Weighing the full impact of a wage floor

PUBLISHED : Friday, 06 May, 2011, 12:00am
UPDATED : Friday, 06 May, 2011, 12:00am


Much of the debate about the minimum wage which came into force this week has focused on the HK$28-an-hour level, or the loopholes used by unscrupulous employers to avoid raising workers' pay. But how are ordinary companies dealing with the law?

My own business, like thousands in Hong Kong, considers itself a caring company. We obey all laws at all times, and see employee welfare as essential to satisfying both customers and shareholders.

We assumed that the minimum wage would not affect us much, since we are a service-sector company with an educated workforce paid competitive monthly salaries. When we reviewed our payroll, we tilted in employees' favour and treated meal breaks and rest days as paid periods. We then raised the salaries of a small number of entry-level staff slightly, to HK$7,400, to comply fully with the (loophole-free) minimum wage. We also raised the pay of another, small, group to maintain relative differences with the first group.

So far, so good. However, the shift from paying on a monthly to an hourly basis does not stop there.

Under the new regime, companies must keep records of hours worked by all employees earning below HK$11,500 a month, based on the actual number of hours worked. In effect, employers may also have to keep records for employees on higher monthly salaries, as payments for annual leave or maternity pay, for example, are not counted as part of a worker's wage under the ordinance. For some smaller firms, this could be an administrative burden.

It gets more complicated when we consider the issue of hours worked. Under monthly salaries, firms could treat working hours with flexibility; people might stay back for a backlog of work, or - as in a restaurant - staff might sit around with little to do in the afternoon.

Now, employers must be more specific and tell staff what their paid hours are and are not. This can work both ways: in catering, employers might cut paid hours, but in many other sectors - where few staff are even on a minimum wage - this could have a different sort of impact altogether.

Employees might find themselves with an incentive to drag work out and claim more overtime. Companies might find that everyone rushes out of the door at exactly 5.30pm, leaving tasks half-done. The word is going round that, in some workplaces, something like this is in fact happening.

This is not an argument against the minimum wage, which is surely needed. The point is that the new law may have unintended consequences. The intent of the minimum wage is to protect hourly paid workers, who are mostly found in certain industries. Yet it has an impact on the way companies in all sectors treat even monthly salaried staff, who form the vast majority of employees in modern Hong Kong.

For our small and medium-sized enterprises, this could involve administrative burdens that they do not need. For all companies, it raises the possibility of falling outside the law - maybe a disgruntled ex-employee decides to sue, for example - unless they are very careful about how they address issues like defined working hours and overtime. In theory, this could lead to interesting changes in employee behaviour and employer-employee relations, as salaried staff become more conscious of the actual times of day when they are, or are not, technically being paid.

Perhaps we will all find ways to adjust to this, and life will go on - as it does in other places that have adopted a minimum wage. But if the unintended consequences turn out to be more serious, there will be a lesson to learn: look beyond the headline issues. It will be worth bearing this in mind if the subject of maximum working hours comes around.

Bernard Chan is a former member of the executive and legislative councils