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Hong Kong, comprised of Hong Kong Island, Kowloon, the New Territories, and numerous small islands, is a Special Administrative Region (SAR) of China. Roughly six times the size of Washington, D.C., it boasts a mountainous and rocky terrain, of which only 6% is arable. Since 1990, the population has steadily increased to about 7.2 million people, thus making Hong Kong one of the most densely populated regions in the world.

Hong Kong’s location in the heart of Asia is directly related to its economic success. At the turn of the 19 th century, the British used Hong Kong and its deepwater harbor as their entrepot with southern China. Today, this port remains the second busiest in the world, and with its new airport Hong Kong has since developed into an international air hub. In the past, positive socioeconomic conditions, including high annual growth rate (from 1987-1997 the average GDP was 5%), have made Hong Kong a major business center for both the east and the west.

On July 1, 1997, China regained sovereignty over Hong Kong after more than 150 years of British colonial control. Hong Kong attained the status of Special Administrative Region of the People’s Republic of China. Hong Kong received almost full autonomy over all of their economic, political, and judicial matters, excluding foreign and defense affairs.

The Sino-British Joint Declaration of 1984 and Hong Kong’s mini-constitution, known as the Basic Law, theoretically guarantee that Hong Kong will retain its economic, political, and judicial systems until the year 2047, or 50 years after the its reversion to China. Although both Hong Kong and China have raised concerns about their disparate ideologies, they currently exist under the “one country, two systems” formula. While there are certain to be some fundamental and significant changes in the coming years, to date Hong Kong generally remains an open society, relatively free from China’s dominance.

The recent terrorist attacks in New York City and Washington, D.C. have affected Hong Kong’s economic environment. Chief Secretary Donald Tsang stated that Hong Kong is now facing an extremely tough time “in economic, strategic, security, and social terms.” He did not speculate on a timeframe for recovery, except to say that it would follow an American and global upturn. Mr. Tsang also encouraged all Asian governments to continue with the reforms that were initiated in the wake of the 1997 Asian Financial Crisis.

The Labor Situation

Hong Kong has a labor force of approximately 3.4 million workers. The majority of these workers are employed in the service sector, including shipping, civil aviation, tourism, and financial services.

The latest labor force statistics, released on October 16 th by the Census and Statistics Department, indicate that the seasonally adjusted unemployment rate in July-September 2001 was 4.9%, higher than that in June-August. The size of the labor force in July-September also increased, yet employment was unable to keep pace with this growth. During September, the rise in the unemployment rate was especially evident, with the external trade and tourism industries suffering in particular.

The government is attempting to boost employment in Hong Kong. On October 11 th, Chief Executive Tung Chee-wa announced $3 billion plans to create more than 30,000 jobs in the public sector. These plans have received some mild support, yet many criticize them as temporary solutions that will not facilitate long-term development. However, as it is generally recognized that Hong Kong’s economy will not improve until the US economy improves, people accept that there is little else that the Hong Kong government can do.

Regardless, the government is also taking steps to assure that less skilled workers can capitalize on job opportunities. The Task Force on Employment met last spring, deciding that they should increase training for local workers and create strategies to foster employment. On September 7 th they announced an initiative that intends to enact a $400 million scheme that is focused on training workers with a low education background over a two-year period. These workers will then be better prepared for a competitive job market.

So although Hong Kong and the whole of Asia continue to face challenging economic times, it appears as if Hong Kong is still hiring some qualified candidates for preferred and permanent positions. As of August 1, 2001, the Immigration Department of Hong Kong was accepting applications for a new arrangement that would allow for mainland students with a college degree or higher to work in Hong Kong. This arrangement is intended to bolster economic development by introducing more talent and competitive elements into the market.

The government’s policy on imported labor mandates that local workers be given priority in the filling of job vacancies. The term “local” refers to any indigenous Hong Kong citizen, regardless of where he or she was educated or has lived in the past. “Returnees,” or Hong Kong citizens who have been educated or trained abroad and want to return home, are included in this category. These candidates are especially attractive to many foreign companies because of their superior language skills both in English and Chinese, as well as their ability to understand and work within several cultures. The employment of these returnees has become a popular hiring strategy that many industries, including banking and finance, are currently utilizing.

The Employment Ordinance

Although employment in Hong Kong is less regulated than in the United States or Europe, each employer must understand and consider the Employment Ordinance. The Hong Kong Employment Ordinance, first enacted in 1968 as a replacement of the Employers and Servants Ordinance, is the cardinal piece of legislation regulating employment conditions in Hong Kong. It applies to every contracted employee in Hong Kong. Although its original provisions included only the protection of wages and the regulation of employment agencies, the Ordinance has since been significantly amended. It now offers an extensive range of protections and benefits for all employees, including rest days, holidays with pay, paid annual leave, sickness allowness, maternity protection, severance payment, long service payment, employment protection, termination of employment contract, and protection against anti-union discrimination.

Severance Payment and Long Service Payment . According to the Ordinance, an employee is eligible for severance payment if they have worked for an employer at least two years prior to a dismissal by reason of redundancy or lay-off. A dismissal by redundancy is summarily attributed to the employer’s closing or ceasing of business, or a diminished requirement for the type of work done by the employee. A lay-off occurs when an employee is not provided with work or pay for more than half of the total number of working days in any period of four consecutive weeks, or the employee receives no work or pay for one-third the total number of working days in any 26 consecutive weeks.

So while severance payment is related to a redundancy situation, long service payment is intended to reward employees who are dismissed in a non-redundancy situation. In order to qualify for long service payment, the Ordinance stipulates that the worker must have been employed under a continuous contract for a period not less than five years, and dismissed for reasons other than redundancy or serious misconduct. The Ordinance also entitles an employee to long service payment if a fixed term contract expires without renewal, or if the employee resigns on the ground of ill health or dies. If an employee over the age of 65 resigns because of old age, he may also claim long service payment.

Significant differences exist between severance payment and long service payment, yet the liabilities of both depend on the years of service to the company. For monthly employees, two-thirds of their last month of wages (or HK$15,000 (US$1,920) -- whichever is less) is multiplied by their years of reckonable service to the company. Since one employee’s severance or long service payment could theoretically become extremely expensive, a maximum amount of compensation was established by the Ordinance. This limit is increased incrementally from HK$210,000 (US$30,000) in 1995 to HK$390,000 (US$50,000) by October 2003.

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