In brief

 

  • The Hong Kong parliament has passed the Minimum Wage Ordinance, which for the first time will create a statutory minimum wage in Hong Kong.
  • The initial wage level will be set by the government upon recommendation by the Provisional Minimum Wage Commission. Thereafter, the minimum wage level will be reviewed every two years.
  • It is expected that the legislation will take effect during the first half of 2011. Employers with employees in Hong Kong should start considering whether they may need to make changes to employment terms and conditions in time for the minimum wage taking effect.  

The Minimum Wage Ordinance (Ordinance) was passed by the Hong Kong Legislative Council on 17 July 2010 and gazetted on 23 July 2010.

Background

Labour unions have been lobbying for a statutory minimum wage in Hong Kong since 1998, after the Asian Financial crisis. Hong Kong Chief Executive Donald Tsang promised during the 2005 election that a proposal on a minimum wage would be worked out. After public consultation and much debate, and attempts to introduce a voluntary wage protection initiative, the bill was finally introduced in June 2009.

How will the minimum wage be set?

The Provisional Minimum Wage Commission (PMWC) is tasked to advise the Chief Executive on the appropriate level of the initial minimum wage rate. The PMWC’s terms of reference require it to adopt an evidence-based approach through objective and comprehensive data analyses as well as extensive consultations with stakeholders, with a view to ensuring a sensible balance between forestalling excessively low wages and minimising the loss of low-paid jobs, while sustaining Hong Kong’s economic growth and competitiveness.

Under the Ordinance, the Chief Executive is empowered to recommend the minimum wage level to the legislature for it to approve or reject. Once the level is set, the law requires the wage level to be reviewed every two years. It is expected that Mr Tsang will propose the first minimum wage level in November 2010, with a view to it taking effect in the first half of 2011.

Reports suggest that the minimum wage level is likely to be set as an hourly rate somewhere in the range of HK$24–33 (US$3–4) per hour, though this is merely speculation at this stage.

Implications for employers

Employers with lower-paid employees in Hong Kong will need to consider the potential impact of the new statutory minimum wage on their workforce, and may need to consider amending terms and conditions of employment in order to ensure compliance.