As an employer, you must be aware whether your worker is an employee or an independent contractor, as it would greatly affect the rights and benefits you must provide for your worker.
Difference between employee and independent contractor
Different factors may be considered to distinguish between an employee and independent contractor, but these factors are not conclusive indications of the employment status.
| Factors that may be considered | Employee | Independent contractor |
| Control over work procedures, working time and method | ✖ | ✔ |
| The person is carrying on business on his own account with investment and management responsibilities | ✖ | ✔ |
| The person is not properly regarded as part of the employer’s organisation | ✖ | ✔ |
| Whether the person is free to hire helpers to assist in the work | ✖ | ✔ |
| Bearing of financial risk over business (e.g. any prospect of profit or risk of loss) | ✖ | ✔ |
Ultimately, the decision rests on the court to determine the employment status of a worker.
A sample of an independent contractor contract can be found here.
Rights and benefits of an employee and independent contractor
Only employees would be entitled to the rights and benefits provided under the Employment Ordinance, as it usually only applies to employers and employees who are engaged under contracts of employment. To avoid unnecessary disputes, an employment contract should separate between an employee and a contractor (or self-employed person).
| Rights and benefits | Employee | Contractor or Self-employed person |
| Entitled to basic protection under the Employment Ordinance. If engaged under a “continuous contract”, also entitled to employment benefits such as paid annual leave, statutory holiday pay, sickness allowance, severance payment or long service payment, etc. | ✔ | ✖ |
| Entitled to protection under the Minimum Wage Ordinance, including the statutory minimum wage | ✔ | ✖ |
| Entitled to protection under the Employees’ Compensation Ordinance, including sick leave and compensation arising from work injuries | ✔ | ✖ |
| Entitled to protection under the Mandatory Provident Fund Schemes Ordinance, including employer’s contribution | ✔ | ✖ |
Changing your employee’s employment status
You can change the employment status of your employee, but you must get their consent before you do so.
It is a criminal offence to falsely label an employee as a self-employed person or independent contractor in the contract to prevent the employee from being entitled to protection under the Minimum Wage Ordinance or Employment Ordinance.
Key takeaways
- The employment contract should clearly establish whether the worker is an employee or independent contractor (or self-employed person)
- Employees are entitled to benefits and rights under the Employment Ordinance, whilst an independent contractor (or self-employed person)t is not
Bibliography
- Labour Department ‘Clarify your Employment Status Protect your Rights and Benefits’: https://www.labour.gov.hk/eng/public/wcp/SelfEmployedPerson.pdf