Hong Kong Minimum Wage: Essential Guide for New Hong Kong business owners

What Are Considered Wages In Hong Kong?

In Hong Kong, wages refer to the money an employee receives for their work. This includes various types of payments like regular earnings, allowances for travel and attendance, commissions, overtime pay, tips, and service charges. These payments must be expressible in terms of money and follow the guidelines outlined in the Employment Ordinance.

What is Hong Kong Minimum Wage?

As of May 1, 2023, the Hong Kong minimum wage was raised to $40 per hour.  Essentially, an employee’s total wages should average out to be at least $40 per hour, taking into account the total hours worked during a specific period.

If an employee’s wage period included the 1st of May 2023, the new Hong Kong minimum wage rate of $40 per hour only applies to the hours worked on or after that date for calculating their minimum wage. Additionally, there was a revised cap on the total number of hours employers were required to record for each employee, set at $16,300 per month, effective from May 1, 2023.

How to Calculate Hong Kong Minimum Wage

Calculating the Hong Kong minimum wage for an employee is straightforward. The minimum wage is calculated by multiplying the total number of hours worked during the given pay period with the SMW rate, which is $40 per hour as of May 1, 2023. The employer is responsible for making sure that the employee receives earnings that are at least equal to the minimum wage for every given pay period.

Why Is There a Hong Kong Minimum Wage?

The main reason for having a Hong Kong minimum wage is to protect workers from being paid unreasonably low wages. It ensures that all employees receive fair compensation and a minimum standard of living. 

By setting a minimum wage, it helps distribute the benefits of economic progress more fairly among workers. It also plays a role in tackling poverty and reducing inequality, including gender-based disparities, by promoting equal pay for equal work.

Factors Determining the Hong Kong Minimum Wage

The full wage period is taken into account when calculating the Hong Kong minimum wage. The basic rule is that, after accounting for all hours worked, the average hourly salary paid to an employee for a particular period cannot be less than the minimum wage in Hong Kong.

To determine a fair and balanced Hong Kong minimum wage, the government also takes several factors into account. These factors include the overall economic and labor market conditions in the country, the level of social inclusion, and the opinions of the general public and stakeholders.

Current Hong Kong Minimum Wage Rate in 2023

In 2023, the Executive Council approved the Minimum Wage Commission’s proposal to increase the statutory minimum wage to HK$40 from HK$37.5 per hour. After receiving the Legislative Council’s approval, the new rate went into effect on May 1, 2023.

Hong Kong introduced the statutory minimum wage in 2011, setting it at HK$28 an hour to protect low-paid employees. Over the years, the rate incrementally increased, reaching HK$37.50 in 2019.

To Whom Does the Hong Kong Minimum Wage Apply?

The Hong Kong minimum wage applies to all employees, regardless of their employment status or type. This means that regardless of an individual’s employment type, such as hourly-rated, daily-rated, monthly-rated, part-time, full-time, permanent, casual, or others, they are entitled to the protection offered by the minimum wage regulations.

However, there are a few exceptions to the Hong Kong minimum wage coverage. Individuals to whom the Employment Ordinance does not apply are exempt. In addition, live-in domestic workers are not protected, regardless of their sex, ethnicity, or nationality. The same rule also applies to specific student interns and students participating in exempt student employment during work experience programs.

Is It Possible For An Employee’s Wage To Be Lower Than The Minimum Wage?

No. Based on the Minimum Wage Ordinance, any contract that tries to reduce an employee’s rights or benefits granted by the Hong Kong minimum wage is invalid. Employers and employees cannot agree to lower the employee’s minimum wage entitlement.

The employee’s contract must state that they are entitled to “additional remuneration” for the specific salary period if their wages are less than the Hong Kong minimum wage for the relevant wage period. 

Other entitlements under applicable laws are also computed taking into account the additional compensation. In principle, no worker should be paid less than what the Hong Kong government has set as the minimum wage.

Penalties For Paying Less Than Hong Kong Minimum Wage

Failing to pay the Hong Kong minimum wage violates the Employment Ordinance, leading to severe consequences. Employers who willfully and unreasonably withhold wages from an employee can face prosecution, resulting in a hefty fine of $350,000 and up to three years of imprisonment. 

If a corporate body commits the wage offense with the involvement or negligence of its directors, managers, secretaries, or similar officers, they are also held accountable and could face the same penalties. Hong Kong authorities take the enforcement of minimum wage regulations seriously to protect workers and ensure fair pay practices across the board.

How We Can Help – Our Incorporation Service

At Premia TNC, we offer comprehensive incorporation services in Hong Kong, helping businesses navigate the complexities of setting up and operating in the city. With our experience and dedication, we make it easier for you to establish your presence in Hong Kong while staying compliant with the minimum wage laws, giving your business a strong and lawful foundation.

Ready to establish your business in Hong Kong and ensure compliance with the Hong Kong minimum wage laws? Schedule a FREE consultation with our experts at Premia TNC today! Let us guide you through the incorporation process and answer all your questions about setting up a successful and law-abiding business venture in Hong Kong.