In 2023, the Hong Kong government increased Hong Kong minimum wage, as it is periodically reviewed every two years.
As a business owner or HR personnel, it’s essential to comply with these requirements, as understanding the Hong Kong minimum wage also helps ensure compliance with other labor laws.
Regarding the minimum wage in Hong Kong, how much is it, who does it apply to, and what are the penalties for non compliance? Read on to find out.
The Minimum Wage Ordinance
According to the Labor department of the Hong Kong Special Administrative Region government, the minimum wage ordinance sets the statutory minimum wage in Hong Kong (SMW) and specifies which payments qualify as payable wages. This regulation has been in effect since 1 May 2011, when the SMW was introduced.
So, what criteria does the ordinance use to determine Hong Kong minimum wage?
It seeks to strike a balance “between forestalling excessively low wages and minimizing the loss of low-paid jobs while sustaining Hong Kong’s economic growth and competitiveness.”
What is counted as wages in Hong Kong?
Payments that qualify as wages cannot fall below the Hong Kong minimum wage standard. So, what falls under the category of wages? According to the the Concise Guide to the Statutory Minimum Wage:
Wages are “all remuneration, earnings, allowances including traveling allowances, attendance allowances, commission, overtime pay, tips and service charges, however designated or calculated, capable of being expressed in terms of money, payable to an employee in respect of work done or to be done, subject to certain exclusions.”
What is Hong Kong minimum wage?
Currently, the Hong Kong minimum wage is HK$40 per hour. This statutory minimum wage took effect on 1 May 2023, and applies to all types of employment contracts, such as full-time, part-time, contractual, casual, daily, and piece-rate work, without regional variations.
To calculate the total Hong Kong minimum wage, multiply the hourly rate (HK$40) by the total number of hours worked during the wage period.
Aside from this, it is important to keep track of employee work hours for payroll and labor law compliance purposes. Regarding the maximum monthly amount for employers to record the total number of hours worked by employees, this stands at HK$16,300.
Read next: Understanding The Payroll System Hong Kong Runs On
What happens if an employee’s wage is less than Hong Kong minimum wage?
The Employment Ordinance classifies this as a breach of wage provisions.
If an employer intentionally fails, without a valid reason, to pay their employees at least the minimum wage in Hong Kong, they may face prosecution.
In cases where a conviction is reached, you could be subject to a fine or imprisonment for failing to comply with the Hong Kong minimum wage requirements.
Penalties for Paying Below Hong Kong Minimum Wage
Those convicted of paying below the Hong Kong minimum wage could face a fine of up to HK$350,000 and imprisonment for a term of up to three years.
This penalty applies not only to employers but also to any managers, directors, secretaries, or other individuals in similar decision-making roles who are complicit, contribute, or neglect to ensure that employees are paid at least the Hong Kong minimum wage.
This penalty applies to employers and any consenting, contributing, or neglectful managers, directors, secretaries, or similar decision-makers who play a part in issuing salaries below the minimum wage in Hong Kong.
Who is protected under the Statutory Minimum Wage (SMW) Regime?
The Hong Kong minimum wage applies to all employees, employers, and their employment contracts, encompassing both manual and non-manual work, irrespective of age, nationality, and occupation.
Under employment contracts
The statutory Hong Kong minimum wage is relevant to full-time, part-time, and casual employment, including apprenticeships, unless the apprentices have undergone a productivity assessment that sets a different minimum wage fitting to their productivity level.
People with disabilities are also covered by the Hong Kong minimum wage regulations. However, they have the option to undergo a productivity assessment to determine if they should receive the Hong Kong minimum wage or a lower rate commensurate with their productivity.
Student interns and work experience students
Regarding student interns and work experience students, the Hong Kong minimum wage ordinance generally applies to them. However, there are exceptions for certain student interns and work experience students during an exempt student employment period.
To qualify for exemptions, students must be enrolled in specific education programs specified under the Minimum Wage Ordinance. They must be student employees registered in full-time education programs for non-local academic qualifications at degree level or higher, or in full-time accredited programs provided by local education institutions, as listed in the Ordinance.
Moving on to interns, they’re exempt from the Hong Kong minimum wage requirements if their education institutions have arranged or endorsed their internships and if these internships are a compulsory or elective part of their programs. It is important to note that age and the duration of the internship are not relevant in this context.
Similarly, work experience students are not required to be paid the Hong Kong minimum wage under certain conditions. They must be enrolled in the same education programs as student interns (as mentioned above). Their internships do not have to be curriculum-related or arranged or endorsed by the education institutions.
Unlike student interns, age and work experience duration of work experience matter for work experience students. They must be under the age of 26 at the start of their employment.
Employers can mutually agree with a student employee to designate 59 consecutive days as an exempt student employment period. In such cases, the student employee must make a statutory declaration confirming this agreement and provide the original form or a copy of it to the employer.
It’s important to note that a student employee can only commence one exempt student employment period per year, even if they work for different employers.
