In his election manifesto 5 years ago, the Chief Executive pledged to assess the effectiveness of the minimum wage scheme and renew the level of minimum wage; set up a special committee to examine issues relating to standard working hours; and resolve the controversial mandatory provident fund (MPF) offset mechanism. This article sets out a summary of the latest recommendation on wage increase and standard working hours proposed by the Minimum Wage Commission and the Standard Working Hours Committee respectively, as well as the latest development on the MPF offset mechanism.

Standard Working Hours

The Standard Working Hours Committee which was set up in 2013 to advise the Government on working hours policy will submit a final report to the Government by the end of January 2017.

The report will include views of the public and recommendations on the following policy directions:

(1) implementing the ‘big frame’- a legislative approach to mandatorily require employers and employees to enter into written employment contracts, which will include the specified working hours terms, such as overtime compensation arrangements;

(2) implementing the ‘small frame’ - where suitable, to set up a working hours standard and an overtime pay rate to further protect grass-roots employees with lower income, lower skills and less bargaining power;

(3) formulating voluntary guidelines on working hours according to the needs of individual sectors.

Currently, there is no general statutory provision for standard working hours of employees, implementation of any working hours policy will likely have impact on employers and employees of various businesses and industries.

Minimum Wage could be increased by HK$2

The level of minimum wage which is reviewed at least every two years, is due to be reviewed by the Minimum Wage Commission by May 2017.The proposed minimum wage might be increased from the current rate of HK$32.50 to HK$34.50, a 6.15 per cent increase which is far below the HK$41 counter proposed by labour unions. The Minimum Wage Commission has not confirmed the proposed rate of increase yet, but any proposed increase will have to be endorsed by the Chief Executive in Council first before it can come into effect, affecting some 154,500 employees across Hong Kong.

Scrapping the Mandatory Provident Fund Offset Mechanism

The Government is expected to announce at the coming policy address on 18 January 2017 its proposed change to the MPF offset mechanism which historically allows employers to settle severance and long-service payments using employee’s retirement funds. It is likely that the proposal would involve specifying a cut-off date, after which employers would no longer be allowed to offset employees’ severance and long-service payments by their MPF contributions. It is also likely that in return the Government would provide subsidies to employers for 10 years after the ending of the controversial MPF offset mechanism.

The Government will launch a three-month consultation period before tabling an amendment to the existing Mandatory Provident Fund Schemes Ordinance and the Employment Ordinance, if the public supports the proposal.

Both labour unions and employers remain anxious about when and how the above policies would be implemented. The only thing certain is that these policies will have significant economic implications and impact on the labour market.