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

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

To implement wage reductions, an employer must obtain the consent of the employees in advance. Unilaterally reducing wages without the employee’s agreement will contravene the law with respect to timely payment of wages. If wages are not paid within one month after they become due, the employees may deem their contracts of employment to be terminated by their employer without notice and they will be entitled to payment in lieu of notice in addition to other statutory and contractual termination payment.

If employers must arrange no-pay leave for their employees due to special needs of the business, they will possibly be liable for severance payment to eligible employees. An employee will be taken to be laid off if the total number of days on which no work is provided, and no wages is paid exceeds half of the total number of normal working days in any four 4 consecutive weeks or one-third of the total number of normal working days in any 26 consecutive weeks. An employee with not less than 24 months of employment under a continuous contract is eligible for severance payment when being laid off.

Furthermore, an employee employed under a continuous contract may claim for remedies under sections 32L to 32Q of the Employment Ordinance against an employer if the contract terms are varied without the employee’s consent, the employment contract does not expressly allow such a variation and the contract terms are varied without one of the five valid reasons as specified in section 32K of the Employment Ordinance.

As to the five valid reasons in section 32K of the Employment Ordinance, see: “Unreasonable Variation of Employment”.

The remedies for unreasonable variation of the terms of the employment contract include an order for reinstatement or re-engagement, an award of terminal payments and an award of compensation; for detail, see: “If I (as an employee) am facing unreasonable dismissal or unreasonable variation of the terms of my employment contract, then what can I do to protect my rights?”.