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Will Hong Kong’s Minimum Wage legislation do more harm than good?

Will Hong Kong’s Minimum Wage legislation do more harm than good?

Will Hong Kong’s Minimum Wage legislation do more harm than good?

Friday, 26 November 2010 15:10

Introduction

Hong Kong is often regarded by many as an affluent city with its countless luxury motorcars and designer boutiques. There are, however, many who live in another world.

 

Hong Kong has a workforce of some 3,500,000, of whom some 410,000 (more than 10% of the workforce) are paid less than HK$4,000 a month. Hong Kong has a long hours and hard work culture and such low wages are often perceived as being exploitative. In an attempt to defuse any claims of exploitation, the Hong Kong Government has, after vigorous debate, passed the Minimum Wage Ordinance, which comes into force on 1st May 2011.

 

The minimum wage debate in Hong Kong, as in most other countries, focused on whether having a statutory minimum wage actually does more harm than good.

 

The debate considered: (i) whether the Ordinance would actually increase wages for the lower paid; or (ii) whether it would actually drive wages lower, (iii) whether it would cause unemployment and (iv) to whom would it actually apply and who would practically benefit from it?

 

What is the Minimum Wage that a Hong Kong Employer will have to Pay?

The minimum hourly wage rate recommended by the Minimum Wage Commission was HK$28 per hour worked.

 

What Counts as an "hour worked"?

This will now include:

  1. time when a lowly paid employee is in attendance at his/ her place of employment irrespective of whether he/ she is provided with work (in accordance with their contract or at the direction of their employers); and
  2. time spent by a lowly paid employee travelling in connection with his/ her employment (excluding commuting between his/ her home and workplace).

 

This aspect is expected to become extremely contentious. The wording in the Ordinance does not specify whether employees' rest time at the workplace, employees' on-call time outside the workplace, and employees' time spent at the workplace after office hours, other than working, would constitute "hours worked".

 

Exemptions

  1. Domestic workers who live with their employers free of charge;
  2. Family members of a business proprietor, who reside with that proprietor;
  3. Employees under Contracts for Employment Outside Hong Kong;
  4. Seafarers; and
  5. Apprentices under registered apprenticeship schemes and certain student employment.

 

Employees with disabilities receive special treatment under the Ordinance.

 

How will the Ordinance Actually Affect Employers?

Employers must ensure that wages paid to the lowly paid employees are not less than the statutory level when the Ordinance comes into force on 1st May 2011. Employers also need to be aware that there is a specific "no contracting out" provision in the Ordinance. In other words, an employer cannot pay below the minimum wage rate, even if an employee was to agree to that.

 

Employers need to set up a time-recording system to clearly record the hours worked by lowly paid employees, if no such system is yet in place. Rules on over-time work should be clearly spelt out and communicated to lowly paid employees. Employers may only want the lowly paid employees to perform over-time work as and when requested by their corresponding supervisors so as to better manage their actual hours worked.

 

Employers are already legally obliged to keep a minimum of 12 months' wage records. This requirement has been extended so that employers must maintain a record of the number of hours worked by their lowly paid employees. Exemptions are granted to employers regarding employees who earn more than the prescribed monthly rate set out in Schedule 9 of the Employment Ordinance, which is likely to be HK$11,500 per month.

 

The Penalties for Breach of the Ordinance

In addition to employees being able to bring claims in the Labour Tribunal to recover unpaid wages, employers may be fined up to HK$350,000 and imprisoned for three years.

 

Conclusion

The minimum wage is coming. Expect year on year heated debates about the actual amount and whether it is too low/ too high. Time alone will tell if it benefits or burdens Hong Kong's employers and employees.

 

OLN's Employment Practice Group constantly develops to keep pace with the law and has gained a respected position with employers, employees and among our peers as being at the forefront of providing practical and straightforward advice in a complex and developing area of law.

 

We are happy to discuss how the Ordinance may impact on your particular business as required.