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Op-Ed

2016/07/26

Labour Contracts Best Solution for Tackling Long Working Hours

The Standard Working Hours Committee’s (SWHC) second-stage consultation on standard working hours has just concluded, and the Hong Kong General Chamber of Commerce supports, in principle, the “big frame” approach. We believe this option would adequately address employers and employees’ concerns about working hours, overtime and compensation arrangements without resorting to legislation.

We are not against regulation where regulation is proven to be needed. What we are against is new regulation that, however well-meaning, constrain Hong Kong’s competitiveness and companies’ flexibility. Moreover, as we saw during the fifth Legislative Council, legislation is a cumbersome tool, often difficult to predict, and increasingly built on emotional and populist views.

In the Consultation, 93.7% of employees agreed with the approach of stipulation working hours and overtime arrangements in employment contracts. Interestingly, out of all the options presented in the Opinion Survey on how the current working hours regime should be changed, the preferred option, which was also from labour union members, was in support of “requiring employers and employees to specify hours of work, overtime arrangement and overtime compensation in employment contracts.”

In fact, over the past 200 years, there is no evidence that contract law, written or non-written, is not adequate to deal with employment contracts.

Under the “big frame,” employers and employees would be required to enter into written employment contracts specifying working hours, overtime arrangements and compensation, agreed wages, meal breaks and rest periods, rest days and records of hours worked, etc. Of course other issues would also need further study, not least thecost of compliance as well as the definition of standard working hours which take into account differences across sectors and staff grades.

There is no doubt that Hong Kong people work hard, which is one of our core strengths. But how hard do we work? The Consultation found that 24.4% (770,000) of employees surveyed considered their working hours too long, but 69.9% of this group would not want to see their working hours cut if it meant a cut in their salary. A total of 25.2% or 790,000 of those surveyed said they had worked overtime, and 18.4% (580,000) said they did not get any overtime pay.

The Consultation also looked at the potential cost to wage bills if SWH were to be set at 44 hours per week, with overtime compensation set at 1.5 times the rate of basic pay, as labour organizations have been calling for. Assuming employees earn $15,000 per month, enterprises’ annual wage bill would soar to $10.4 billion, which is equivalent to 1.84% of the total annual wage bill. That in turn would force 6,990 companies into the red and put 187,300 jobs in jeopardy.

Companies may try to avoid paying overtime rates by reducing employees’ working hours and hiring an additional 195,000 fulltime employees. However, given the existing labour shortage and the average of 83,800 job vacancies in 2015, many companies may not be able to find extra employees.

Opponents of the “big frame” concept argue that low-income and low-skilled employees have no bargaining power to stipulate employment terms in contracts. They believe the “small frame” concept, which would set a working hours standard and an overtime pay rate for such employees, would provide more protection.

The “small frame”might sound like a feasible approach to protecting grassroots workers, but in reality, this artificial manipulation of employment terms for a segment of the labour force would reduce businesses’ flexibility. It could also adversely impact the job security of workers, who would most likely be the first to be laid off when companies needed flexibility to overcome severe downturns.

Hong Kong’s strengths have always been our agility and adaptability, which in turn have fostered our entrepreneurial spirit. These attributes have helped us weather economic down cycles and prevent layoffs. Artificially manipulating markets and costs – as the Statutory Minimum Wage has proven – can exacerbate problems and do little to solve the issue.

We understand that there are a lot of different opinions within the community, which is a healthy thing. We need to find a way to channel and harvest those ideas to arrive at a solution that is acceptable to all parties. I believe no one wants to see Hong Kong’s economic wellbeing suffer, nor the interests of employees. The challenge going forward is to ensure both of those concerns are adequately addressed.

Shirley Yuen is CEO of the Hong Kong General Chamber of Commerce

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