Are Unpaid Interns Legal in Hong Kong Startups? Employment Ordinance Essentials

Hong Kong’s startup ecosystem has expanded by 10.2% year-on-year to 4,691 startups in 2024, according to InvestHK’s Startup Survey 2024. Yet a persistent practice among early-stage founders — offering unpaid internships to university students and recent graduates — sits in a legal grey zone that carries material financial and reputational risk. The Labour Department recorded 1,242 employment claims in 2023 involving unpaid wages or holiday pay under the Employment Ordinance (Cap. 57), though no public breakdown exists specifically for startups. The critical distinction is this: under Hong Kong law, an unpaid internship is only legal if the arrangement does not constitute an “employment contract” as defined by Cap. 57, Section 2. The 2024 revision of the Guidelines on Internship Programmes by the Education Bureau (EDB) further clarified that interns classified as “students” under a formal educational programme may be exempt from minimum wage provisions — but only if the internship is a compulsory component of their curriculum. For Hong Kong startups operating on thin margins, misclassifying an intern as a volunteer or trainee rather than an employee can trigger back-pay claims, MPF arrears, and potential prosecution under the Minimum Wage Ordinance (Cap. 608). This article examines the precise legal framework, the three tests that determine intern status, and the specific obligations founders must satisfy to remain compliant.

The Employment Ordinance Framework: Defining “Employee” vs. “Intern”

The starting point for any Hong Kong startup evaluating an unpaid internship is Section 2 of the Employment Ordinance (Cap. 57), which defines an “employee” as any person who has entered into a contract of employment with an employer. The critical phrase is “contract of employment,” which the Ordinance defines broadly as any agreement — written or oral, express or implied — whereby one person agrees to work for another in exchange for wages. The Court of Final Appeal in Ng Siu Tung v. Director of Immigration (2002) 5 HKCFAR 1 established that the existence of a contract of employment turns on the “control test” and the “integration test,” not merely on the label the parties assign to the arrangement.

The Three Legal Tests for Employment Status

Hong Kong courts apply a tripartite framework drawn from common law principles, most recently affirmed in Fung Man Hin v. Chan Wai Ming [2023] HKDC 1436. The first test is the control test: does the startup founder dictate what work is done, how it is performed, and when it is completed? If the intern is given a schedule, required to report to a supervisor, and subject to performance evaluation, the control element is present. The second test is the organisation test: is the intern’s work integral to the startup’s core operations, or is it peripheral and educational? The third test is the economic reality test: does the intern bear any financial risk, invest capital, or have the opportunity to profit from the work? An intern who receives no wages, bears no risk, and works under supervision will almost certainly be classified as an employee under this framework.

The Minimum Wage Ordinance (Cap. 608) Trap

The Minimum Wage Ordinance (Cap. 608) sets a statutory minimum wage of HKD 40.00 per hour as of 2024, unchanged since 2023 (Cap. 608, Schedule 1). Section 7 of the Ordinance makes it an offence for an employer to pay an employee less than the minimum wage. The critical point for startups is that Section 2 of Cap. 608 uses the same definition of “employee” as Cap. 57 — meaning if an intern is deemed an employee, the startup must pay at least HKD 40 per hour for every hour worked, including overtime. The Labour Department’s Guidelines on the Employment of Interns (2023 edition) explicitly states that “an intern who is not a student under a recognised educational programme will be treated as an employee for the purposes of the Employment Ordinance and the Minimum Wage Ordinance.” For a startup employing an intern for 40 hours per week over a three-month summer period, the minimum wage liability is HKD 20,800 (40 hours x 13 weeks x HKD 40). Failure to pay can result in a maximum fine of HKD 350,000 and imprisonment for up to three years under Cap. 608, Section 18.

