Employment law in Hong Kong and Australia: a comparison

October 2011

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Summary

Are you planning to conduct business in Australia or Hong Kong? If yes, are you aware of the minimum entitlements afforded to employees in these two jurisdictions? This article compares the minimum employment entitlements afforded to employees in Australia and Hong Kong.

Introduction

In Hong Kong, the primary piece of employment legislation is the Employment Ordinance (EO), which sets out the minimum statutory entitlements for the employees. The EO is applicable to all employees in Hong Kong, subject to limited exceptions. In addition, if an employee is employed under a continuous contract for four weeks or more, with at least 18 hours worked in each week, then he/she is entitled to additional protections under the EO. These include rest days, paid statutory holidays, paid annual leave, paid maternity leave, sickness allowance, and severance/long service payment. Further, an employee is entitled to protection against unreasonable termination if he/she has been continuously employed for at least 24 months.

The employment law system in Australia generally offers greater protection to employees than that of the Hong Kong system. The principal piece of employment legislation in Australia is the Fair Work Act 2009 (Cth) (FW Act) which applies to employees of corporations trading within Australia. The FW Act provides a framework of minimum employment conditions through the National Employment Standards. “Modern Awards” made by arbitral tribunals also contain minimum terms and conditions of employment for certain employees who are employed in defined industries and fall within the scope and classification provisions of a relevant award.

Under both employment law systems, any agreement which purports to extinguish or reduce any entitlement conferred on an employee by the relevant legislation is void. Therefore, employers in both jurisdictions should ensure that their employees’ terms of employment are consistent with the minimum entitlements set out under the relevant legislation.

We set out in the comparison table below the minimum statutory entitlements available for the employees in Hong Kong and Australia.

Employment benefits/protectionHong KongAustralia
Minimum wage
  • Minimum hourly rate: HKD 28 (AUD equivalent: $3.51).
  • National minimum hourly rate: AUD $15.51 (HKD equivalent: $123.82).
Maximum number of working hours
  • No maximum number of working hours.
  • Full-time employees - 38 hours plus reasonable additional hours.
  • Other employees - the lesser of 38 hours or the employee’s ordinary hours of work in a week.
Statutory/public holidays
  • 12 statutory holidays or public holidays (i.e. every Sunday and 17 other days).
  • An employee is entitled to be absent from work on a day or part-day that is a public holiday. An employee can reasonably refuse to work on a public holiday.
Annual leave
  • 7 to 14 days per year depending on the length of continuous service.
  • Permanent employees - 4 weeks
  • Shift workers - 5 weeks
  • Casual employees - none
Sickness allowance
  • 2 paid sickness days for each completed month of employment under a continuous contract during the first 12 months of employment; and 4 paid sickness days thereafter, up to a maximum of 120 days.
  • Becomes payable where an employee has accumulated sufficient number of paid sickness days and the sick leave taken is not less than four or more consecutive days.
  • No carer’s leave.
  • 10 days personal/carer’s leave per annum to be used by an employee if they are unable to attend work due to personal illness or injury or to care for a family or household member who is ill/injured or if an unexpected emergency affects the member.
  • Personal/carer’s leave accumulates from year to year.
  • Employees are also entitled to 2 days of paid compassionate leave to be used to spend time with a member of the employee's immediate family or household who has sustained a life-threatening illness or injury. It may also be used after the death of an employee’s immediate family member.
Maternity leave / Parental leave
  • 10 weeks’ paid maternity leave if a female employee has been continuously employed for 40 weeks or more at the rate equal to four fifths of the employee’s average daily wages.
  • No parental or paternity leave in Hong Kong.
  • Referred to as parental leave in Australia because eligible male and female employees can access parental leave.
  • Permanent employees and long term casual employees are entitled to 12 months unpaid parental leave after completing more than 12 months continuous service with an employer. Eligible employees can extend the period of unpaid parental leave by an additional 12 months.
  • Long term casual employees are casual employees with 12 months continuous service who have performed regular and systematic work and have an expectation of ongoing employment.
  • Australia has a government funded paid parental leave scheme which provides eligible primary carers who are responsible for the care of a newborn or adopted children with 18 weeks paid leave at the federal minimum wage - AUD $589.30 per week (HKD equivalent: $4,700 per week).
Termination requirements
  • Without notice during the first month of the probationary period.
  • For the remainder of the probationary period, not less than 7 days notice.
  • If no probationary period and there is an agreement as to the length of notice, the agreed notice should be not less than 7 days.
  • If there is no agreement as to the length of notice, the notice period should not be less than 1 month.
  • Either party may terminate immediately by making payment in lieu of notice
  • The minimum period of notice will depend on the employee’s length of service with the employer, which ranges from 1 week notice for employees with less than a year of service to 4 weeks notice for an employee with more than 5 years of service.
  • An employee is entitled to an additional week of notice if he/she is over 45 years of age with more than 2 years of continuous service.
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Wages

In Hong Kong, the term “wages” is widely defined under the EO to include “all remuneration, earnings, allowances … capable of being expressed in terms of money … payable to an employee in respect of work done or to be done under his contract of employment”. The definition of “wages” is important as many categories of employment benefits set out under the EO are calculated by reference to the wages earned by the relevant employee. The Hong Kong courts have consistently interpreted the definition of “wages” to include any pecuniary payments arising out of the employment contract unless they are expressly excluded under the EO. The EO requires wages to be paid to an employee as soon as practicable but in any case not later than seven days after the due date.

