Feb. 10 – The draft guideline for Hong Kong’s first minimum wage law has left ambiguity over whether workers’ meal breaks and days off should qualify as paid working time, a situation that could be exploited by Chinese city and provincial governments as they seek to improve workers’ conditions and quell potential social unrest by putting more money in the pockets of China’s huge reserve of peasant workers.

The Hong Kong draft, which is set to take effect from May 1 this year, is non-specific on this issue for monthly paid workers, and does not clearly state these should be included as part of the wage calculation. Rather, the draft guideline includes meal breaks and days off as examples for potential inclusions in paid working time calculations. These inclusions could potentially raise the effective minimum wage from HK$6,200 to HK$8,000, an increase of 22.5 percent.

The issue is now subject to clarification by the Hong Kong General Chamber of Commerce, which is lobbying the government to have meal breaks and days off excluded from the calculation. The present prevailing legal opinion in Hong Kong is that, according to the draft guideline, these items should be paid and local accounting firms are advising clients that this may be the case. A final version of the wage calculation will be released later this month.

Should these items be included in wage calculations set out by the Hong Kong guideline, it is highly likely that provincial governments in China will ask why Hong Kong workers are treated better than their mainland counterparts. The issue therefore has the potential for heated debate in China and, should such debate prove popular, to become part of Chinese Labor Law. We will keep readers informed of the progress of this issue in Hong Kong.

Dezan Shira & Associates advises foreign companies on establishing business in China and Hong Kong. For advice on Hong Kong incorporation, tax and company secretarial issues please email hongkong@dezshira.com. For advice on mainland China incorporation, establishment and operational costs, in addition to tax filings and compliance matters, please email china@dezshira.com. The firm’s brochure may be downloaded here.