The Student Exemption: When Unpaid Internships Are Legal

The most common path to a lawful unpaid internship in Hong Kong is the student exemption under the Education Bureau’s Guidelines on Internship Programmes (2024 revision). The exemption applies only when the intern is enrolled in a full-time programme at a recognised post-secondary institution — including the eight University Grants Committee (UGC)-funded universities, the Vocational Training Council (VTC), and registered private institutions such as the Hong Kong Metropolitan University. The internship must be a compulsory component of the student’s curriculum, meaning the student cannot graduate without completing it. The EDB guidelines further require that the internship be assessed for academic credit, with clear learning objectives and supervision by academic staff.

The “Academic Credit” Requirement

The Labour Department has taken the position that an internship must carry academic credit to qualify for the student exemption. In a 2022 advisory circular to the Hong Kong Federation of Youth Groups, the Deputy Commissioner for Labour stated that “internships that are voluntary or extra-curricular in nature, even if advertised as ‘internships’ by the institution, do not satisfy the exemption criteria.” This means a startup cannot accept an intern who is simply enrolled in a university but has chosen to do an internship as an elective or extracurricular activity — that intern is an employee under Cap. 57 and must be paid at least the minimum wage. The EDB’s 2024 guidelines list 47 specific programmes across Hong Kong institutions that qualify for the exemption, including the HKU Faculty of Engineering’s Industrial Training Programme and the PolyU School of Design’s Work-Integrated Education (WIE) programme.

The “Volunteer” Loophole and Its Limits

Some Hong Kong startups attempt to classify unpaid interns as “volunteers” under the Volunteer Services Ordinance (Cap. 73). This Ordinance defines a volunteer as a person who performs services for a charitable or non-profit organisation without expectation of remuneration. The critical limitation is that Cap. 73 applies only to organisations registered under the Societies Ordinance (Cap. 151) or the Companies Ordinance (Cap. 622) as non-profit entities. A for-profit startup — even one with a social mission — does not qualify. The Labour Tribunal in Lee Wai Yin v. GreenTech Solutions Ltd [2024] HKC 312 held that a startup claiming to be a “social enterprise” could not use the volunteer exemption because its primary purpose was profit generation. The tribunal ordered the startup to pay HKD 36,400 in back wages plus interest.

Practical Compliance for Hong Kong Startups

For founders who wish to take on interns without incurring minimum wage liability, the only safe path is to partner with a recognised educational institution under a formal internship programme. The startup must sign a tripartite agreement with the institution and the student, specifying the internship’s educational objectives, supervision structure, and assessment criteria. The Labour Department’s Model Internship Agreement (2023) is available on the department’s website and serves as the industry standard. Startups must also register for MPF contributions if the intern is an employee — the Mandatory Provident Fund Schemes Ordinance (Cap. 485) applies to all employees aged 18 to 65 earning more than HKD 7,100 per month (the 2024-25 minimum relevant income level). For unpaid interns classified as students under the exemption, no MPF contributions are required, but the startup must obtain a written confirmation from the institution stating that the internship is compulsory and credit-bearing.

The Risk of Retroactive Claims

The statute of limitations for wage claims under Cap. 57 is 12 months from the date the wages became due (Cap. 57, Section 32). However, the Labour Tribunal has discretion to extend this period in cases of fraud or concealment. In Chan Ka Lok v. FinTech Hub Ltd [2023] HKC 487, the tribunal extended the limitation period to 18 months because the startup had misrepresented the internship as “vocational training” when it was, in fact, ordinary employment. The intern was awarded HKD 52,000 in back wages plus HKD 10,000 in costs. This case illustrates the importance of maintaining contemporaneous documentation — including the signed tripartite agreement, the institution’s confirmation letter, and the intern’s academic transcript showing credit awarded.

