Welcome to the Employment Ordinance (EO)!
Hello there! Today we are diving into one of the most practical chapters in your HKICPA QP journey: the Employment Ordinance (Cap. 57). This is the "rulebook" for working in Hong Kong. Whether you are an employer or an employee, these rules affect your daily life and your bank account!
For the exam, you don't need to be a lawyer, but you do need to understand the rights and obligations of both parties. Think of this chapter as learning the "Terms and Conditions" of the Hong Kong workforce. Let's break it down together!
1. Application of the Ordinance
The Employment Ordinance (EO) is the main piece of legislation governing conditions of employment in Hong Kong.
Who does it cover?
It applies to all employees in Hong Kong, whether they are full-time, part-time, or even "casual" workers.
The Exceptions:
Only a few people are not covered by the EO:
1. Family members who live in the same dwelling as the employer.
2. Persons as defined in the Contracts for Overseas Employment Ordinance.
3. Seamen or people serving on foreign ships.
Quick Tip: Even if a contract says "The Employment Ordinance does not apply," that clause is usually void. You cannot "contract out" of your legal rights!
2. The "4-18" Rule: Continuous Contracts
This is a superstar concept for your exams! Many benefits (like annual leave and sick pay) only kick in if an employee is under a Continuous Contract.
What is the "4-18" Rule?
An employee is in a continuous contract if they have been employed by the same employer for:
1. At least 4 consecutive weeks, AND
2. At least 18 hours in each of those weeks.
Memory Aid: "Four-Eighteen"
Just remember: 4 weeks, 18 hours each. If they meet this, they are "in the club" for full benefits.
Key Takeaway:
If a student works 15 hours a week for 10 weeks, they are not under a continuous contract because they didn't hit the 18-hour mark, even though they worked for a long time.
3. Wages: Payment and Deductions
Wages include almost all forms of remuneration (salary, commissions, allowances) but usually exclude discretionary bonuses or traveling allowances.
When must wages be paid?
Wages must be paid as soon as possible, but never later than 7 days after the end of the wage period.
Example: If the month ends on the 31st, the employer must pay by the 7th of the next month.
Deductions:
Employers are very limited in what they can take out of your paycheck.
- For damage or loss of goods: The deduction cannot exceed HK$300 in any single case.
\n- Total deductions (except for things like overpaid wages or absence) cannot exceed 1/4 (25%) of the wages payable for that period.
Common Mistake: Don't assume an employer can deduct a whole month's salary if an employee breaks an expensive laptop. They are capped at $300 for that specific damage!
4. Rest Days, Holidays, and Leave
Everyone needs a break! The EO provides three main types of "time off":
A. Rest Days
Employees under a continuous contract are entitled to at least one rest day in every period of seven days.
- It must be a continuous period of 24 hours.
- Rest days can be paid or unpaid (this depends on the contract).
B. Statutory Holidays
There are currently 13-14 statutory holidays in HK (this is gradually increasing to 17 by the year 2030).
- Did you know? Statutory holidays are not the same as "Bank Holidays" (General Holidays). Office workers often get more days off than the law strictly requires.
C. Paid Annual Leave
After 12 months of service under a continuous contract, an employee is entitled to paid annual leave. It starts at 7 days and increases with years of service up to a maximum of 14 days.
Quick Review:
Rest Day: 1 per 7 days.
Statutory Holiday: Everyone gets these off (or a day in lieu).
Annual Leave: Starts after 1 year of service.
5. Sickness Allowance
Don't worry if this seems tricky at first; just follow the three Golden Rules for a paid sick day:
1. The sick leave is at least 4 consecutive days.
2. The employee has enough accumulated paid sickness days.
3. The claim is supported by a medical certificate (Doctor's note).
How do you accumulate days?
- 2 days for every month in the first year.
- 4 days for every month thereafter.
- Maximum accumulation: 120 days.
The Rate:
The sickness allowance is 4/5 (80%) of the average daily wages.
\( \text{Allowance} = \text{Average Daily Wage} \times 0.8 \)
6. Maternity and Paternity Leave
Maternity Leave:
- A female employee is entitled to 14 weeks of maternity leave.
- If she has been employed for 40 weeks, it is paid at 4/5 of her average daily wages.
Paternity Leave:
- Male employees are entitled to 5 days of paternity leave.
- Like maternity leave, it is paid at 4/5 of wages if they have 40 weeks of service.
7. Termination of Contract
An employment contract can be ended in several ways:
A. Termination by Notice
Either party can give notice or "payment in lieu of notice" (paying the salary for the notice period instead of working it).
B. Summary Dismissal (The "You're Fired!" moment)
An employer can fire an employee immediately without notice or pay if the employee:
- Intentionally disobeys a lawful and reasonable order.
- Conducts themselves misconducting.
- Is guilty of fraud or dishonesty.
- Is habitually neglectful in duties.
C. Constructive Dismissal
This is when the employer behaves so badly (e.g., violence or non-payment of wages) that the employee is forced to quit immediately. Legally, this is treated as if the employer fired the employee unfairly.
8. Severance and Long Service Payments
Students often confuse these two. Let's use a simple comparison table:
Severance Payment (SP)
- Qualification: At least 24 months of service.
- Reason: Redundancy or lay-off (the job no longer exists).
- Formula: \( (\text{Last full month's wages} \times \frac{2}{3}) \times \text{years of service} \)
Long Service Payment (LSP)
- Qualification: At least 5 years of service.
- Reason: Dismissal (NOT for misconduct), retirement (age 65+), or death.
- Formula: Same as SP!
Crucial Rule: An employee cannot get both. It is one or the other!
Key Takeaway Summary:
1. Continuous Contract: 4 weeks, 18 hours per week.
2. Wages: Pay within 7 days.
3. Sick Pay/Maternity: Generally 4/5 of average wages.
4. Termination: Need notice unless there is serious misconduct.
5. SP vs. LSP: SP is for redundancy (2 years service); LSP is for general dismissal/retirement (5 years service).
Congratulations! You've just covered the essentials of the Employment Ordinance. Keep these rules in mind, and you'll be well-prepared for any workforce-related questions in your exam!