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Legislative Council Secretariat IN06/12-13

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INFORMATION NOTE

Standard working hours

1. Introduction

1.1 There have been calls over the years from some sectors of the

community, particularly the labour unions, to introduce standard working hours in Hong Kong to better protect the rights and interests of employees. On the other hand, there are other views that the introduction of standard working hours would undermine the flexibility of the labour market and the competitiveness of Hong Kong.

1.2 According to the Government, the issue of standard working hours

is a highly complex one and various sectors of the community have divergent views on whether standard working hours should be introduced in Hong Kong. The Government considers that it must be prudent in handling the issue in view of its far-reaching implications on the Hong Kong society and the local economy.

1.3 In his 2010-2011 Policy Address, the then Chief Executive

announced that with the enactment of the Minimum Wage Ordinance (Cap. 608), it was time to embark on a policy study on standard working hours. Against this background, the Labour Department ("LD") had embarked on a policy study on standard working hours in Hong Kong in late-2010. According to the Government, LD had commissioned the Census and Statistics Department and the Economic Analysis and Business Facilitation Unit to collect the data required and provide support on data analysis for the study.

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1.4 The third term Government had completed the policy study on

standard working hours in June 2012 and passed the report to the fourth term Government for consideration on the recommendation of the then Executive Council ("ExCo"). The current term Government had submitted the report on the policy study to the current ExCo and the Labour Advisory Board 1 for consideration, and will update the Panel on Manpower on the findings of the policy study at its meeting on 18 December 2012.

1.5 This information note aims to provide information on stakeholders'

concerns about working hours of employees in Hong Kong, highlight the Government's policy study on standard working hours, and summarize previous deliberations related to the issue of standard working hours at the

Legislative Council.

2. Stakeholders' concerns about working hours of employees in

Hong Kong

2.1 Some stakeholders, especially the labour unions, are concerned

about the long hours of work faced by some employees in Hong Kong as it may have adverse effect on their physical and mental health as well as their family and social life. They are also concerned that some employees may not be compensated for their overtime work and their rights are not fully protected. To strengthen protection of the rights of employees and promote work-life balance among them, some stakeholders have suggested that the Government should enact legislation to prescribe standard working hours at

40 to 44 hours per week, set the compensation for work in excess of the

standard working hours at 150% of the normal wage rate, and limit the maximum number of working hours to 60 hours per week.

2.2 On the other hand, some other stakeholders, including employers,

are concerned that the implementation of standard working hours will undermine the flexibility of operation and increase the manpower cost of enterprises, particularly for the small-to-medium ones. In addition, the introduction of standard working hours would add to the burden of the industrial and commercial sectors, which have been adapting to the effects brought by the implementation of statutory minimum wage on 1 May 2011. 1 The Labour Advisory Board is a non-statutory body to advise the Commissioner for Labour on labour matters. The Board is chaired by the Commissioner for Labour, and comprises 12 unofficial members with six representing employers and six representing employees.

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3. Government's policy study on standard working hours

3.1 The Government had initiated the policy study on standard working

hours with a view to providing a solid and objective basis for an informed and in-depth public discussion on the subject of standing working hours. The policy study covers the following three main areas: (a) the regimes and experience of 12 selected economies in regulating working hours 2 (b) the latest working hours situation of the working population in various sectors of Hong Kong; and (c) assessment of the possible impact of introducing standard working hours in Hong Kong.

