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Circulars
2011/03/31
Implementing the Statutory Minimum Wage
Dear Members,
All companies with employees based in Hong Kong will be required, as of May 1st, 2011, to pay workers at least $28 per hour for all hours worked in accordance with requirements in the Minimum Wage Ordinance (MWO).
To understand the MWO’s requirements and potential issues that may arise, members may draw reference from three sources of information, namely:
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“Advice to Employers” published by the Employers Federation of Hong Kong on 21 March 2011, and
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“Preparing for the Minimum Wage Ordinance”, powerpoint presentation at the Chamber by Mr Duncan Abate of Mayer Brown JSM on 16 March 2011.
Copies of the last two documents mentioned above are attached with this Circular.
The Chamber issues this Circular to alert members of major issues that may arise in the process of implementing the minimum wage, with a view to helping members comply with the law and avoid possibly serious ramifications if prompt and effective actions are not taken by employers.
On the face of it, it is simple enough to implement the minimum wage. But many employers have been asking the following questions with increasing urgency as the effective date is near:
My company pays employees monthly wages but the minimum wage is defined in terms of an hourly rate. How should we determine whether the existing monthly wages are above or below the hourly minimum level? What is the minimum monthly wage we have to pay in order to comply with the law?
One of the major issues in complying with the MWO arises in the “conversion” of monthly wages into hourly rates, and the issues essentially stem from the MWO’s requirement that any payment made to the employee for “time that is not hours worked” by the employee must not be counted as part of the wages for the purpose of ascertaining whether the minimum wage is met.
Those hours which may attract payment but should be deducted from the wages calculated for the MWO purposes include payment for statutory holidays, statutory annual leave, maternity leave, sick leave, etc. However, the same “deduction” also applies to any payment made for rest days and meal breaks, which are enjoyed by many monthly-paid workers.
The Employment Ordinance does not require payment for rest days and meal breaks. It is entirely a matter for employers and employees to agree upon. In practice it is seldom made clear in the vast majority of monthly-paid employment contracts whether rest days and meal breaks are paid or not, because there was never any need to address such question until the MWO was passed.
Whether rest days and meal breaks are considered to be paid or not after the MWO comes into effect would have far-reaching consequences for employers in respect of determining the actual wages they would have to pay. (To understand more about the potential consequences, please refer to Examples 20-22 in the Labour Department’s Reference Guidelines as well as the example in the “Advice to Employers” issued by the Employers’ Federation of Hong Kong.) The Chamber is concerned about the potential cost impact on member companies, especially the SMEs.
Members, in particular the SMEs, are advised to carefully examine all employment contracts (and manuals or other documents if applicable) for monthly-paid employees, and clearly state in the relevant employment documents what hours are to be paid for. When taking the necessary steps to comply with the MWO, employers should not reduce employees’ existing monthly pay and they should pay full regard to their legal and contractual obligations. Employers are also encouraged to communicate with their employees about any changes proactively and openly.
Apart from paying the minimum wages, companies are required to keep records of pay and working hours for all employees currently earning $11,500 or less per month. But employers should pay attention to the possibility that the pay and hours worked for employees earning substantially in excess of $11,500 per month might need to be logged because of the requirement that payment for hours not worked have to be excluded in calculating the minimum wage. (See Example 33 in the Labour Department’s Reference Guidelines). Members are urged to audit their current arrangements for keeping records of hours worked by employees, and to clarify with employees exactly when they are considered to be “on the job,” and when they are not.
For general information enquiries, members may call the Chamber Secretariat help desk at 2823-1257. Our colleagues will point you to available public information for reference. Please note that the help desk will not provide legal advice or advice on specific company policies. Members are urged to carefully consider whether they should seek legal advice on specific arrangements for their own companies.
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The Chamber is grateful for the insights and contribution received from Mr Duncan Abate of Mayer Brown JSM law firm. The statements contained in this circular are for general informational purposes only and should not be construed as legal advice. Members are recommended to contact legal professionals for detailed legal advice appropriate to their individual business circumstances.
If your company has relevant expertise in labour law and is interested to be included as a resource support unit for other members of the Chamber, please let the help desk know so that we can include your company’s name in a list of resources for members needing additional advice or support.
Regards,
Alex Fong
CEO
Att.
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