Simon McConnell, Partner and Michelle Lai, Associate in Clyde & Co's Hong Kong office report on the proposals to change holiday entitlements.
Background
Recently, the Hong Kong Government has been engaged in discussions into increasing the number of statutory holidays from 12 to 17 days, to match general or public holidays. This proposal is aimed at removing the disparity in the holiday entitlements of blue-collar workers and office workers, which could be regarded as unfair and discriminatory against blue-collar workers.
It is suggested that the increase in statutory holidays should be made gradually, with one additional day's holiday added each year, over a five year period, to minimize the impact on employers.
Under the current Hong Kong employment regime, there are two types of holidays for employees. Blue-collar workers are normally provided with 12 days' paid statutory holiday a year. Office workers, however, usually follow the general holidays system and enjoy five extra days' leave, in addition to the statutory holidays. At present, fewer than 50% of Hong Kong employees are taking general holidays, particularly employees in the retail, accommodation, security and food services sectors. Labour representatives have therefore urged the Government to standardise the two types of holiday, to improve the welfare of employees. This change is expected to benefit at least 850,000 workers in Hong Kong.
The statutory holidays and the general holidays are different in nature and origin. The general holidays are days when all banks, educational establishments, public offices and Government departments are not required to open, while statutory holidays (or so called 'labour holidays') are minimum statutory holiday entitlements for all employees, and are determined after extensive public consultation.
Implications for employers
There is concern that the proposed legislative change will bring a significant financial burden on employers, particularly small and medium enterprises. According to a survey, the estimated annual compliance cost for one additional day's statutory holiday would amount to HKD 370 million. After all, increasing the number of statutory holidays would mean that employers will need to hire additional workers to supplement the reduction in manpower which will increase their operating costs. Another key concern is whether this proposal would also apply to the 300,000 foreign domestic helpers and its implications on foreign labour policy.
What next?
The discussions on the alignment of statutory and general holidays at the Labour Advisory Board (a non-statutory body which advises the Commissioner for Labour) appears to be still at a preliminary stage. In May 2015, employee representatives put forward some specific proposals for consideration by employer representatives. Given its impact on business operations and costs, the Government will need to strike a balance between employees' interests and employers' affordability, and reach community consensus before making any substantive changes.
Increasing the number of statutory holidays was one of the major labour issues which Chief Executive Leung Chun-ying promised to deal with in his term of office during the election campaign in 2012. With his term ending in two years, he has been fairly active in promulgating discussions in labour policy to rally support in the 2017 election.
The Press has recently reported that the Chief Executive will resolve the issue of offsetting contributions to the mandatory provident fund in his next policy address, one of the other key labour issues which Leung Chun-ying promised to tackle. At the moment, employers are allowed to use their contributions to the employees' mandatory provident fund schemes (a compulsory pension scheme designed by the Hong Kong government) to offset severance or long-service payments.
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