstatement or re- engagement could only be made with the mutual consent of the employer and the employee. If the employer eventually does not reinstate or re-engage the employee as required by the order, the employer shall pay to the employee a further sum, amounting to three times the employee’s average monthly wages and subject to a cap of HKD 72,500. A dismissal is unlawful and unreasonable if the employee is dismissed by the employer other than for a valid reason (valid reasons include the conduct of the employee, the capability or qualifications of the employee for performing his work) and the dismissal is in contravention of the law (for example, the dismissal of a pregnant woman without a valid reason).

Are termination payments chargeable to salaries tax?

In the case of Poon Cho Ming, John v Commissioner of Inland Revenue [2018] HKCA 297, the Court of Appeal clarified that a termination payment made for some other reason than from an office of employment is usually not chargeable to salaries tax. In the above case, the employee obtained under a separation agreement signed with his employer a sum in lieu of a possible discretionary bonus which he was eligible to under his contract of employment and acceleration of the vesting schedule for some share options previously granted to him. It was held by the Court of Appeal that the gains were not chargeable to salaries tax as they constitute consideration to induce the employee to enter into the separation agreement (and avoid litigation, as well as bad public image of the employer), and did not arise from his contract of employment.

Further tax deductions under salaries tax to people who purchase eligible health insurance products for themselves or their relatives under the Voluntary Health Insurance Scheme (Inland Revenue (Amendment) (No. 8) Ordinance 2018)

Starting from 1 April 2019, taxpayers who purchase eligible health insurance products for themselves or their relatives under the VHIS can claim deductions for VHIS premiums paid up to HKD 8,000 per insured person for insurance policies procured for the benefit of the taxpayer and all specified relatives, which cover the taxpayer's spouse and children, and the taxpayer's or his/her spouse's grandparents, parents and siblings.

Immigration update: Official change in policy for same sex dependant visas

Following the decision on 4 July 2018 QT v Director of Immigration (which we covered in our previous newsletter), the government has  announced an official change in Hong Kong's immigration policy in relation to same-sex dependant visas. From 19 September 2018, a person who has entered into a same-sex civil partnership, same-sex civil union, same-sex marriage, opposite-sex civil partnership or opposite-sex civil union outside Hong Kong will become eligible to apply for a dependant visa / entry permit for entry into Hong Kong.

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