The contracts stayed. The daily rate stayed. But one shift in the pay structure changed everything
A Hong Kong court has overturned a tribunal's finding that five construction workers were employees, ruling the tribunal failed to properly investigate a mid-project pay switch.
The workers did formwork on a construction project at Hill Road in Hong Kong. They had written employment contracts with a subcontractor, daily pay of HK$2,150, and Mandatory Provident Fund (MPF) contributions - Hong Kong's compulsory retirement scheme. By every conventional marker, they were employees.
Then the payment arrangement changed.
From September 2024, the subcontractor switched to a task-based model. The workers would still receive their HK$2,150 daily rate as a kind of advance, but their actual entitlement would be calculated per completed layer of formwork - HK$135,000 for a standard layer, HK$165,000 for a base layer. The daily payments would be deducted from whatever the final lump sum came to.
Same workers. Same site. Same subcontractor giving directions. But a fundamentally different pay structure.
When the workers stopped on October 26, 2024 - the same day a fellow worker who had originally referred them to the job resigned - six layers had been completed: two base layers and four standard layers. The workers sued the main contractor, Hien Lee Engineering, for the outstanding balance, arguing they had been employees of the subcontractor the entire time and the main contractor was liable as the principal contractor on the project.
Hien Lee pushed back. It accepted the workers were employees before September 2024 but argued the new payment arrangement turned them into independent contractors. If that was right, Hien Lee owed them nothing.
The Labour Tribunal sided with the workers. The adjudicator pointed to the written employment contracts, the daily salary payments, the MPF contributions, and the subcontractor's ongoing control over the work - including progress, standards, worker numbers, and large equipment.
That reasoning did not survive appeal.
In a judgment handed down on October 13, 2026, the High Court found the tribunal had not done its job. The core problem: the tribunal treated the daily payments as straightforward wages without engaging with what the task-based arrangement actually meant.
Counsel for Hien Lee argued that the daily payments were, in commercial reality, "buffer monies" designed to keep the workers coming back while their real entitlement was calculated by completed task. The court accepted the argument had force. Workers paid per task rather than per day look more like independent contractors than employees - and the tribunal never explored that distinction.
The adjudicator did not examine the commercial rationale behind the new arrangement, did not consider how the daily payments interacted with the lump-sum entitlement, and did not explain why the legal relationship had stayed the same despite the shift in payment structure. The court found that approach "far too simplistic."
The tribunal had also relied on the subcontractor's control over various aspects of the work. The court accepted that control can point toward an employment relationship - but said it is not conclusive on its own.
Citing a 2024 Hong Kong authority, the court noted that in modern commercial arrangements, a degree of control often exists for sound commercial reasons - to protect quality and meet contractual obligations - rather than because the parties are in an employer-employee relationship. A subcontractor facing liability to a main contractor has every reason to supervise progress and standards, regardless of whether the workers are employees or contractors.
There was also evidence from a director of the subcontractor that the workers were free to decide how many people to engage and when to work. They just had to finish before the main contractor's deadline and meet its stipulations. The tribunal never addressed this evidence.
The court allowed the appeal, set aside the tribunal's September 2025 order, and sent the case back for a fresh hearing before a different adjudicator. That new adjudicator will need to properly investigate whether the workers became independent contractors when the payment arrangement changed.
On costs, the court noted the workers could not be blamed for the tribunal's shortcomings. The costs of the appeal will follow the outcome of the retrial.
For HR teams managing project-based or task-based workforces across Asia, the case makes one thing plain: changing a pay structure can raise genuine questions about employment status - and getting the classification right means looking at the full commercial reality of the arrangement, not just the paperwork that came before it.