3.2 The Government released the Report of the Policy Study on

Standard Working Hours ("the Report") on 26 November 2012. According to the Report, among the 2.81 million employees in Hong Kong in

2011 (excluding government employees and live-in domestic workers)

3 , the average and median weekly total working hours 4 were estimated at 47.0 and

46.6 hours respectively. The corresponding figures for the 2.61 million

full-time employees (excluding government employees and live-in domestic workers) were at 49.0 and 48.0 hours. 2 The 12 selected economies were: Singapore, the Republic of Korea, Japan, the Mainland, Macao,

Taiwan, Australia, the European Union (the European Union as a whole, with particular reference to the

United Kingdom and Belgium), the United States and Canada. These economies were selected in view

of their similarities to Hong Kong in terms of the level of economic development, or social and cultural

background. 3 Employees refer to persons who work for employers for wage, salary, commission, tips or payment in kind, including full-time and part-time employees. 4 The estimated total working hours is the sum of contractual working hours, paid overtime hours,

overtime hours to be compensated by time-off in lieu and uncompensated overtime hours. Contractual

working hours are working hours in accordance with the contract of employment, or with the agreement or at the direction of the employer.

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3.3 The Report indicated that 725 400 employees (27.8% of full-time

employees) worked 54 hours or more per week 5 in 2011. Six sectors were identified to have higher proportion or number of employees working

54 hours or more per week as compared to the overall economy, namely

(a) retail; (b) estate management and security; (c) restaurants; (d) land transport; (e) elderly homes; and (f) laundry and dry cleaning services.

3.4 According to the Report, 656 800 employees (23.4% of all

employees) performed overtime work in 2011. Among these employees,

51.8% (340 400 employees) had their overtime work compensated by either

paid overtime (292 500 employees) or time-off in lieu (50 600 employees) 6 The remaining 48.2% (316 400 employees) received no compensation at all.

3.5 In assessing the cost impact of implementing standard working

hours on the businesses, a static cost impact assessment was conducted basing on three policy parameters, namely: (a) weekly standard working hours threshold 7 ; (b) statutory minimum overtime pay rate for working hours beyond the standard working hours threshold 8 ; and (c) exemption criteria with regard to employees 9 5

Fifty-four hours is the weekly total working hours at the upper quartile of full-time employees. The

upper quartile is the value that delineates the lowest 75% of all the data concerned in an ordered data set

which is arranged from the smallest to the largest value. 6 Some employees who performed overtime work might have been compensated by both paid overtime and time-off in lieu. 7 Three scenarios, i.e. 40 hours, 44 hours and 48 hours, were adopted for the weekly standard working hours threshold. 8 Three scenarios, i.e. 1.0 time of the employees' original hourly pay, 1.25 times and 1.5 times, were adopted for the statutory minimum overtime pay rate. 9 Three exemption scenarios were adopted, namely: (a) without any exemption; (b) with exemption of managers, administrators and professionals; and (c) with exemption of managers, administrators, professionals and associate professionals.

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3.6 Under scenarios with variations in the parameters of weekly

standard working hours threshold and statutory minimum overtime pay rate, and without any exemption, it was estimated that the implementation of standard working hours would affect 1.32 million to 2.38 million employees (50.6% to 91.1% of full-time employees). The corresponding estimated increase in total wage bill would range from HK$8.0 billion to HK$55.2 billion per annum (1.7% to 11.4% of 2011 total wage bill). Under scenarios with exemption of managers, administrators, professionals and associate professionals, the estimated number of affected employees would range from 0.96 million to 1.43 million (36.7% to 54.8% of full-time employees). The corresponding estimated increase in total wage bill would range from HK$1.1 billion to HK$20.5 billion per annum (0.2% to 4.2% of

2011 total wage bill).

10

3.7 With regard to the impact of implementing standard working hours

on employees' earnings, the Report indicated that employees' earnings might increase, decrease or remain unchanged depending on the policy design and contractual arrangement between employers and employees 11

3.8 In the Report, the Government has identified a number of issues

that need to be further discussed in depth by the stakeholders before deciding the way forward on the subject of regulating working hours. These issues include: (a) objectives of the working hours policy; (b) labour flexibility and Hong Kong's competitiveness; (c) possible proliferation of part-timers and casual workers; (d) impact on businesses in general and small-to-medium enterprises in particular; (e) operation characteristics of different industries; and (f) whether legislation is the best way forward. In addition, the Government considers that issues relating to the design of a working hour regime such as definition of working hours, setting of working hours limit, exemptions and flexibility arrangements have to be further examined. The Government has planned to set up a special committee comprising government officials, representatives of employers and employees, academics and community leaders by the first quarter of 2013 to follow up on the policy study. 10

