An Overview of the Minimum Wage Ordinance

Introduction

Effective enforcement of the Minimum Wage Ordinance has become one of the most important steps that governments have embarked on with the aim of ensuring that the rights of employees and grass-root laborers working in the city are protected. Studies point out that many employees’ payable wages at their wage period and in respect to the total number of working hours have over the years failed to meet the statutory minimum wage requirement. Recent developments in Hong Kong point out that the government passed the Minimum Wage Ordinance as well as set the minimum statutory wage and embarked on creating awareness to employees and employers on the requirements of the law and the need to have better and improved employment conditions. Tran and Abate indicate in their publication that statutory minimum wage should cover employees regardless of whether they are part-time, casual, daily-rated or monthly rated and whether or not their employment contract is continuous as defined by the employment ordinance.¹ As this paper analyses, the Minimum Wage Ordinance in Hong Kong is a key component governed by legislation which has the power to establish minimum wages penalties for non-compliance. This paper examines minimum wage ordinance (MOW (Cap 608) and its implications on employment.

Objectives

To determine the effectiveness of minimum wage ordinance in protecting employees rights and its impact on the economy

An overview of the minimum wage ordinance in Hong Kong

Studies indicate that legislation on minimum wage in Hong Kong began in 1932 when the colonial governor at that time was granted the power to establish and set up minimum wage. Even though the legislation provided the governor with the ability to set minimum wages for piece of work and rate of time taken as well as to institute penalties for failure to comply, the governors did not effectively and efficiently exercised the power granted to them to establish a minimum wage requirement and protect employees’ rights. Gentile argues in her article “Wage laws see varied results over 14 years” that it was not until 2006 that legislators saw the need to float a proposal calling for voluntary minimum wage.² This eventually gave birth to a Minimum Wage Provisional Commission, an executive branch that was formed in February 2009 whose goal was to conduct extensive research and set a floor for proposed wage.

Simonsis indicates in her publication that in 2010, plans to set up an effective minimum wage system began with special contributions from prominent legislatures like Tommy Cheung, a Legislative Council of Hong Kong (LegCo) member and a representative of the growing catering industry functional constituency.³ Cheung had initially suggested that the minimum wage be limited to HK$20 but later amended it to HK$24. In July 2010, the Hong Kong Legislative Council passed the Minimum Wage Ordinance and which come into full force at the beginning of May 2011. Economic analysts argue today that bringing into effect the minimum wage system in Hong Kong is one of the most serious forms of legislative incursions that will impact on its marketing economy. As such, the aspects of minimum wage have not escaped opposition from leaders in an organization like Lion Rock institute which is a think tank in the free market, as well as from certain members of the Liberal party who pillory that a minimum wage system will cause massive loss of jobs of between 25,000 and 170,000 people depending on the type of minimum wage adopted.⁴

Economic analysts argue that the passing of the ordinance in Hong Kong has marked a rare departure from the free market economy and provided employees with a statutory minimum wage (SMW). The mechanical provision of minimum wage at HKD28 given by the Ordinance makes the effective minimum wage of an employee to be higher and impacts on a business in certain ways that legislators had not foreseen. In disagreement, Walsh and Papwort posit that the minimum wage ordinance is an important component and an aspect that not only minimizes the loss of jobs that are low paying, but also forestalls low wages that has been in excess in Hong Kong.⁵ This in turn ensures that economic competitiveness and growth of Hong Kong’s economy is sustained.

Application of the ordinance

Studies indicate that the Minimum Wage Ordinance (MWO) in Honk Kong states the statutory minimum wage (SMW) that offers employees about HK$28 for every hour of work.⁶ Besides the hourly wage, section two of the Ordinance ensures that a Minimum Wage Commission is established to review and monitor the statutory minimum wage. Ellison points out his publication that the ordinance requires that a record be kept for employees whose wages are not more than HK$ 11,500.⁷ It is imperative to note that with certain exceptions, MWO applies to all casual, part-time and full-time employees in both continuous and non-continuous contract. Research indicates that in section three, the ordinance expressly exempts certain categories of employees which include work experience students, student interns and live-in domestic helpers. Another category that the MWO does not apply to includes non-employees such as self-employed people and contractors.⁸

Methodology

The research methodology applied in this research project was designed to achieve the set objective of the paper. Primary data collection was achieved through focused group interviews. Primary and secondary data were obtained from two broad methods. They included quantitative and qualitative methods. The former comprised of various databases which contain information on establishing minimum wages ordinances. Some of the resource materials for quantitative analysis of this research study included minimum wage cap 608, research official statistics, published books, peer reviewed journals, newspapers, research industry reports, magazines and credible government websites.

Recruitment

Recruitment was done using social network and online forums to reach out to targeted participants. For the interviews, employers and legislators were contacted on phone. Their phone numbers were obtained from directories. All participants were presented with adequate explanations and guidelines for the study. All participants were also required to fill and sign a consent form agreeing to voluntary participation. The snowball technique was also used to reach the targeted number of participants required for the study.