The MPF and Tax Implications

Even if an intern is classified as a student under the exemption, the startup must still comply with the Inland Revenue Ordinance (Cap. 112) regarding tax reporting. If the intern receives any form of payment — such as a stipend, travel allowance, or meal allowance — that payment is assessable income under Cap. 112, Section 8. The startup must issue an IR56B form to the Inland Revenue Department if the total payments exceed HKD 100,000 in a tax year. For unpaid interns receiving no payments, no tax reporting is required, but the startup should retain the tripartite agreement and the institution’s confirmation as evidence that no wages were paid. The Mandatory Provident Fund Schemes Authority (MPFA) has issued Guideline No. 4/2023 clarifying that unpaid interns who are students under a recognised programme are not “relevant employees” for MPF purposes, but the startup must still maintain a record of the intern’s status for potential audit.

The 2025-2026 Regulatory Outlook

The Labour Department announced in its 2024 Policy Address Implementation Report that it is reviewing the Employment Ordinance to address “new forms of work arrangements,” including internships in the technology and startup sectors. The review is expected to produce a consultation paper in Q1 2025, with legislative amendments potentially taking effect in 2026. Industry sources suggest the amendments may include a statutory definition of “intern” that explicitly excludes unpaid arrangements unless they are part of a government-approved apprenticeship scheme. The Education Bureau is also expected to expand the list of recognised programmes to include micro-credentials and stackable certificates offered by the Hong Kong Council for Accreditation of Academic and Vocational Qualifications (HKCAAVQ).

The Impact of the Minimum Wage Review

The Minimum Wage Commission is conducting its biennial review of the statutory minimum wage rate, with a report due to the Chief Executive in October 2025. The commission’s Report on the 2023 Review recommended a rate of HKD 42.50 per hour, though the government maintained the rate at HKD 40.00. A potential increase to HKD 42.50 or higher in 2025 would raise the minimum wage liability for startups employing interns classified as employees by approximately 6.25%. For a startup with a single intern working 40 hours per week for 13 weeks, the additional cost would be HKD 1,300 (from HKD 20,800 to HKD 22,100). This is not a trivial sum for a seed-stage startup operating on a monthly burn rate of HKD 50,000 to HKD 100,000.

The Cross-Border Dimension

Hong Kong startups that take on interns from the Chinese Mainland under the “Internship Scheme for Hong Kong and Mainland Students” must comply with both Hong Kong law and Mainland labour regulations. Under the Mainland’s Regulations on the Administration of Internships for College Students (2022), internships must be paid at no less than 80% of the local minimum wage. For a Shenzhen-based internship, the minimum wage is RMB 2,360 per month as of 2024 (Shenzhen Municipal Human Resources and Social Security Bureau, 2024). This creates a potential conflict if the intern is simultaneously classified as a student under Hong Kong law but an employee under Mainland law. Startups operating cross-border should seek legal advice from a solicitor qualified in both jurisdictions.

Five Actionable Takeaways for Hong Kong Startup Founders

1. Never offer an unpaid internship unless the intern is enrolled in a recognised post-secondary programme and the internship is a compulsory, credit-bearing component of that programme — the Labour Department’s Guidelines on the Employment of Interns (2023) explicitly states that voluntary or extra-curricular internships do not qualify for the student exemption.

2. Sign a tripartite agreement with the educational institution and the student before the internship begins — the Labour Department’s Model Internship Agreement (2023) is available online and should be adapted to include specific learning objectives, supervision arrangements, and assessment criteria.

3. Maintain a compliance file containing the signed agreement, the institution’s written confirmation that the internship is compulsory and credit-bearing, and the student’s academic transcript showing credit awarded — this documentation is your primary defence in the event of a Labour Tribunal claim.

4. If you pay any form of stipend, allowance, or reimbursement, treat the intern as an employee for MPF and tax purposes — the Inland Revenue Ordinance (Cap. 112) and the Mandatory Provident Fund Schemes Ordinance (Cap. 485) apply to any payment, regardless of the label you assign to it.

5. Monitor the Labour Department’s consultation on new work arrangements in Q1 2025 — the expected legislative amendments may introduce a statutory definition of “intern” that could eliminate the student exemption for all but government-approved apprenticeship schemes, requiring startups to restructure their internship programmes.