B. Remuneration

B. Remuneration

"Wages" means all remuneration, earnings, allowances, tips and service charges however designated or calculated, which are payable to an employee for work done or work to be done. Allowances, including travel allowances, attendance allowances, commission and overtime pay are within the definition of wages.

An employee's entitlements to end of year payments, maternity leave pay, severance payments, long service payments, sickness allowance, holiday pay, annual leave pay and wages in lieu of notice are calculated according to the above definition of wages. However, wages do not include:

1. the value of any accommodation, education, food, fuel, water, light or medical care provided by the employer;
2. the employer's contribution to any retirement scheme;
3. commission or attendance allowance which is of a gratuitous nature or is payable only at the discretion of the employer;
4. non-recurrent travel allowance or the value of any travel concession or travel allowance for actual expenses incurred by the employment;
5. any sum payable to the employee to defray special expenses incurred by the nature of the employment;
6. end of year payments, or annual bonuses which are of a gratuitous nature or are payable only at the discretion of the employer; and
7. gratuity payable on completion or termination of a contract of employment.

Manner and place of payment of wages

An employer should pay wages to an employee as soon as practicable but in any case, not later than 7 days after the end of the wage period. An employer must pay interest on any outstanding amount of wages to the employee. An employer who wilfully and without reasonable excuse fails to pay wages to an employee when it becomes due is liable to prosecution and, upon conviction, to a fine of $350,000 and to imprisonment for three years.

Wages should be paid on a working day directly to employees at the place of employment or at any office or other place customarily used by the employer for payment of wages or at any other place mutually agreed. If the employees agree, wages may be paid by cheque, money order or postal order; by transfer to their bank accounts; or to their duly appointed agent. In the absence of any agreement, it should be paid in cash in Hong Kong dollar.

1. My secretary has damaged the computer in my office and I intend to deduct $3,000 from her salary this month for compensation. Can I make this deduction? When will I be entitled to deduct salaries from my employees?

2. My previous month’s salary is overdue by 10 days. Has my boss violated the law?

3. My previous month’s salary is one month overdue and my boss told me that he is unable to pay it. Has he breached the employment contract? Can I terminate my employment contract immediately and claim compensations?

4. My place of work has suddenly shut down and I haven’t received my salary since last month. I think that the company is in huge financial difficulty and it is likely to become insolvent. Do I have the chance to get back my salary (or part of my salary)?

5. If my employer is likely to become insolvent, then where can I seek assistance?

6. If I am late for work, can my employer deduct my salary?

7. Can an employer unilaterally reduce the employee's salary, arrange no-pay leave, or vary the contract terms?

8. Are princIpal contractors in building and construction works liable to pay wages of subcontractors' employees?

Discretionary bonuses

Under the Employment Ordinance, any bonus of a gratuitous nature or payable only at the discretion of the employer does not fall within the definition of "wage". However, the word "discretionary" in the employment contract is not conclusive, especially if in substance the bonus is determined based on a detailed formula (for example, if the employees have completed $x of transactions, they will get y% as bonus). The court reads the contract as a whole to determine whether in substance the bonus is genuinely discretionary or not.

It is impossible to explain exhaustively in what circumstances the bonus will become discretionary or otherwise. A generalised statement will be misleading. However, just to give an example, if the contract mentions that the employer will not only consider the employee's performance, but also other factors, such as performance of the whole department or team, outlook for business, market trends, business forecast, the economy of the city as a whole and so on, the bonus will more likely be regarded as discretionary.

9. Do wages include discretionary commission or bonus?

End of year payments

End of year payments are any annual payments (including double pay, 13th month payment or end of year bonus) of a contractual nature. They do not include any payment that is of a gratuitous nature or that is payable at the discretion of the employer.

Employees are eligible for end of year payments if they have been employed under continuous contracts for a whole payment period. The payment period is the period that is specified in the employment contract, or a lunar year if it is not specified.

Employees who resign before the payment period expires are NOT entitled to pro rata end of year payments unless their contracts provide otherwise.

Employees who have been employed under a continuous contract for not less than 3 months in a payment period and who are dismissed by the employer (except in cases of summary dismissal due to serious misconduct) are eligible for pro rata end of year payments.

The provisions of the Employment Ordinance concerning end of year payments apply to employees who are employed under continuous contracts who, in accordance with a contractual term (including agreement made orally or in writing, in an express or an implied term), are entitled to end of year payments from their employers.

10. Are employers required to pay year-end double pay or bonuses to employees?

11. How do I calculate my end of year payments? When will I receive the money?