Introduction

The Minimum Wage Ordinance (“MWO”), a very controversial piece of legislation was passed by the Legislative Council on 17 July 2010 and gazetted on 23 July 2010.

On 31 August 2010, members of the Provisional Minimum Wage Commission (“the Commission”), comprising representatives of the business sector, employees, scholars and public officers announced that its members had reached a consensus on the initial minimum wage level to be recommended to the Chief Executive of the HKSAR Government.  The Chief Executive will then put forward the relevant figures to the Legislative Council for approval.  The Commission did not disclose the figures for the minimum wage level but there is speculation that the recommended hourly wage rate is about HKD 29.  For the purpose of determining the initial minimum wage level, the Commission had considered various factors which include the need to maintain an appropriate balance between the objectives of forestalling excessive low wages and minimizing the loss of low-paid jobs; and to sustain Hong Kong’s economic growth and competitiveness.

A Minimum Wage Commission will be established under the MWO which will make recommendations to the Chief Executive about the minimum wage once every two years.

The MWO is expected to take effect in the first half of 2011.  This article will give you an overview of the MWO and the actions which employers may take before the MWO comes into effect.

Purposes of the MWO

The purpose of having the MWO is to provide a statutory minimum wage (defined below) to all relevant employees based on the prescribed minimum hourly wage rate and the hours which they have worked in the relevant wage period.

According to the statistics made by the Hong Kong Government in 2009, about 374,800 employees (mainly consisted of low skilled workers from the catering, retail and cleaning industry) will benefit from the MWO.

Application of the MWO

The MWO applies to every employee and his/her employer except the following person:

·            a person who is engaged under a contract of apprenticeship

·            domestic worker who dwells in the household of the employer free of charge

·            certain student intern (a student undergoing a period of work arranged or endorsed by certain education institution specified by the MWO in connection with an accredited programme provided by the institution for which the work is a compulsory or elective component for the award of the relevant academic qualification)

·            certain work experience student (a student who is enrolled in an accredited programme specified by the MWO or is a resident in Hong Kong who has enrolled in a non-local education programme and is engaged under a contract of employment which is a compulsory or elective component for the award of the relevant academic qualification) (The student must be under 26 years old at the beginning of the employment and the exempted period shall be limited to 59 days).

The MWO is also applicable to an employee under disabilities who holds a valid registration card issued by the Central Registry for Rehabilitation established by the Government (“PWD”). Basically, a PWD may agree with his/her employer concerning his/her wages during a four-week trial period (or until the completion of assessment of productivity, if earlier) at a rate which is not less than 50% of the prescribed minimum wage.  After obtaining the relevant certificate of assessment, the hourly wage rate of the PWD shall be calculated with reference to the assessed degree of productivity.

Major provisions of the MWO

Hours worked

The hours worked by an employee in a “wage period” shall include:

·            the time which the employee is in attendance at a place of employment (regardless whether the employee is provided with work or training) in accordance with the contract of employment or at the direction of the employer; and

·            traveling time in connection with the employment (which shall exclude the traveling time between the employee’s residence and his/her usual place of employment)

Wage Period

·            the period in which wages are payable to an employee for work done or to be done under the contract of employment

·            unless the contrary is proved, the wage period shall be one month

Wages

“Wages” has the same meaning as in the Employment Ordinance which includes all remuneration, earnings, allowances (including travelling allowances and attendance allowances), attendance bonus, commission, overtime pay [which is of a constant character or the monthly average of the overtime pay over a period of 12 months (or if not applicable, such shorter period of employment) is equivalent to or exceeds 20% of an employee’s average monthly wages during the same period].

The MWO specifically stipulates that “with the prior agreement of the employee, any commission paid after the first 7 days of a wage period (but before 7 days immediately after the subsequent wage period) shall be counted as part of the wages of the wage period when the commission is paid irrespective of when the relevant work is done.”  Therefore, if an employer obtains the agreement of an employee, the date of payment of the contractual commission can be used for adjusting the wages of a particular wage period so as to comply with the MWO.

Minimum Wage

“Minimum Wage” means the amount derived by multiplying the total number of hours worked by an employee in a wage period by the minimum hourly wage rate prescribed by the MWO.

No contracting out of the MWO

The MWO stipulates that a provision of a contract of employment that purports to extinguish or reduce any right, benefit or protection conferred on the employee by the MWO is void.  Therefore, all relevant employers must comply with the MWO notwithstanding any agreement with the employee which is contrary to the MWO.

Record of employees’ total hours of work

If an employee is protected under the MWO and the wages payable to that employee in any wage period are less than the amount prescribed by the MWO, then the wage record (which the employer is obliged to maintain under the Employment Ordinance) must contain information about the total number of hours worked by the employee in the wage period.  Such record shall be kept by the employer for a period of 6 months after the employee ceases to be employed.

Preparation for the implementation of the MWO

While employers and employees are waiting for the determination of the prescribed initial hourly wage rate and the effective date of the MWO, employers may take various actions to protect their interest and to ensure compliance of the MWO:

·            to clearly define the time which will be regarded as worked hours of the employees, especially in relation to employees who are required to “stand by”, subject to “on-call arrangements” or have to travel outside Hong Kong for business purposes.

·            to specify the rules for over-time work (e.g. employee may stay in the work place after the normal working hours only if he/she is required by the relevant supervisor to stay for work).

·            to establish a system for recording the employee’s actual hours of work (e.g. install a “clock in” and “clock out” system).

Conclusion

The MWO represents a milestone in relation to employment protection.  While all employers and employees are waiting for the announcement of the prescribed minimum hourly wage rate and guidelines to be issued by the Labour Department in relation to the MWO, prudent employers shall consider taking necessary steps to cope with the new challenges which may arise in relation to MWO so as to ensure compliance with this new legislation.