### Minimum Wage Ordinance

The Minimum Wage Ordinance ("MWO") came into effect in Hong Kong on 1 May 2011. As the name of the legislation implies, employees to whom the MWO applies are entitled to be paid wages of at least the Statutory Minimum Wage, which is currently set at HK\$28 per hour.

### Who does the MWO apply to?

The MWO applies to most full-time, part-time and casual employees, with the following exceptions:

• Student interns;
• Work experience students who have agreed to an exempted period of less than 60 days with their employers; and
• Domestic workers who live free of charge in the household in which they work.

### Employees with Disabilities

Employees with disabilities are entitled to the same minimum wage protection under the Ordinance. However, the MWO provides an arrangement whereby an employee with a disability whose productivity may be impaired by their disability can elect to have their productivity assessed to determine whether they should be remunerated at a rate no lower than the statutory minimum wage or at a rate commensurate with their productivity. Where an employee does not elect to undergo the assessment, they must be paid no lower than HK\$28 per hour.

### Calculating the Minimum Wage

Under the MWO, wages payable to an employee in respect of any wage period should be no less than HK\$28 per hour on average for the total number of hours worked (including any part of an hour). The wage period is the period in respect of which wages are payable, which in Hong Kong is usually one month. The formula for calculating the minimum wage is:

### Minimum wage = Total number of hours worked in a wage period × HK\$28

To calculate the hours worked by an employee, an employer must include time during which the employee is physically at the workplace or travelling in connection with his or her employment. Normally, this would include the time during which an employee is receiving training or working overtime. Hours not worked, such as holidays or travelling time between an employee's home and the workplace, are excluded from the calculation of minimum wage and should not count towards the wages payable to the employee. However, employers should be aware that the question of what time should be included in the total number of hours worked by an employee must be determined by reference to the facts and circumstances of each individual case.

Whether meal breaks and rest days are to be paid is a matter to be agreed between an employer and their employees. Such issues are relevant to calculating the total number of hours worked by an employee. Where an employee is paid for his or her meal breaks or rest days, then in order to calculate whether an employee is being paid the minimum wage of HK\$28 per hour on average, an employer must discount the sums received by the employee for hours not worked.

### Compliance

Regardless of when an employment contract was entered into, if a provision in a contract would mean that an employee would receive less than the minimum wage for hours worked, that provision will have no effect. Further, if the wages payable to an employee are less than the minimum wage of HK\$28 per hour on average, his or her employer must pay the employee the difference in respect of that wage period. The employment contract must be taken to provide for this additional sum.

The Statutory Minimum Wage will be subject to review at least once every two years. If an employer fails to comply with its obligation to pay the Statutory Minimum Wage to its employees, the employer may be liable to prosecution and, upon conviction, to a fine of HK\$350,000 and to imprisonment for 3 years.

### Record-keeping

Every employer has to retain records of the wage and employment history of each employee covering the period of his or her employment for the past twelve months. For employees that are covered by the MWO and receive less than HK\$11,500 per month, their employers are also required to keep a record of the total number of hours worked by the employee. The records have to be kept for six months after the employee ceases to be employed.

An employer who fails to keep wage and employment records is liable to prosecution and, if convicted, to a fine of HK\$10,000.

### Conclusion

Whilst the MWO was intended to protect the wages of low-income workers and minimise the loss of low-paid jobs, matters such as paid meal breaks and rest days have had the effect of complicating the issues. Employers who hire new staff from 1 May 2011 onwards may want to consider if their employment contracts should be revised so that employees will only be paid for hours worked and not for meal breaks and rest days. In addition, employers may want to consider inserting provisions in employment contracts for new staff which will assist them in their record keeping obligations.