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Hong Kong has released the final guidelines on its first statutory minimum wage on Monday – a controversial move first announced in October 2010 amid anger from labour groups as overheads set to soar. The future bodes well for employment law practice groups; but some lawyers worry the impact on the economy will be significant.

“There has been a huge shift in Hong Kong labour legislative trends [since the 1990s] that leans towards employee protection,” Hong Kong-based Mayer Brown JSM partner Duncan Abate said. “China operates on a very different system to Hong Kong – they are far more protective of employee rights than Hong Kong is. Hong Kong is moving towards China – rather than the reverse.”

According to Abate, the progress wrought brings with it new challenges for the economy.  “One of Hong Kong’s main competitive element is its ease of operations for business in Hong Kong. With the increased regulation surrounding the workplace, this materially impacts the attractiveness of Hong Kong as a place to set up regional headquarters.”

Congruent with these changes, many law firms have beefed up its employment law capabilities to cope with the expected rise in demand from companies realigning their compliance to the new law. “The statutory minimum wage will hit the SMEs the hardest – but the larger catering industries as well as retail will also be affected. The real problem lies with the low paid industries or those with uncertain and unpredictable wage levels (for example those with a high proportion of commission in their remuneration),” Abate said.

The statutory minimum wage will come into force on May 1 and the initial rate is 28 HK dollars per hour. “The big issue at the moment is the impact of wages paid for hours not worked,” Abate said. "Such wages cannot be counted for the purposes of the Minimum Wage legislation and this can have a substantial impact on employers - possibly increasing the effective minimum wage up to $40 per hour".

Further employment legislation amendments in discussion in Hong Kong include standardization of working hours – a change that also stands to have a huge impact on businesses if passed.ALB

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