In brief

  • Hong Kong’s Minimum Wage Ordinance took effect on 1 May 2011. 
  • The initial minimum wage level is HK$28 per hour. The minimum wage level will be reviewed every two years. 
  • The Labour Department has recently released non-binding Reference Guidelines for Employers and Employees with respect to the application of the minimum wage.
  • Employers with employees in Hong Kong should ensure that  they have made any necessary changes to employment terms and conditions in light of the minimum wage legislation taking effect.

Hong Kong’s new Minimum Wage Ordinance (Ordinance) has taken effect on 1 May 2011, with the initial minimum wage being HK$28 per hour.

Background

The Ordinance was passed by the Hong Kong Legislative Council on 17 July 2010 and gazetted on 23 July 2010, following much public debate regarding whether or not Hong Kong should introduce a minimum wage.

The Legislative Council has since approved a number of pieces of subsidiary legislation under the Ordinance, including the initial statutory minimum wage and the effective date of the minimum wage.

The statutory minimum wage

The initial minimum wage is HK$28 per hour, effective from 1 May 2011. Under the Ordinance, the minimum wage level must be reviewed once every two years.

That review will be undertaken by the Provisional Minimum Wage Commission, which is tasked to advise the Chief Executive on the appropriate level of the minimum wage rate. Under the Ordinance, the Chief Executive is then empowered to recommend the minimum wage level to the legislature for it to approve or reject.

Coverage of the Ordinance

The Ordinance applies to all employees, whether they are full-time, part-time or casual employees, with certain exceptions such as live-in domestic workers, apprentices and student interns. The Ordinance also applies regardless of whether an individual is employed under a continuous or non-continuous contract of employment in accordance with the Employment Ordinance.

The Ordinance includes special arrangements for employees who have disabilities, such that they may be paid below the minimum wage level in accordance with their productivity.

Employers and employees cannot lawfully agree to contract out of the application of the Ordinance.

Determining compliance with the Ordinance

The calculations necessary to determine whether a lower paid employee’s remuneration is compliant with the Ordinance can be complicated. In particular, employers should note that the relevant minimum wage is calculated with reference only to hours actually worked. An employee who receives a monthly salary is considered to be paid both for time worked and time not worked. The portion of their salary attributable to time worked must be greater than the minimum wage. So in order to determine whether or not an employee’s monthly salary is above the minimum wage level, each month the employer must perform a calculation that deducts from the salary that portion that is paid for the employee’s rest days, statutory holidays and leave etc for that month.

The Labour Department has recently released Reference Guidelines for Employers and Employees with respect to the minimum wage (Guidelines). While the Guidelines are not legally binding and the legal interpretation of the Ordinance would be based on its original text, the Guidelines do provide some guidance to employers in understanding how the minimum wage should be applied. The Guidelines set out examples for calculating the relevant minimum wage levels with respect to meal breaks, rest days, absences on work days (for example due to statutory holidays, annual leave, sick leave), overtime and commission payments.

Implications for employers

Employers with lower-paid employees in Hong Kong need to consider the potential impact of the new statutory minimum wage on their workforce, and it may be appropriate to undertake a formal review of employment agreements for legal compliance. Employers may need to consider amending terms and conditions of employment in order to ensure compliance.

Given the calculations necessary each pay period to determine whether or not the minimum wage is exceeded for an employee, employers may wish to consider amending employment agreements to state that only hours worked are paid, with additional salary payments to be made for statutory holidays.

However, employers should be careful to avoid making any unilateral changes to an employee’s conditions of employment that may have a detrimental effect on the employee, in an attempt to avoid or minimise the application of the minimum wage. Likewise, employers cannot unilaterally change a worker’s status from employee to contractor or self-employed person in order to avoid coverage by the Ordinance.

Employers should also be aware that the Ordinance imposes a duty on employers to retain records of hours worked for all employees who are paid less than HK$11,500 a month (as calculated for actual hours worked in each month, rather than as a monthly salary).