Global Employer Services Newsletter September 2019

Don’t underpay your employees or you might pay even more

The continuing changes to the Hong Kong Employment Ordinance can make hiring and compensating employees increasingly complicated. Employers can be hard pressed to ensure their compliance with the updated employment laws of Hong Kong in respect of the local workforce. In particular, multinational organisations who have expanded their business into Hong Kong have found a lack of knowledge makes it difficult to comply with the local employment-related legislation.

Over the past few years, a number of labour disputes have touched upon various aspects concerning the incorrect calculation of wages, holiday pay and annual leave pay due to employees by employers. In one recent case, the chief executive of a restaurant chain voluntarily revealed that, since 2007, the company had underpaid holiday wages due to employees. It was believed that up to 3,000 employees had been affected to whom the chief executive had sent an apology letter and promised to settle the underpaid amounts within a specific timeline.

The Labour Department expressed concern regarding this incident and stressed that employers must pay wages to employees in an accurate, complete and timely manner by strictly adhering to the requirements stipulated in the Employment Ordinance.

It is not uncommon that labour disputes involve mistakes in the calculation of an employee’s Daily Average Wages (DAW), which applies to the computation of the seven relevant statutory entitlements - holiday pay, annual leave pay, sickness allowance, maternity leave pay, paternity leave pay, end of year payment and payment in lieu of notice.

Employers should pay special attention to the provisions under the Employment (Amendment) Ordinance 2007 (the E(A)O 2007) relating to the calculation of the seven relevant statutory entitlements. The main objective of this amendment is to ensure that all types of remuneration defined as wages under the Employment Ordinance are included in the computation of the seven relevant statutory entitlements

Joseph Hong