Population and sampling

A stratified random sampling method to select the respondents was employed. A total sample size of 100 participants was used and systematic sampling procedure was employed to gather data. All the participants were interviewed. Besides, a random sampling procedure was used to collect relevant data from the participating organization. Both regression analysis and statistical software (SPSS) were used to analyse collected data and the final results presented in chart format.

Findings

Minimum wage Cap 608

From the study, it was clear that the Minimum Wage Ordinance Cap 608 provides certain employees with minimum wage for rated hourly for every work done in section four, five and six, and ensures that a commission on minimum wage is established. Besides, it provides room for legislators to construct consequential amendments on ordinances such as the Employment Ordinance, Labor Tribunal Ordinance, Disability Discrimination Ordinance and the Minor Employment Claims Adjudication Board Ordinance. The minimum wage ordinance gives clear and strong on how to carry out minimum wage allocation wage allocation and the roles of the commission which reports to the Chief Executive.

Using minimum wages to meet the requirements of the statutory minimum wage (SMW)

It is imperative note that the study found out that statutory minimum wage system sets up an important floor that ensures that the existing benefits and rights of employees in the current Employment Ordinance and employment related legislation in Hong Kong is not detracted. Indeed, it does not interfere with the nature of wages, but by following the law, establishes lowest and yet permissible remuneration.

Discussion

Gillette posits in his publication and with reference to the Ordinance that all employees should be paid according to the total number of hours they have worked and in line with statutory minimum wage rate.⁹ In essence, the wage that an employee gets for every work period which can be monthly of weekly should not fall below the required SMW, and incase of any difference, employees should be entitled to certain payments. Howell concurs with Gillette and argues that the Ordinance expressly and strongly indicate that there should be no agreement between an employee and an employer to extinguish any protection, benefit or right the Ordinance confers to employees.¹⁰ The minimum wage, which is the initial SMW rate of HK$28 multiplied by total hours worked, should therefore be paid and employers who fail should be held liable and be imprisoned for three years or be fined to a tune of HK$350,000 according to the law.¹¹

Conclusions

To sum up, the paper concludes by supporting the thesis statement that “effective enforcement of the Minimum Wage Ordinance has become one of most important steps that governments have embarked on with an aim of ensuring that the rights of employees and grass-root laborers working in the city are protected”. The analysis in the paper clearly brings out the important aspects of minimum wage ordinance in protecting the rights of employees. Inasmuch as it may be cumbersome to predict the best pay level for workers especially due to problematic aspects such as holidays, maternity and sickness among workers, the report has indicated that an employer must make proper calculations. The discussion has further indicated that the remuneration arrangements that employers make for low income employees must be in accordance with the statutory minimum wage requirement.

References

Ellison Minter, “Learning from the recent Cathay Pacific lawsuit.” (2009) 15 China Staff 4, 34-37.

Gentile Annie, “Wage laws see varied results over 14 years”. (2008) 123 The American City & County, (10), 16, 18.

Gillette Clayton. “Local redistribution, living wage ordinances, and judicial intervention.” (2007) 101 Northwestern University Law Review 3, 1057-1122.

Howell Debbie. “Wage Debate Rages On.” (2006) Chain Store Age 546.

Kendall Susan, “To pay or not to pay?” (2005) 11 China Staff 9, 31-33.

Simonsis Yolanda,”Living in the City That Works.” (2006) Paper, Film and Foil Converter 8

Tran Hong & Abate Duncan, “Legal Briefing.” (2004) 10 China Staff 5, 22-24.

Walsh Pattie and Papwort Deborah, “Maternity leave rights.” (2006) 12 China Staff 38-41.

Walsh Pattie, “Payments in lieu of notice.” (2006)12 China Staff 5, 35-37.

Footnotes

• 1 Tran Hong & Abate Duncan, “Legal Briefing.” (2004) 10 China Staff 5, 22-24.
• 2 Gentile Annie, “Wage laws see varied results over 14 years”. (2008) 123 The American City & County, (10), 16, 18.
• 3 Simonsis Yolanda,”Living in the city that works.” (2006) Paper, Film and Foil Converter 8
• 4 See Gentile Annie, “Wage laws see varied results over 14 years”.
• 5 Walsh Pattie & Papwort Deborah, “Maternity leave rights.” (2006) 12 China Staff 38-41.
• 6 Walsh Pattie,”Payments in lieu of notice.” (2006)12 China Staff 5, 35-37.
• 7 Ellison Minter, “Learning from the recent Cathay Pacific lawsuit.” (2009) 15 China Staff 4, 34-37.
• 8 Kendall Susan, “To pay or not to pay?” (2005) 11 China Staff 9, 31-33.
• 9 Gillette Clayton. “Local redistribution, living wage ordinances, and judicial intervention.” 101.3 (2007) Northwestern University Law Review 1057-1122.
• 10 Howell Debbie. “Wage debate rages on.” (2006) Chain Store Age 546
• 11 See Howell “Wage Debate Rages On.”