Hong Kong HR & Staffing Agency Tax — Expert Advisory

If the staffing agency is the employer of the temp workers (contract of employment with the agency, not the client), it is acting as principal. The full billing to the client is revenue, and the worker's salary is a deductible expense. If the agency is merely an intermediary (the client is the employer, the agency just finds and processes the worker), the agency is acting as agent and only its fee or markup is income. Most Hong Kong temp agencies are the employer — but review your contracts carefully.

Many permanent placement agencies offer a guarantee — if the placed candidate leaves within 3 months, a full or partial replacement or refund is provided. Economically, the full placement fee is not earned until the guarantee period expires. A prudent approach is to defer a portion of the fee corresponding to the guarantee liability, and recognise the full fee when the guarantee period expires. This avoids paying tax on fees that may need to be refunded.

Executive search fees are sourced where the search services are performed. If the search team conducts all their work from Hong Kong (database searches, candidate assessments, client meetings by video), the fees are HK-source regardless of where the candidate is placed. If the search team travels to the client's country and conducts significant on-site work there, that portion may be offshore-sourced. Detailed activity records are needed to support any offshore claim.

In an Employer of Record (EOR) arrangement, the EOR company is the legal employer and is responsible for all employment obligations including MPF contributions. The EOR must make mandatory MPF contributions for all Hong Kong-employed workers aged 18-64, and must contribute 5% of the worker's relevant income (capped at HKD 1,500/month) as employer contribution. The EOR must also withhold and remit the employee's 5% MPF contribution. These are pass-through costs billed to the client.

Yes. Referral fees paid to other recruitment agencies for successful candidate referrals or split-fee arrangements are deductible business expenses. The fee must be genuinely for a business referral (not personal in nature) and should be supported by a referral agreement or written arrangement. Referral fees paid to non-resident agencies may be subject to withholding tax analysis if they exceed the de minimis threshold.