Employers should exercise caution when salary benchmarking to avoid breaching competition rules

The exchange of salary and bonus information among employers for the purposes of benchmarking is commercially advantageous as it can help to ensure that a company’s labour costs are not higher than necessary. Benchmarking can enhance efficiency as it may result in reduced costs across an industry.

However, actions which could artificially depress the price (salaries and bonuses) paid by employers for the services of their employees could prevent, restrict or distort competition in the “market” and could amount to a potential breach of the Competition Ordinance and businesses should therefore exercise caution when exchanging information of this nature.

If labour is viewed as a ‘market’, then employees are assets to be ‘bought’ at a price (i.e. their salary and bonus). The following guidelines are intended to help businesses ensure they do not fall foul of the Competition Ordinance in Hong Kong when benchmarking salaries.

Don’t - agree salary or benefit levels with other employers

Agreeing salary, bonuses or the value of other benefits to be offered to employees levels with other employers (and particularly competitors) would be regarded as serious anti-competitive conduct under the Competition Ordinance. For these purposes, note that an ‘agreement’ does not have to be written down, a ‘meeting of minds’ will suffice.

Do - use an independent third party

Data on employee salaries and benefits should not be exchanged directly with other employers. If you are asked by a competitor to share information you should politely refuse! Using an independent third party that promises not to disclose one company’s information to the other reduces the risk.

Do - use historical information

Even when using an independent third party, the data exchanged as part of a benchmarking exercise should be “historic” (relating only to current salary and benefit practices, as opposed to future plans). Information on prospective or planned salaries and benefits should not be exchanged.

Do - ensure data is not attributable

Even where an independent third party is conducting the benchmarking survey, it is vital that information remains confidential and that it cannot be reverse engineered to identify its source. This can be achieved by:

  • anonymising results so that individual data cannot be attributed directly to individual employers; and/or
  • presenting data in an aggregated format in ranges or averages; (ideally there should be at least five participants to the survey so that information is sufficiently diluted).