After a long period of heated debate, Hong Kong recently implemented the Minimum Wage Ordinance on 1 May 2011. It applies to all employees regardless of whether they are employed under a continuous employment contract with limited exceptions. Under this new legislation, an employee is entitled to paid wages in respect of any wage period (usually one month) of not less than the statutory minimum wage. The statutory minimum wage is the amount derived by multiplying the total number of hours worked by an employee in a wage period by the prescribed minimum hourly wage rate for the employee (i.e. currently set at HKD 28 per hour (AUD equivalent: $3.51 per hour)).

In Australia, the term “earnings” is defined under the FW Act to include an employee’s wages, the agreed monetary value of non-monetary benefits and any amounts dealt with in any way on the employee’s behalf or as the employee directs (i.e. salary sacrificing). The FW Act does not specify a rate of minimum earnings for employees. However, employment law in Australia provides a minimum wage for employees through one of several instruments below:

  1. An enterprise agreement - this is a formal agreement made between an employer and a group of employees which sets out the terms and conditions of employment applicable to a group of employees. The enterprise agreement must meet the minimum standards established by the National Employment Standards in Australia. Such an agreement will override any modern award or contract except to the extent that the enterprise agreement specifies a rate of pay lower than a relevant modern award.
  2. An applicable modern award – sets the minimum wage for an employee if an enterprise agreement does not apply to that employee.
  3. National Minimum Wage Order – if neither an enterprise agreement or a modern award apply to the employee, the minimum rate of pay can be found in the national minimum wage order (currently set at AUD $15.51 (HKD equivalent: $123.82) an hour for an adult employee).
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Maximum working hours

The EO in Hong Kong does not impose any maximum number of working hours.

In contrast, the employment law system in Australia prescribes the maximum hours of work for employees in Australia. For a full-time employee, the maximum weekly hours of work are 38 hours plus reasonable additional hours. For an employee who is not employed on a full-time basis, the maximum weekly hours of work are the lesser of 38 hours or the employee’s ordinary hours of work in a week. An employee may refuse to work additional hours if such hours are unreasonable. What is “reasonable” will depend on the individual circumstances and the factors to be taken into account include the employee’s personal circumstances (for example, family responsibilities), the business needs, remuneration, and the usual pattern of work in the relevant industry.

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Statutory/public holidays

Confusingly, Hong Kong has two systems of holidays: (1) statutory holidays; and (2) public holidays. All employees in Hong Kong are entitled to 12 statutory holidays per year. However, an employee is only entitled to statutory holiday pay under the EO if he/she has been continuously employed for a period of three months immediately preceding a statutory holiday. In practice, many employers (especially for employers in the finance industry) observe public holidays rather than statutory holidays. Public holidays mean every Sunday plus 17 other days (i.e. the 12 statutory holidays plus 5 extra days).

In Australia, different states may have different public holidays in addition to national public holidays. An employee is entitled to be absent from work on a day or part-day which is a public holiday in the state where the employee is based for work. Permanent employees who are usually rostered to work on a public holiday are entitled to be paid at their ordinary rate of pay for that public holiday. Casual employees can refuse to work on a public holiday but they are not entitled to be paid unless they perform work that day.

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Annual leave

In Hong Kong, an employee’s annual leave entitlement will depend on his/her length of continuous service, which ranges from seven to 14 days (in addition to any statutory holidays and rest days). An employee will only be entitled to paid annual leave after completing not less than 12 months’ continuous service. Strictly speaking, an employee is only entitled to take annual leave within the period of 12 months beginning immediately after the expiration of the leave year to which it relates. However, it is a widespread practice adopted by employers in Hong Kong to require their employees to clear annual leave before the end of the year in which the leave accrues. An employer may of course agree to provide more paid annual leave days to the employees than the minimum statutory entitlements.

The annual leave system in Australia is much more generous to employees than in Hong Kong. In Australia, permanent employees are entitled to four weeks of annual leave for each year of service (shift workers are entitled to five weeks of annual leave). Casual employees are not entitled to accrue annual leave. Annual leave accrues progressively over a year of continuous service according to the employee’s ordinary hours of work, and accumulates from year to year.

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Sickness allowance

In Hong Kong, an employee is entitled to sickness allowance if he/she has been employed under a continuous contract for a period of one month or more immediately preceding a sickness day. The employee “earns” paid sickness days at the rate of two paid sickness days for each completed month of employment under a continuous contract during the first 12 months of employment, and four paid sickness days thereafter, up to a maximum of 120 days. Sickness allowance becomes payable where an employee has accumulated a sufficient number of paid sickness days and the sick leave taken (which is supported by an appropriate medical certificate) is not less than four or more consecutive days. Sickness allowance is payable at the rate equal to four fifths of the employee’s average daily wages (calculated by reference to the daily average of wages earned by the employee during the period of 12 months immediately before the commencement of the sickness day or first sickness day (as appropriate)), or, if the employee has been employed for a period shorter than 12 months immediately before the commencement of his/her sickness day, such shorter period. The Hong Kong employment law system does not require an employer to provide carer’s leave or compassionate leave.

