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Legal Update

2018 Policy Address – Workplace issues

1 November 2018
Mayer Brown Legal Update

Hong Kong's Chief Executive Carrie Lam delivered her most recent Policy Address a couple of weeks ago. It contained a number of important proposals, some of which will impact the workplace. This article details the most important of these.

1. More time off for new dads

The policy address proposes an increase in paternity leave from three days to five days. This proposal has already been fast tracked through the legislative process and will become effective on a day to be notified by the Hong Kong government, which is expected to be early in 2019.

The structure and process for taking paternity leave remains as set out in our update of 6 January 2015 here.

Comment: Cynics have suggested that this gives Hong Kong fathers two more days to play golf.

2. Increase in maternity leave for new mums

The policy address proposes that statutory maternity leave increase from 10 weeks (which has been in place for millennia) to 14 weeks. This proposal has already resulted in many large employers in Hong Kong already changing their maternity leave policies to match or exceed the 14 week proposal. Such reaction from employers would appear to be an indication that this change is not going to be difficult to get through the Hong Kong legislature.

It is proposed that the additional four weeks maternity leave will be paid, but only up to a limit of HK$36,822 (which is 80% of HK$50,000). Entitlement to maternity leave pay will remain conditional on the mother having worked 40 weeks prior continuous service.

As a sweetener for employers it is proposed that employers may apply for reimbursement of the additional maternity leave pay from the government.

This extension will be debated by the Labour Advisory Board (never a smooth process!) and, as such, there may be twists and turns to the story that are not obvious now.

Comment: This is an overdue move. Hong Kong's maternity leave provision is low in comparison with our main competitors. The fact that many employers have jumped at the opportunity to change their practice in anticipation of the legislation is indicative that it is the right thing to do.

3. The vexed question of MPF Offsetting

After years of to'ing and fro'ing it appears that employers, labour unions and the government may be close to resolving the difficult question of eliminating the Mandatory Provident Fund (MPF) offsetting arrangement which is currently incorporated in the employment protection legislation.

In essence the concern is that an employee's long service or severance pay entitlement under the Employment Ordinance can be reduced (or "offset") by the value of the contributions which an employer has paid to an MPF scheme in respect of that employee. In practice this can almost entirely erode the employee's Employment Ordinance payments.

For years the labour unions have been screaming that this is unfair, whilst the employer bodies have been arguing that the arrangement has been in place for decades and that it is part of a deal struck in the mid-90s when the MPF was first being established. Both arguments are probably true.

The government has been stuck in the middle trying to broker a deal to get employers and unions to agree to the removal of the offset (so an employee would get his or her full long service or severance pay and retain his or her full MPF benefits).

Ultimately this is all about money. And the government now appears prepared to put some HK$29.3 billion into the problem in the form of subsidies for employers. It is proposed that this amount will be paid out over the next three decades.

We won't bore you with the detail. Suffice to say that the parties are certainly moving closer, but it is not anticipated that anything will happen soon.

Comment: This is a positive move, but it is largely political (the government needs to be seen to be taking active steps to resolve this particular pinch point with the unions). As always, the devil will be in the detail. We doubt any amending legislation will be passed on this point for several years and it is likely there will be multiple dramas in the meantime.

4. Other incidentals

The policy address paid lip service to a relaxation of the importation of labour in certain sectors. We will wait and see if this actually operates to assist what is a critical problem in many industries.

The address also made incidental comment on an increase in protection of rights for government contractors. Given the large number of government contractors in Hong Kong any material change to the terms on which they are appointed can have a trickle-across impact on the broader manpower environment.

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