Wages are compensation that is made to the employee by an employee corresponding to the work done, earnings, allowances, tips, plus any other chargeable service. Such might include; commissions, all allowances, overtime pay, commission, among others. However, the wage payment does not include;
- Expenses spent on accommodation, education, food, fuel, water, light, or any other medical expenses that are provided by the employer.
- Contributions towards any retirement scheme.
- Any compensation made to an employee because of any expenses they incurred by nature of employment.
- End of year payment that is made as gratitude or amount that is only payable at the discretion of the employer.
- Gratuity is rewarded to an employee at the termination of the employment contract.
However, if an employee is entitled to the end of year payment, maternity pay, sick leave payment, severance pay, holiday pay, annual leave pays, among other payment entitled, then they will be treated as wages according to the above definition.
The payment of wages is due on the expiry date of the last day of the wage period or as defined by the contract. It is thus a good practice that an employer pays wages to the employees as soon as practicable but in case of any failures, the wages should not go beyond seven days from the time that the wages are due.
In case an employer willfully and without any reasonable excuse fails to make payments to their employees as stipulated is liable to prosecution and upon conviction is charged a fine of $350,000 and three-year term imprisonment. Further, if such failures result from the corporate body that includes the company secretary, director, manager, or any other officer within the company then they become liable to the same penalty.
On the other hand, if an employer, without giving a convincing reason, fails to pay for the interests on the outstanding wages will be prosecuted and might, upon conviction, pay a fine of $10,000.
If an employer can no longer afford to make payments to their employee then they should terminate the contract of employment in accordance with its terms.
What can I deduct from wages?
The following can be deducted from the employee’s wages according to the Employment Ordinance in Hong Kong;
- Days absent; the days an employee misses to go to work may be deducted from their wages. However, such deductions should not exceed the wages payable for the period of absence.
- Damages or loss of goods; if an employee through their negligence damages or loses equipment or an employer’s property, then such might be deducted from their earnings.
- If an agreement made between the two contracting parties to supply food and make the deductions thereafter. Then such are liable for deductions.
- Accommodation is provided to the employees’ families.
- Recovery of a loan made by the employer to the employee although the employee must write and sign a consent on the same.
Statutory Minimum Wage (SMW) in Hong Kong applies to all the employees in Hong Kong. The exemptions include;
- Live-in domestic workers
- Some seafarers
- Students under the internship programs
- Registered apprentices
The SMW rate is usually set at an hourly rate and it is currently set at HKD37.5 as of 2019. The figure is however reviewed up words after every two years by the Hong Kong government.
Rest days, Holidays, and Leave
The Employment Ordinance in Hong Kong requires that an employee enjoys rest days including statutory holidays and paid annual leave during the employment period.
An employee who is employed under a continuous contract is entitled to not less than one rest day within a seven-day work period. A rest day, according to the Hong Kong labor law is defined as a continuous period that is not less than 24 hours that an employee is exempted from executing the employers’ activities. As defined by the law or otherwise the contract, the leaves, and rest days are payable.
Tax requirements for employers
All the employers or potential employers in Hong Kong are expected to prepare and report all their wages to the income tax ordinance. If an employee is set to leave Hong Kong then the employer should inform the Inland Revenue Department (IRD) with at least one month’s notice. The purpose of the notification is to ascertain that the employee leaves the country after paying all their obligations as required by the IRD. This applies only to those employees who intend to quit their Hong Kong work or relocate abroad.
Mandatory Provident Fund (MPF) Scheme
All the Hong Kong employees who are between the ages of 18-65 are expected to contribute towards the MPF irrespective of whether they are full-time or part-time workers or even casual laborers. However, the following are exempted from contributing to the MPF;
- Self-employed hawkers
- Domestic workers
- Those who are already benefiting from pensions
- Employees of the European Union Office and European Commission who are situated in Hong Kong.