In Australia, all employees (except casual employees) are entitled to accrue 10 days of personal leave/carer’s leave per 12 months of continuous service. Employees who have accrued personal/carer’s leave may use the leave if they are unable to attend work due to personal illness or injury or to care for a family or household member who is ill or if an unexpected emergency affects the member. There is no maximum amount of sick leave accrual and sick leave cannot be “cashed out” at anytime. Employees are entitled to take personal/carer’s leave in single or multiple days upon the production of reasonable evidence to their employer (i.e. a medical certificate or a statutory declaration). Sick leave is paid to the employee at his or her ordinary rate of pay.

In addition, Australian employees are entitled to two days of paid compassionate leave to spend time with a member of the employee's immediate family or household who has sustained a life-threatening illness or injury. Compassionate leave can also be used when there is a death of an employee’s immediate family member.

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Maternity leave

A female employee in Hong Kong is entitled to 10 weeks’ paid maternity leave under the EO if she has been continuously employed by the employer for more than 40 weeks immediately before the date on which the maternity leave commences. Under the EO, the daily rate of maternity leave pay is equal to 80 per cent of the average daily wages earned by the employee in the 12-month period preceding the commencement of her maternity leave. With the agreement of the employer, the employee may decide to commence her maternity leave from two to four weeks before the expected date of confinement. An employer is prohibited from terminating an employee who has given a notice of pregnancy to the employer, except in cases where the employer is entitled to summarily dismiss the employee or where the employee is on a probationary period of up to 12 weeks (as long as the reason for termination is not connected with the employee’s pregnancy). The Hong Kong employment law system does not require an employer to provide parental leave (other than maternity leave).

In Australia, both male and female permanent and long term casual employees are entitled to 12 months unpaid parental leave upon reaching 12 months continuous service. Long term casual employees are employees with at least 12 months continuous service who perform regular and systematic work and have an expectation of ongoing employment. Employees who are entitled to unpaid parental leave have the option of extending the period of unpaid parental leave for an additional 12 months prior to the expiration of the first period of parental leave taken. Parental leave can be taken in association with the birth of a child to the employee or the employee’s spouse or de facto partner. Alternatively, it may be taken in relation to the placement of a child with the employee for adoption if the employee has or will have responsibility for the care of that child.

For a pregnant employee, parental leave can commence no earlier than 6 weeks before the birth of a child. The spouse or de facto partner can commence parental leave on the date of the birth of the child. Adoption leave can commence on the date of the child’s placement. Australia has a government funded paid parental leave scheme which provides eligible primary carers who are responsible for the care of a newborn or an adopted child with 18 weeks paid leave at the federal minimum wage - AUD$589.30 per week (HKD equivalent: $4,700 per week). Employers are responsible for providing these payments to the eligible employee and the employer then receives reimbursement from the government.

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Termination requirements

In Hong Kong, under the EO, either the employer or the employee may terminate an employment contract without notice during the first month of the probationary period. For the remainder of the probationary period, either party may terminate the employment contract by giving the other party not less than seven days’ notice. If there is no agreement as to the length of notice (minimum seven days), either party may terminate the employment contract by giving the other party not less than one month’s notice. The EO provides that either party who has given proper notice of termination may terminate immediately at any time prior to the expiry of the notice period by making payment in lieu proportionate to the amount that would have been earned had the employment continued to the end of the notice period. This election may only be made by the party that has given the notice of termination. On termination, an employee may be entitled to severance pay or long service pay depending on the length of their continuous service and the reason(s) for termination of his/her employment.

The notice requirement in Australia is slightly different from that in Hong Kong. The minimum period of notice of termination will depend on the employee’s length of service with the employer, which ranges from 1 to 4 weeks. An employee is entitled to an additional week of notice if he/she is over 45 years of age with more than two years of continuous service. In addition, permanent employees have a statutory entitlement to redundancy pay after completing one year of service. The entitlement ranges from four weeks redundancy pay for an employee with at least one year of service but not more than two years service to 12 weeks redundancy pay for an employee with more than 10 years of service.

We will discuss the key employment benefits/protection and the other employment related issues (such as pensions, redundancy payments and other termination issues) in more detail in our subsequent articles. Our next article will be on the issues relating to the minimum rate of pay in Hong Kong and Australia.

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Implications for employers

Employers should:

  • make themselves aware of the minimum statutory entitlements in the relevant jurisdiction in which they propose to operate;
  • ensure that the contracts of employment for employees are up to date in the relevant jurisdiction and do not detract from the statutory minimums in order to minimise the risk of breaching the relevant legislation; and
  • consider the impact of the minimum statutory entitlements available to employees in the relevant jurisdiction before relocating or seconding employees there (even if on a temporary basis). Appropriate agreements should also be put in place to cover the arrangement.
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