Hong Kong Reviews the Minimum Wage Amount Taking Effect from 1 May 2019

Hong Kong Reviews the Minimum Wage Amount Taking Effect from 1 May 2019

Hong Kong Reviews the Minimum Wage Amount Taking Effect from 1 May 2019 829 500 Adam Hugill

The debate about the minimum wage in Hong Kong started more than a decade ago and was intended to devise an optimal statutory regime to forestall excessively low wages. However, from the government perspective the intent was also to avoid impacting labour market flexibility, economic growth and competitiveness, and moreover to set off a significant loss of low-paid jobs.

The regulation adopted an evidence-based approach to making its recommendation for the initial minimum wage. That evidence included data research and analysis, as well as extensive consultation with stakeholders. The initial minimum wage level was established in the form of subsidiary legislation once the principal minimum wage bill had passed, recommending a rate to the Chief Executive.

In terms of emotional heat and public controversy, the debate over the minimum wage for Hong Kong lags not far behind political reform. On the one hand workers were demanding the right to earn enough to support families and enjoy the benefits of living in Hong Kong and on the other hand the employers were saying they cannot sustain demands for a high minimum wage without laying off huge numbers of employees.

The Legislative Council voted to accept the proposed wage on 5 January 2011 and the Statutory Minimum Wage Ordinance came into force on 1 May 2011, setting a minimum hourly rate of HK$28.00. Back then, there was also quite a bit of controversy as the law does not mandate that meal breaks and rest days be paid as this should be decided by private negotiation between employers and employees.

The 2019 Minimum Wage Review will see the biggest rise to the statutory minimum wage since the legislation came into force in 2011. The Executive Council has, again, adopted the recommendation of the Minimum Wage Commission and will be raising the minimum wage from HK$34.50 to HK$37.50 effective 1 May 2019.

Since 2011, the minimum wage has been reviewed every two years increasing relatively consistently:

  • HK$30.00 in the first review in 2013;
  • HK$32.50 in 2015; and
  • HK$34.50 in 2017.

Overall, the statutory minimum wage has increased by more than 30% in 8 years, but it is still far from being enough to meet the needs of people living in one of the world’s most expensive cities.

This conclusion is supported by a study conducted by Oxfam Hong Kong and the Hong Kong Institute of Asia-Pacific Studies’ Centre for Quality of Life at the Chinese University of Hong Kong before the 2019 Review was announced. The recommendation result was to set the minimum wage at HK$54.70. The aim of the study was to understand working families’ cost of living to calculate a living wage rate. The study found that the basic monthly household expenditure for a one-person family in 2017 was HK$10,494 to HK$11,548, and HK$19,935 to HK$21,156 for a three-person family. More than one million employees (excluding government employees) earned less than a living wage. Nearly 60% of these employees work in the import and export, retail, food, property management, security and cleaning industries.

In addition, many other groups have been pushing for the minimum wage to be increased substantially to over HK$50 per hour.  These arguments are met with responses from business and industry groups who say that the increase of the minimum wage will wipe out profits and lead to lay-offs.

Taiwan and South Korea looked set to raise their minimum wage to about HK$38.00 and HK$58.00 respectively, which is substantially higher than Hong Kong when factoring the difference in local cost of living. The highest minimum wage in developed economies is still in Australia set at the equivalent of HK$84.10, while other major European countries rates are around HK$70.00, much higher than countries like Japan or the U.S. where the minimum wage is around HK$47.00.

As many have repeatedly said, Hong Kong – as a well-developed economy – could do much better, urging the government to review the wage every year, instead of biennially. Catherine Yan Sui-han, convenor of the Environmental Services Contractors Alliance, which represents 90% of the city’s cleaning companies, was outraged at the new level. “It’s a big blow to the business sector” she said. “The new level will just drive up inflation”. She said most cleaners are paid above the minimum wage level, at HK$42.00 an hour. But, she warned of the “ripple effect”, and said those making more than the minimum wage would ask for a raise if they saw lower paid colleagues get a salary bump because of the change. “If you don’t offer a raise, they would just leave. That’s a problem because the industry is already facing a shortage of workers”, Yan said.

Foreign Domestic Helpers’ (FDHs) minimum wages are inflation-adjusted annually for contracts about to be signed, and apply for the duration of the contract. Furthermore, FDHs are entitled to one 24-hour rest period each week.

The minimum wage for FDHs was reduced by HK$190 in 1999. Again in April 2003, in a deflationary environment, the Government announced a HK$400 reduction in pay, to HK$3,270, “due to the steady drop in a basket of economic indicators since 1999.”, which even led to several lawsuits and the minimum allowable wage was raised by HK$80 to HK$3,480 per month for contracts signed on or after 6 June 2007. Another HK$100 cost of living adjustment took effect for all employment contracts signed on or after 17 July 2008, increasing the minimum wage to HK$3,580 per month. In September 2017, the minimum wage was further increased from HK$4,310 to $4,410 per month.

Employers who are convicted of failing to pay the minimum wage will be fined, and jailed for up to three years.

Our team at Hugill & Ip has extensive experience in dealing with Hong Kong employment law – so kindly get in touch with us to find out how we can help.

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.

Adam Hugill

Adam Hugill

Adam advises on a wide range of contentious and non-contentious legal and commercial issues, with a special emphasis on employment law in Hong Kong and the Asia Pacific region.

All articles by : Adam Hugill
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