In the context of Hong Kong’s second wave of Covid19 contamination in March 2020 and adoption of lock-down measures by a number of countries around the world, many Hong Kong companies are bracing themselves for difficult months. The most fragile financially are closing their business down, or preparing for winding up while the others are taking preventive measures to reduce costs as they anticipate reduced activity and income in the coming months.
Reduction of working hours and salaries is considered by many Hong Kong companies as an option to reduce costs without compromising the company’s ability to bounce back.
CHALLENGE
While jurisdictions in Europe, and notably France, contain provisions to support companies facing a temporary reduction of business, and exceptional new measures are announced almost on a daily basis, there is no such thing in Hong Kong. It is only on 8 April 2020 that Hong Kong Government has announced measures to support employment.
Employers remain bound by the provisions of the employment agreements and salaries must be paid within seven days of the end of the month. Based on those premises, reductions of working hours and salaries need to be agreed by each employee individually, as an amendment to the terms of their employment agreement, notwithstanding the fact that measures are adopted for all employees of a company – and most of the time by managers and directors as well.
ACTIONS
First, we have reminded our clients enquiring about options in Hong Kong that their duties are unchanged. Different scenarios have been considered in turn where all employees (including managers) agree to the reductions in working hours and salaries, or most of them or only some of them, and what the options are in each situation.
Then, we have reviewed or drafted the following documents for our clients’ managers who have decided to implement reductions in working hours and salaries – sometimes up to 50%:
information to all employees setting out the new arrangements principles and referring to departments’ heads for implementation;
templates or individualised amendments to employment agreements.
OUTCOME
The necessity of preventative measures to save jobs in the long term, in companies facing an exceptional reduction in business has been well understood by our client’s employees. Measures are now in place until the end of April or later, and will have to be reviewed periodically in light of the uncertain evolution of the global economic slowdown.
Note: the paragraph Challenge has been updated in April 2020 to reflect the announcement by the Government Hong Kong of measures to support companies to maintain employment, including a subsidy capped at 50% of Hong Kong median salary (i.e. HK$9,000.00) for all MPF (Mandatory Provident Funds) registered employees.
