The Deferred Salary Agreement is utilized when an employer and employee wish to establish a formal arrangement for deferring part of the employee's compensation to a future date. This arrangement is common in Hong Kong, particularly in financial services and professional services sectors, where it can serve various purposes including tax planning, employee retention, and alignment with long-term company performance. The agreement must comply with Hong Kong employment law, including the Employment Ordinance (Cap. 57) and relevant tax regulations. It typically includes detailed terms about the deferral mechanism, payment conditions, tax treatment, and MPF implications. This document is particularly relevant during employment contract negotiations, company restructuring, or implementation of new compensation schemes.
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1. Parties: Identification of the employer and employee entering into the agreement
2. Background: Context of the agreement and employment relationship
3. Definitions: Key terms used throughout the agreement including Deferred Salary, Deferral Period, and Payment Date
4. Salary Deferral Arrangement: Core terms of the salary deferral including amount or percentage to be deferred and deferral period
5. Payment Terms: Conditions and timing for payment of the deferred salary
6. Tax Treatment: Clarification of tax implications and responsibilities
7. MPF Treatment: Impact on MPF contributions and calculations
8. Confidentiality: Obligations regarding the confidentiality of the agreement terms
9. Governing Law and Jurisdiction: Specification of Hong Kong law and jurisdiction
10. Entire Agreement: Standard entire agreement clause
11. Execution: Signature blocks and execution details
1. Investment of Deferred Amounts: Terms regarding how deferred amounts will be invested, if applicable
2. Early Termination Provisions: Specific provisions for early termination of employment
3. Change of Control: Provisions dealing with company ownership changes or restructuring
4. Vesting Schedule: If the deferred salary vests over time, detailed vesting conditions
5. Clawback Provisions: Terms allowing employer to recoup payments in specific circumstances
6. Assignment and Transfer: Restrictions on assignment or transfer of rights
7. Force Majeure: Provisions for extraordinary circumstances affecting the agreement
8. Amendment Procedure: Process for making changes to the agreement
1. Schedule 1 - Calculation of Deferred Amount: Detailed formula and examples of how deferred amount is calculated
2. Schedule 2 - Payment Schedule: Detailed timeline of when deferred amounts will be paid
3. Schedule 3 - Tax Examples: Illustrations of tax treatment in different scenarios
4. Appendix A - Notification Form: Template for employee to notify changes affecting the agreement
5. Appendix B - Payment Election Form: Form for employee to specify payment preferences
6. Appendix C - Consent Form: Employee's consent to data processing and storage
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Deferred Salary Agreement
A Hong Kong law-governed agreement establishing terms for deferring a portion of an employee's salary to a future date.
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