Self-employed individuals, volunteers and others
When it comes to exemptions, self-employed individuals and volunteers are not covered by the Hong Kong minimum wage regulations.
If you operate a family business and employ a relative, you are allowed to pay them below the Hong Kong minimum wage. This also applies to live-in domestic workers. Additionally, specific jobs, such as those of seafarers, aviation workers, and public officers, are subject to unique regulations concerning the minimum wage in Hong Kong.
Learn more: Your Guide to Managing Payroll Hong Kong
Factors Affecting the Statutory Hong Kong Minimum Wage
Understanding the factors that influence the government’s decision on the Hong Kong minimum wage transforms it from a random number to a well-considered and computed rate. This understanding is crucial, especially when managing the cost of recruitment and processing payroll.
General Economic Factors
Consider the needed resources for economic growth, productivity levels, employment demand, prices, cost of living, investment, and competitiveness. But how do these economic factors play into the Hong Kong minimum wage?
The International Labor Organization (ILO) captured it succinctly when it stated, “If the minimum wage is set too high or increased too much, this may have unexpectedly large impacts on the labor costs that employers must pay. This, in turn, could trigger price inflation, hurt exports, and reduce the level of employment.”
Conversely, if wages are too low, many households in Hong Kong may struggle to sustain themselves.
Labor Market Conditions
To determine the minimum wage, decision-makers must evaluate labor market conditions, such as the cost, demand, and supply of employment. They key question is: Is the labor market competitive?
In a competitive market, offering wages that are competitive (according to the market standards) is essential to retaining a strong workforce. If wages are too low, employees may be disengaged and leading to high attrition rates, while paying excessively high wages can lead to revenue loss and potential market exit.
Therefore, policymakers must be careful when considering an increase in the Hong Kong minimum wage, as it could result in loss of employment. Employers may struggle to meet the increased wage demands, leading to reduced demand for labor and a surplus of willing workers.
Conversely, in a non-competitive labor market, wage adjustments can be made more flexibly without the risk of job losses or business closures. This allows governments to raise the Hong Kong minimum wage without adversely affecting employment levels.
Social Inclusion
The Hong Kong minimum wage should help contain issues of labor market inequality and poverty and empower you to abide by social employment policies.
With a set hourly rate that businesses can’t go below, decision-makers provide vulnerable workers with a degree of protection against exploitation, including women, immigrants, youth, and people of color (regardless of their employment agreement).
Read next: How to Eliminate Gender Discrimination in the Workplace
Additionally, exemptions from the minimum wage in Hong Kong contribute to social inclusion. Consider this: individuals with disabilities, depending on the nature of their disability, may face challenges in being as productive as necessary for a business to profit from their employment. This situation can make them particularly vulnerable to being replaced and experiencing hiring biases.
However, a lower Hong Kong minimum wage would enable these individuals to find employment suitable for their productivity levels, while also enabling businesses to safeguard their revenue and promote workforce diversity. The same principle applies to other groups with limited availability for work, such as student interns mentioned above.
Public and Stakeholder Views
Stakeholder and public opinions matter in determining Hong Kong minimum wage, which explains why many individuals choose to voice their opinions on the matter. Their livelihoods are directly impacted by it.
For shareholders, investors, and suppliers, the Hong Kong minimum wage represents a compulsory expense that reduces business revenue. They expect a certain return on their investment. Otherwise, many may opt to leave the market, reallocating their funds elsewhere and potentially harming the Hong Kong economy.
However, decision-makers must also consider employee perspectives since the minimum wage issue in Hong Kong directly affects employees, influencing their quality of life.
Additionally, customers rely on services and goods that are within their purchasing power. If salaries are excessively high or low, it could price them out of the market entirely. Furthermore, human rights organizations and social services advocate for improved living conditions.
Many activists and community workers expressed outrage over the modest 32-cent increase in the Hong Kong minimum wage in 2023. They viewed it as insufficient for one of the most expensive cities in the world. Does this mean we can anticipate a significantly higher minimum wage in Hong Kong next year? Only time will tell.
Leveraging Omni to Ensure Compliance with Hong Kong Minimum Wage
Understanding and managing Hong Kong minimum wage requires careful attention and accuracy to ensure compliance. That’s why it’s important to pick the right HR tool and strategy to make the whole process less overwhelming.
Omni’s suite of features makes the requirements for running a compliant and efficient payroll system in Hong Kong easy. With secure and centralized employee records, HR teams can swiftly access employment contracts and essential documents that support payroll practices. Our time and attendance features empower teams to automate data and produce accurate reports in minutes. And with payroll solutions that support Hong Kong currency and pay schedules, Omni offers an entire suite of solutions to make your payroll system Hong Kong seamless.
Manage more than one company? Omni helps you establish a dedicated payroll admin for each company, who have the power to enroll employees, manage company settings and easily process your payroll.
Book a demo with our team, or try out Omni for a free 14-day trial to learn how our automation can help you remain compliant and reduce your administrative workload for all of your People management needs.
