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I MPACTS OF M INIMUM WAGE O RDINANCE ON S ERVICE INDUSTRY

I MPACTS OF M INIMUM WAGE O RDINANCE ON S ERVICE INDUSTRY. Speaker: Ms. Catherine S H Yan Convener, Environmental Services Alliance (Hong Kong). IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY. The Development of Statutory Minimum Wage (“SMW”)

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I MPACTS OF M INIMUM WAGE O RDINANCE ON S ERVICE INDUSTRY

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  1. IMPACTS OFMINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY Speaker: Ms. Catherine S H YanConvener, Environmental Services Alliance (Hong Kong)

  2. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • The Development of Statutory Minimum Wage (“SMW”) • Introduction of Wage Protection Movement in 2007 • Minimum Wage Provisional Commission was formed in 2009 • Minimum Wage Bill was passed on 15 July 2010 • Recommended minimum wage level at $28 per hour on 10 November 2010

  3. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • The Development of Statutory Minimum Wage (“SMW”) • The recommended wage level was accepted by Legco on 5 January 2011 • Implementation of SMW on 1 May 2011

  4. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Impacts of SMW on the Industry and the Labour Market • No cut off date for reckonable year of service of employees had created a substantial non-budgeted financial burdens on employers • More administration work and costs involved • A ripple effect and chain reaction has emerged e.g. wage for capable workers and upper ranking employees need to be scaled up to justify responsibilities

  5. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Impacts of SMW on the Industry and the Labour Market • Increased operational costs had affected the profitability of business especially in labour intensive industries • Higher inflation due to costs has increased and transferred across the board • SMW paid with additional benefits has enticed capable workers in our industry to migrate to other industries

  6. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Impacts of SMW on the Industry and the Labour Market • Labour shortages in the industry have worsened because of unfavourable working condition in comparison with other industries on the same wage bracket

  7. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Does the Implementation of SMW Really Serve its Legislative Purpose? • In theory, it does raise the wage level for those low paid workers • In practice, it creates unexpected and irrational conflicts between employers and employees due to the inconsistent interpretation of the Ordinance by Government Officials.

  8. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Does the Implementation of SMW Really Serve its Legislative Purpose? • It is a concession to the labour-backed politicians which does not fully serve its legislative purpose • It was legislated without making a good balance of interests for all parties e.g. no cut off date for years of service incurred non- budgeted staff compensation cost to employers

  9. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How is SMW Calculated? The Ordinance: • Minimum wage = Total number of hours worked by the employee in the wage period x SMW rate (i.e. $28)= 8 hrs x 26 days x $28 = $5,824

  10. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How is SMW Calculated? (con’t) Labour Unions’ Interpretation: • Minimum wage = (Total number of hours worked by the employee in the wage period + Rest day with pay + meal break with pay) x SMW rate= (8 working hrs + 1 hr meal break) x (26 working days + 5 rest days) x $28 = $7,812 • Difference: $7,812 - $5,824 = $1,988 (+34%)

  11. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How is SMW Calculated? (con’t) • The labour unions’ interpretation of the Ordinance, converts the minimum wage from $28 to $37.55

  12. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How is SMW Calculated? (con’t) Current Pay Patterns • Government : $6,944 (8 hrs x $28 x 31days) • Most SME : $5,824 (8hrs x $28 x 26 days) • Companies offer meal break with pay : $6,552 (9hrs x $28 x 26 days) • Companies offer rest days with pay : $6,720 (8hrs x $28 x 30 days)

  13. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How is SMW Calculated? (con’t) • Companies offer rest days and meal break with pay : $7,560 • (9hrs x $28 x 30 days) • Companies offer rest days with pay based on previous wages at $5,000: $5,000 - $667 rest day pay = $4,333 under Minimum Wage To top-up the Minimum Wage, $5,824 - $4,333 = $1,491 i.e. $5,000 + $1,491= $6,491

  14. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY How is SMW Calculated? (con’t) Actual charge for SMW with no rest day and meal break pay (including staff benefits, administration, other costs and profit) Take home pay (100%) + staff benefits, insurance & MPF (49%) + operating & administration costs (8%) + materials & equipment cost (12%) + profit (5% on overall cost) = ($28 + $13.72 + $2.24 + $3.36) x 105% = $49.69

  15. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY How is SMW Calculated? (con’t) Actual charge for SMW with rest day and meal break pay (including staff benefits, rest day pay, meal break pay, administration, other costs and profit) Take home pay (100%) + staff benefits, insurance & MPF (49%) + rest day pay (16.67%) + meal break pay (12.5%) + operating & Administration costs (8%) + materials & equipment cost (12%) + profit (5% on overall cost) = ($28 + $13.72 + $4.67 + $3.50 + $2.24 + $3.36) x 105% = $58.26

  16. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How, in the long run, do we tackle the consequent problems and adopt the SMW? • Improve employment conditions like raising wage levels, enhancing training for new comers and offering promotion opportunities • Foster the social image of the industry and reinforce our management modes to attract new blood to join the industry

  17. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • How, in the long run, do we tackle the consequent problems and adopt the SMW? • To modernize, corporatize and turn electronic to cope with changes in the industry • Make reasonable profit to enable us to carry on our business, to balance the operating risks and to have sufficient resources for service improvement

  18. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Do we need “Standard Working Hours” in the Future? • Standard Working Hours is the next target of labour-backed politicians • Standard Working Hours will worsen the labour shortage problems in Hong Kong • Most industries facing labour shortages due to limited labour resources and an aging problem with a lack of sufficient new entrants to maintain numbers

  19. IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRY • Do we need “Standard Working Hours” in the Future? • Employees who want to earn more for a better living will be restricted and earn less • We don’t need standard working hours at this stage

  20. Q & A Session

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