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Minimum Wage Increase From 1 May 2013

29 April 2013

The Minimum Wage Ordinance (Cap. 608) (the "Ordinance") came into force on 1 May 2011 and introduced a statutory minimum hourly wage rate of HK$28. With effect from 1 May 2013, the statutory minimum hourly wage rate will be increased for the first time to $30 per hour, an increase of 7.1%.

The Amendment
The Minimum Wage Commission (the "Commission") is tasked by the Ordinance to make recommendations to the Chief Executive regarding the statutory minimum wage rate at least once in every two years. When doing so, the Commission must have regard to the need to maintain an appropriate balance between the objectives of forestalling excessively low wages and minimising the loss of low-paid jobs, and to sustain Hong Kong’s economic growth and competitiveness.

In its 2012 Report (published in October 2012), the Commission recommended an increase of HK$2 in the statutory minimum hourly wage rate. The 2012 Report estimated that:

  • although the number of employees earning an hourly rate below HK$30 in May to June 2011 was 327,200 accounting for 11.7% of all employees, the number of employees affected by the increase might be less;
  • the recommended amendment would increase the total additional wage bill to around HK$2billion (an increase of 0.3%);
  • the overall unemployment rate would increase by about 0.3%; and
  • the Composite Consumer Price Index would go up by about 0.3 to 0.4%.

In December 2012, the Chief Executive in Council adopted the Commission's proposals, and the consequent amendments to the Ordinance and the Employment Ordinance (Cap. 57) were gazetted and tabled.

The Ordinance

Who?
The Ordinance covers all employees, except live-in domestic helpers, student interns, and work experience students during a period of exempt student employment.

Calculation
Statutory minimum wage = Total number of hours worked in the wage period x Statutory minimum hourly wage rate

"Hours worked" include any time when the employee is in attendance at the place of employment or travelling in connection with his employment. The phrase excludes unworked time; for example, rest days, paid holiday, paid annual leave, paid maternity leave, paid sick days, etc.

"Wage period" is taken to be one month unless the contrary is proven; for example, where the employment contract provides that wages are to be paid on a weekly-, daily- or piece-rate.

Penalty
If the wages paid in a wage period are less than the statutory minimum wage, the employee is entitled to be paid the differential. Failure to pay the statutory minimum wage renders an employer liable to a fine of HK$350,000 and imprisonment for 3 years.

Employers may not contract out of the statutory minimum wage. Any provision in a contract of employment that purports to extinguish or reduce any right, benefit or protection conferred on the employee by the Ordinance is void.

Record Keeping
From 1 May 2013, employers must keep records of the total number of hours worked by employees whose net wages in any wage period are less than $12,300 (an increase of HK$800 from the previous minimum).

Where an employee is ordinarily receiving on average more than $12,300 per month, the exclusion of paid unworked time (e.g. paid rest days, paid annual leave, etc) may reduce the employee's "net wages" to less than $12,300, so that the record keeping requirement under the Ordinance will apply. It is therefore good practice to keep a record of the hours worked by employees regardless of the threshold.

Points to note
The method of calculation and the key requirements of the Ordinance will not change on 1 May 2013. However, all employers are reminded to update their systems and ensure that, from 1 May 2013, they are paying all employees at least the statutory minimum hourly wage rate of HK$30.

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The team

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