(a) No. The approach adopted by the courts is to examine all features of the relationship and determine whether, as a matter of overall impression, the relationship is one of employment or not.

(b) There is no legislation that generally deems contingent workers to be employees for Hong Kong tax purposes. 

Whether a contingent worker will be regarded as an employee or independent contractor for Hong Kong tax purposes will depend on the substance of the arrangement. The Inland Revenue Department and courts will, in determining this question, have regard to cases decided in the employment law context.

(c) Yes. The Mandatory Provident Fund Schemes Ordinance (Cap. 485) (MPFSO) requires certain categories of contingent workers to be enrolled into Mandatory Provident Fund (MPF) schemes. Such categories of contingent workers include the following:

1. Casual employees: Employers must enroll casual employees into an MPF scheme. A casual employee is a person who is aged 18 to 64 and employed in the construction or catering industry on the following basis:
   1. On a day-to-day basis
   2. For a fixed period of less than 60 days  
      
      
2. Temporary employees who are not casual employees: Employers must enroll persons who fulfill the below requirements into an MPF scheme:
   1. Is not a casual employee (see definition of casual employee under item (i) above) 
   2. Is aged 18 to 64
   3. Is employed for 60 days or more (irrespective of whether employment is on a full-time or part-time basis)

(a) No.

(b) No.

(c) Yes. Among other exemptions from MPF scheme enrolment under Schedule 1 to the MPFSO, a person who fulfills the below requirements is exempted from enrolment into an MPF scheme:

1. Is not a casual employee (see definition of casual employee under point (i) above)
2. Falls outside of the ages of 18 to 64
3. Is employed for 59 days or less

There are no specific developments but, on a wider note, with the rise in digital platform services, we are seeing an increasing global trend in case law and legislation aimed at protecting platform workers' labor rights. For more insight on these developments, along with other employment law updates, click here.

There is a risk of misclassification. If a contingent worker is misclassified as an independent contractor when they are at law an employee, then the employer would be placed under various legal obligations, including the following:

• The employee would be entitled to the rights and benefits provided for under the Employment Ordinance (EO), such as paid statutory holidays, paid sick leave, protection against dismissal, etc. These rights and benefits are not available to contingent workers.
• The employer is vicariously liable for any loss and harm resulting from the employee's negligence committed in the course of employment.
• The employer is required to take out insurance to cover liabilities for employees' work injuries, pursuant to the Employees' Compensation Ordinance (Cap. 282).

Another risk related to misclassification is a mismanagement risk. When engaging contingent workers, an employer should avoid interfering with or exerting too much control over the worker's activities, for fear of making the contingent worker appear to be an employee.

The following are the consequences of violation:

• In cases of misclassification, an employer is still required to fulfill their responsibilities under the EO and other relevant legislation by retroactively paying back statutory benefits to the employee who has been falsely labeled as a contingent worker.
• Failure to provide the prescribed statutory benefits under the EO to employees may attract criminal liability for the employer. On conviction, the maximum penalty for such offenses is a fine of up to HKD 50,000 for each offense. Furthermore, in case of any negligence committed by the (misclassified) employee, the employer may be vicariously liable for the loss and damage caused, thus potentially leading to substantial liability. 
• Failure to have employees' compensation insurance coverage in place is a criminal offense with a penalty of up to HKD 100,000 under the Employees' Compensation Ordinance and two years' imprisonment.

There is risk of misclassification. If a contingent worker is misclassified as an independent contractor when they are at law an employee, the employer could be liable for failing to file various notifications required to be filed by employers (e.g., as to the employee's commencement and cessation of employment), and employer's tax returns.

However, a person engaging independent contractors is also required to file returns (e.g., Form IR56M) in respect of every contractor to whom it pays remuneration exceeding relevant thresholds during the basis year (which commences on 1 April each year), being HKD 25,000 for consultants, agents, brokers, freelancers etc., and HKD 200,000 for subcontractors. Although failing to file an employer's return in respect of an employee is a breach of the law, we consider the practical risk of enforcement to be low if an employer has filed Form IR56M in respect of a contingent worker whom it believes to be an independent contractor (when in fact the person is an employee).

Hong Kong does not impose an obligation on employers to withhold or deduct tax chargeable on salary and wages paid to employees.

It is a criminal offense for employers to fail to make the requisite notifications as employers or file employers' returns in respect of its employees. On conviction, the maximum fine is HKD 10,000 for each offense.

There are no risks from a social security perspective.

None.

The main risk from a pensions perspective is the employer being found liable under Section 43B(1) of the MPFSO for not enrolling relevant employees into an MPF scheme.

Further, where the employer is a company, pursuant to Section 44(1) of the MPFSO, there is also a risk of any officer (which includes company directors, the managing director and the chief executive officer), any other person concerned in the management of the company or any person who was purporting to act in that capacity being found to be personally liable. This applies if the offense is proved to have been committed with the consent or connivance of, or attributable to any neglect on the part of, the relevant individual.

In addition, there is also a reputational risk.

The following are the consequences of violation:

• There are essentially two ways in which failures to enroll relevant employees may be uncovered: (i) employee complaints; and (ii) proactive inspections by the Mandatory Provident Fund Schemes Authority (MPFA). These increase the risk of enforcement. Noncompliance may lead to criminal liability, whereby penalties could be substantial.
• Under Section 43B(1) of the MPFSO, an employer that fails to enroll a relevant employee into an MPF scheme on time is liable to a maximum fine of HKD 350,000 and to imprisonment for three years.
• These penalties apply equally to relevant individuals who are found to be liable by virtue of Section 44(1) of the MPFSO.

No.

Essentially, there are two ways where such a breach may be uncovered:

• Firstly, employees may make complaints to the MPFA regarding their failure to be enrolled into an MPF scheme, leading to regulatory investigations into the same.
• Secondly, the MPFA may independently audit employers (e.g., by proactively inspecting employer premises) on whether relevant employees have been enrolled into an MPF scheme. Based on our experience and records of non-compliance on the public register, there have been multiple instances where employers have been penalized for non-enrollment of employees. Hence, the MPFA will not hesitate to penalize employers for failing to enroll relevant employees into an MPF scheme.

This is a combined risk rating across all areas, including likelihood of challenge, impact of challenge and uncertainty of law.