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Legal pitfalls for Hong Kong HR departments to look out for in 2017

With the New Year well under way, now is a prime time to focus on key employment-law developments and identify matters to watch out for in the Year of the Rooster. The following may provide some food for thought.

Minimum wage and upskilling

A statutory minimum wage has been in place in Hong Kong since May 1, 2011. The current minimum wage is HK$32.50 per hour. Subject to approval by the Legislative Council, this will be raised to HK$34.50, with effect from May 1, 2017. This is the smallest increase since the baseline was introduced five years ago.

While the news will come as a disappointment to low-wage workers, it could also cause concern among labour-intensive businesses, given rising labour costs. As more companies look for ways to improve labour efficiency, the future of work will continue to change with globalisation and with the increased use of smart machines and robotics.

Employers and employees should all be alert to the fact that some types of jobs will eventually be phased out and that skill mismatches will continue to grow. Upskilling of the workforce is therefore key to overcoming skill mismatches, as businesses will continue to change and evolve very rapidly in the “gig economy”.

Severance and long-service payments

As confirmed by the chief executive in his policy address in January, the government is planning to abolish the mechanism allowing employers to use Mandatory Provident Fund (MPF) contributions to offset severance and long-service payments.

Currently, the formula for calculating severance payment or long-service payment is the employee’s number of years of service multiplied by either two-thirds of the employee’s last full month’s salary or two-thirds of HK$22,500 – whichever is lower.

Employers are entitled to offset from the liability of paying a severance or long-service payment MPF contributions made in respect of any years of service for which the severance or long-service payment is payable.

However, the government is planning to progressively abolish the mechanism that allows employers to use MPF contributions to offset severance or long-service payments.

Once the offset mechanism is abolished, employers will be given subsidies for 10 years to deal with extra costs during the adjustment period.

The government also proposes to change the severance and long-service payment calculation formula by lowering the amount of severance and long-service payment from two-thirds of the staff member’s monthly salary to half a month as compensation for each year of service.

Scrapping the MPF offset scheme will likely win wide support from the public and the legislators as this will result in better severance and long-service protection for employees. Since business restructurings will continue to gather pace this year and in the coming years, employers should definitely watch this space when counting the costs of redundancies.


Going forward, greater resources will be devoted by the various regulators to combat money laundering and corruption. As such, shortcuts and greed could end up coming home to roost.

In the private sector, anybody who offers advantages to an employee in return for favours without the approval of the employer is guilty of bribery. Any employee who accepts or solicits such an advantage is also guilty.

In the last quarter of 2016, a businessman was jailed for six months for attempting to bribe a bank official with a bottle of perfume to help him open a bank account. The businessman apparently could not clearly explain the details of his business or the services he required of the bank. In an attempt to expedite the process, he offered the bank employee the perfume as a “gift”. The matter was then reported by the bank to the regulators.

As high-profile fraud, money-laundering and corruption cases continue to make headlines, properly implementing an ethics programme is crucial to fighting corruption and fraud in the workplace.

Employers should set standards by ensuring their company’s anti-fraud policy and code of ethics is adhered to by integrating certain policies in employee manuals. These include raising awareness through staff training and building an internal compliance environment; conducting risk assessments to identify significant high-risk areas; providing whistleblowing channels; applying disciplinary action consistently; and regularly testing internal systems and controls.

Early planning is the key to success. As such, get cracking now because “the whole year must be planned for in the spring!”


This article appeared in the Classified Post print edition as Take heed of new developments in 2017.