Whether you are an employer or employee operating in Hong Kong, it is important to know how wages are calculated. In Hong Kong, there is a legally built minimum wage system with the purpose to protect low-income workers and to have fair compensation for their labor. Effective from 1 May 2023, Hong Kong has raised the minimum hourly rate from HK$ 37.5 to HK$ 40. This article will guide you the basic principles and overview of minimum wages system in Hong Kong.
Which employee types are covered by minimum wage?
Minimum wage affects all types of employee including employees with disabilities. Therefore, it doesn’t matter whether they are monthly rated, weekly rated, daily rated, hourly rated, piece-rated, permanent, casual, part-time. However, there are some exception defined in employment ordinance. They are live-in domestic workers, student interns, work experience students and persons to whom the employment ordinance does not apply.
How to Calculate Minimum Wage Hong Kong?
Employer need to pay the exact wages to employee calculated as below. The wages payable should not be less than the amount of minimum wage calculated.
Minimum wage = Total number of hours worked by the employee in the wage period × SMW rate (i.e. $40 per hour with effect from 1 May 2023)
Rules and Penalties
- The Basic principle for Minimum Wage: the basic principle is that wages payable to an employee in respect of any wage period, when averaged over the total number of hours worked in the wage period, should be no less than the SMW rate.
- Mutual Agreement: an employer and an employee cannot by agreement reduce the employee’s entitlement to statutory minimum wage.
- Employment mode: As long as wages meet the minimum wage requirement, any mode of employment and wage payment is acceptable. Therefore, employers and employees do not need to change their current employment and wage payment methods.
- Penalties: Employer who failed to pay minimum wage may experience legal action. It may lead to a fine of HK$350,000 (US$44,781) and up to three years of imprisonment.
Consult with Professional
By following the guidelines set out in the Minimum Wage Ordinance, you can ensure fair pay practices and avoid legal complications. And, it is essential to regularly check the employment ordinance related to minimum wage Hong Kong. As an employer, you need to stay updated, keep hourly records and consult with the professionals when it is necessary. Fastlane HR can help you with experienced professionals of the field. Contact us today and get the better solution.