Wage law's loopholes invite more policy ills

PUBLISHED : Monday, 18 April, 2011, 12:00am
UPDATED : Monday, 18 April, 2011, 12:00am


Most people are neither employers nor low-wage employees so they probably haven't paid much attention to the detail of the minimum wage discussions.

But the events of the past few weeks should have forced a rapid revision of that rather laid-back stance. Because the pickle the government is now in is threatening other areas of public policy.

The debate during the past 12 months seemed to be about ending the disgrace of full-time jobs paying below HK$4,000 per month, and setting a floor in the region of HK$6,000.

Subsequently, all sides settled on a figure of HK$28 per hour to achieve that target. It is accepted by both employer representatives and trade unionists that the calculations that resulted in the figure did not include payment for rest days and meal breaks. If those periods are included, then the relevant monthly income becomes something in the region of HK$7,500.

I am not arguing here about which figure is more reasonable or more socially just, but simply stating the common understanding upon which the HK$28 figure was derived.

As the date approached for the minimum wage to become effective, the twin issues of rest days and meal breaks suddenly reared their ugly head.

It became apparent that the most logical thing for some employers to do would have been to lay off their low-income monthly paid staff and re-employ them on an hourly paid basis. So actual earnings would move up, on a monthly basis, to the new higher figure but the terms of employment would be different.

But while such a move might be technically correct, and lawful, and still achieve the avowed objective of a monthly wage in the region of HK$6,000, it would be controversial. At that point, as we have come sadly to expect these days, the government fell strangely silent.

So now, in the absence of leadership, individual employers and employees have been left to find their own way. Some employers will no doubt bite the bullet and move to the new de facto HK$7,500 minimum. Good luck to them and their employees. Other employers face a choice of either courting the stigma of mass dismissal/ re-engagement, or going out of business. While some loss of jobs was always going to arise, the number is bound to be greater under the scenario we now face.

Nor is that the end of the story; the government has now said it will give its contractors extra money to allow them to pay for rest days (but not meal breaks).

There are two things wrong with this proposal. First, these workers are not employed by the government, they are employed by companies that have secured a contract from the government to provide certain services. It is for those companies to comply with the minimum wage law at their own expense, not for the government to throw taxpayers' money at them to cover the extra cost.

And, secondly, those public contracts were secured by competitive tender. Other companies, perhaps including some who budgeted more prudently and allowed for the extra expense of complying with the imminent minimum wage legislation in their tender price, have good grounds to complain that the goalposts have been moved.

And if you think things could not possibly get worse - they just have. For now, the same contracting companies have claimed that the new legislation has pushed up their costs in other areas, such as insurance, and as these could not have been foreseen (why on earth not?), they want the government to cover these extra costs, too.

In the present political environment, who could blame them for trying it on?

Mike Rowse is the search director of Stanton Chase International and an adjunct professor at the Chinese University of Hong Kong