1 i mpacts of m inimum wage o rdinance on s ervice industry speaker: ms. catherine s h yan convener,...

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IIMPACTS OFMPACTS OF

MMINIMUM WAGE INIMUM WAGE

OORDINANCE ON RDINANCE ON

SSERVICE INDUSTRYERVICE INDUSTRYSpeaker: Speaker: Ms. Catherine S H YanMs. Catherine S H YanConvener, Environmental Services Alliance (Hong Kong)Convener, Environmental Services Alliance (Hong Kong)

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IMPACTS OF MINIMUM WAGE ORDINANCE IMPACTS OF MINIMUM WAGE ORDINANCE ON SERVICE INDUSTRYON SERVICE INDUSTRY

The Development of Statutory Minimum Wage (“SMW”)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

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The Development of Statutory Minimum Wage (“SMW”)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

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Impacts of SMW on the Industry and the Labour MarketImpacts 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

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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

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Labour shortages in the industry have worsened because of

unfavourable working condition in comparison with other

industries on the same wage bracket

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Does the Implementation of SMW Really Serve its Legislative Does the Implementation of SMW Really Serve its Legislative Purpose?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.

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Does the Implementation of SMW Really Serve its Legislative Does the Implementation of SMW Really Serve its Legislative Purpose?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

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How is SMW Calculated?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

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How is SMW Calculated? How is SMW Calculated? (con’t)(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%)

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How is SMW Calculated? How is SMW Calculated? (con’t)(con’t) The labour unions’ interpretation of the Ordinance, converts

the minimum wage from $28 to $37.55

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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)

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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

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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

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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

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How, in the long run, do we tackle the consequent problems aHow, in the long run, do we tackle the consequent problems and adopt the SMW?nd 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

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How, in the long run, do we tackle the consequent problems aHow, in the long run, do we tackle the consequent problems and adopt the SMW?nd 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

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Do we need “Standard Working Hours” in the Future?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

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Do we need “Standard Working Hours” in the Future?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

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QQ & & AA SSessionession

1 i mpacts of m inimum wage o rdinance on s ervice industry speaker: ms. catherine s h yan convener,...

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