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Hong Kong: Business Environment

The Labour Market

Hong Kong has the very antithesis of an over-regulated inflexible labor market. Nonetheless in the last 10 years a considerable amount of labor legislation aimed at improving the working conditions and welfare of the workers has been passed. The main labor ordinance is the Employment Ordinance which sets out the conditions of service in general employment and which includes provisions for paid holiday leave, sickness allowances and severance pay. Wages can be calculated by the hour, day or month, or by piece rate.

Until recently, there was no legal minimum wage in Hong Kong (apart from the Minimum Allowable Wage (MAW) for foreign domestic helpers (FDHs), which is currently set at HKD3,580 per month). However, in July 2010, the Minimum Wage Ordinance was passed by the Legislative Council, which brought into force a statutory minimum wage of HKD28 per hour, a rate recommended by the recently-established Minimum Wage Commission, on May 1, 2011.

Chief Executive Donald Tsang said that legislating for a minimum wage was a major labour policy of the current-term government and represents a milestone in the protection of low-income workers' rights.

"The minimum wage rate has been discussed in society for years. It is a subject of much controversy. I would like to extend my thanks to the chairperson and members of the Provisional Minimum Wage Commission for their hard work. Despite the tremendous difficulties, the commission reached a consensus on the initial statutory minimum wage rate, having adopted an evidence-based approach and conducted extensive consultation. This is a hard-won achievement."

The Employment Ordinance sets minimum entitlements for employees, such as statutory holidays, sick and maternity leave, severance and long-service payments.

It is up to employers whether to provide additional benefits, such as a Lunar New Year bonus (normally equivalent to one month's extra pay), medical allowances, subsidised meals, good-attendance bonus, paid holidays over and above statutory public holidays, subsidised transport to and from work, free or subsidised accommodation.

The Factories & Industrial Undertakings Ordinance aims to strictly regulate the employment practices of the "sweat shop economy" with which the territory has long been associated. Under the provisions of the Employees Compensation Ordinance injured workers can claim compensation for work related injuries. Most employment disputes come before the labor tribunal whose proceedings are conducted in Cantonese and are generally very informal.

A survey in 2002 cast some doubt on the competitiveness of the Hong Kong labour force. Looking primarily at the quality of labour within the Asian region, the results of the poll suggested that inadequate education investment and rising labour costs have meant that although salaries for white collar workers and managerial staff are higher, the quality of service provided is not necessarily any greater than that provided by labour in other Asian countries.

The survey showed that the jurisdiction still excels in terms of language skills, overall professionalism, and technical expertise, but warned that on a comparative 'value for money' basis, the competitive margin between Hong Kong and the Chinese mainland was narrowing, and regional rivals such as Singapore, Taiwan, and India have overtaken the SAR.

The labour market deteriorated slightly in the second quarter of 2011, with the seasonally adjusted jobless rate edging up to 3.3% in the period August to October, up from 3.2% in the July to September period.

Increases in the unemployment rate (not seasonally adjusted) were mainly observed in the construction, import/export trade and wholesale, and cleaning and similar activities sectors.

Total employment decreased by around 2,300 from 3,642,400 in July - September 2011 to 3,640,100 (provisional figure) in August - October 2011. Over the same period, the labour force also decreased by around 4,200 from 3,769,400 to 3,765,200 (provisional figure).

Commenting on these figures, Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung observed that the contraction in the labour force came after seven consecutive months of increasing employment levels.

On the short-term outlook, Cheung said: "The Hong Kong economy would continue to be affected by the worsening external conditions amidst the deepening eurozone debt crisis and the subdued economic growth in the United States. Employers generally are expected to remain cautious towards staff hiring. We will continue to be vigilant and closely monitor development."

Cheung noted that since the implementation of the statutory minimum wage, the number of private sector vacancies recorded by the Labour Department has stayed at a high level of over 3,000 per working day on average.

In October 2011, the number of private sector vacancies recorded by the Labour Department increased by 17.1% from 73,174 in September 2011 to 85,716, and up by 20.4% over 71,216 in the same period last year.

In October, 2007, Hong Kong leader Donald Tsang announced new plans designed to ensure that Hong Kong's position as a leading global finance hub is consolidated and strengthened. He observed that China's rapid development and the opening up of its financial sector have presented unprecedented opportunities for Hong Kong's financial-services sector.

Hong Kong therefore will need to expand its pool of skilled workers, and will "require talented people from everywhere", he said. Consequently, to help attract more qualified people, the Quality Migrant Admission Scheme's requirements was be relaxed and widely promoted. In 2006, 28,000 foreigners came to work in Hong Kong and settled in the jurisdiction, including about 5,500 from the Mainland.

During the Chief Executive’s 2010-11 Policy Address it was announced that the investment, net asset and net equity entry requirements for admission to Hong Kong under the Capital Investment Entrant Scheme have been increased.

After a review of the scheme, during which the government took into account overseas practices, changes in economic indicators, and the views of the public and Legislative Council members, the requirement is raised to HKD10m (US$1.3m) from HKD6.5m. In addition, real estate is suspended temporarily as a class of permissible investment assets under the Scheme.

See Hong Kong Residence and Property for more information on the Quality Migrant Admission Scheme and the Capital Investment Entrant Scheme.



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