After much heated debate that lasted 41 hours in the Hong Kong Legislative Council, the Minimum Wage Ordinance ("Ordinance") was passed on 17 July 2010 and will come into force on this year's Labour Day holiday, 1 May 2011. The Ordinance, a rare departure from Hong Kong's free market economy, provides for a statutory minimum wage ("SMW") for employees and aims "to strike a balance between forestalling excessively low wages and minimising the loss of low paid jobs while sustaining Hong Kong's economic growth and competitiveness".
Because of the extensive application of the new SMW system, there is a need for all employers to understand the relevant provisions and the application of the Ordinance regardless of whether you pay employees on an hourly basis or below the SMW.
The Applicability of the Ordinance
The Ordinance applies to every employee in Hong Kong except :-
- persons to whom the Employment Ordinance ("EO") does not apply;
- persons who are employed as domestic workers and dwell in the employing household free of charge;
- employees under contracts for employment outside Hong Kong;
- persons who are engaged under a contract of apprenticeship registered under the Apprenticeship Ordinance; and
- student interns.
The SMW Requirement
SMW is a wage floor which will not detract the employees' existing rights and benefits under the current employment-related legislation, including the EO. The SMW will not change the nature of wages, but simply sets the lowest permissible remuneration under the law.
In essence, an employee's wages must not be less than the SMW on average for the hours worked in any wage period (normally one month). The initial SMW rate is HK$28 per hour and such rate is subject to review every 2 years.
The calculation of the minimum wage for a wage period payable to an employee is :-
Total no. of hours worked by the employee in the wage period X SMW rate (initially at $28)
It is expressly stated in the Ordinance that the employers and employees may not reach private agreement to extinguish any right, benefit or protection conferred on the employees by the Ordinance.
Additional Obligations Imposed on Employers – Records Keeping
The Ordinance has significantly changed an employer's obligation with regards to records keeping. Employers are now obliged to keep records of the number of hours worked by the employees, unless the employees' wages for any wage period is more than a specified amount ("Minimum Amount"), which is initially set as HK$11,500 per month. This obligation is applicable to all employees regardless of whether the SMW is met and may be an onerous administrative burden on employers who hire large number of employees at relatively low wages eg supermarkets, fast food chains etc.
If the records keeping obligation is applicable, the following should be recorded :-
- time when the employee is in attendance of his/her place of employment irrespective of whether he/she is provided with work at that time; and
- time spent by the employee on travelling in connection with his/her employment (excluding travelling between his/her home to workplace other than a place of employment that is outside Hong Kong and is not his/her usual place of employment).
During the term of employment, the records should be kept for 12 months at the employer's place of business or at the place where the employee is employed. After the employee ceases to be employed, any undestroyed records should be kept for another 6 months after the employee's departure.
Employers should be aware of their additional obligations under the Ordinance to avoid any liability thereunder. For failure to pay the SMW, the penalty is a maximum fine of HK$350,000 and imprisonment for 3 years. For failure to keep proper records of the hours worked, a fine of HK$10,000 may be imposed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.