According to the Government, the findings of the cost impact assessment are rough estimates and serve

only as a broad reference. The actual impact will depend on the policy design and employers' response

under the prevailing economic and labour market situations when the policy is implemented. 11 According to the Report, under the assumption that there is no change in overall employment, hourly wage and working time of employees with the implementation of standard working hours, earnings of affected employees might increase by 3.7% to 13.0% on average depending on the standard working hours threshold and statutory minimum overtime pay rate. However, under scenarios that employers vary the contractual working hours and overtime hours of employees to cope with the labour costs, earnings of employees may increase, decrease or remain unchanged.

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4. Deliberations at the Legislative Council

4.1 Members have discussed the issues related to standard working

hours at the Council meetings and meetings of the Panel on Manpower. The recent discussions on the issues are summarized in the paragraphs below. Introduction of standard working hours in Hong Kong

4.2 Members had moved motions urging the Government, among other

things, to legislate for regulating employees' working hours on several occasions during the Council meetings since 2000. At the Council meeting of 23 June 2010, Members passed the motion on "Legislating for 'standard working hours'" urging the Administration to legislate on 'standing working hours' according to the people-oriented principle to ensure a work-rest balance for employees.

4.3 The Administration responded at that Council meeting that its

established labour policy was to progressively improve employees' rights and benefits in a way that struck a reasonable balance between employers' and employees' interests. In addition, the labour policy must also be commensurate with the pace of Hong Kong's socio-economic development. The Administration pointed out that legislating on standard working hours would affect flexibility of the labour market and hinder operation of enterprises. It might also lead to fragmentation of jobs and emergence of more casual or part-time jobs, thus affecting employees' livelihood. The Administration further advised that it must be cautious in dealing with the issue and carefully consider the affordability of society as it would have far-reaching implications for the Hong Kong society and the local economy.

4.4 At the Council meeting of 15 February 2012, Members passed the

motion on "That this Council notes the Report of the delegation of the Panel on Manpower to study the experience in the implementation of standard working hours in the Republic of Korea". The Report indicated that the experience of the Republic of Korea had provided very useful reference to Hong Kong in considering the subject of introduction of standard working hours in a number of areas. These included (a) establishing a high-level body with tripartite involvement to take forward proposals for introducing standard working hours; (b) implementing standard working hours in phases; and (c) providing incentives to small and medium enterprises for implementing standard working hours.

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4.5 The Administration responded that while the experience of the

Republic of Korea in implementing standard working hours was of reference value, one must pay attention to its distinctive social, economic and cultural backgrounds against which its working hour policies were worked out. Hence, each place should make the most appropriate arrangements in the light of its actual situation. The Administration further pointed out that the labour force of Hong Kong was known for having a high degree of flexibility and strong adaptability. To maintain the advantages of Hong Kong, the key lay in striking a suitable balance between maintaining the competitiveness of Hong Kong and its talents and protecting employees' rights and interests.

4.6 At the Council meeting of 17 October 2012, a motion on

"Legislating for the regulation of working hours" and six amendments to the original motion were moved. At the motion debate, some Members had urged the Government to introduce a bill within the 2012-2013 legislative session on the regulation of working hours, including the number of standard weekly working hours and overtime pay. The motion and amendments to the original motion were negatived at the Council meeting.

4.7 At the motion debate, the Administration reiterated that the

introduction of standard working hours would have far-reaching implications for the Hong Kong society and the local economy. Hence, it must fully consider the socio-economic conditions of Hong Kong, the nature of operation of various trades and industries, as well as the impact of the implementation of statutory minimum wage on the labour market and the operation of enterprises. The Administration also responded that pushing through a policy on working hours or making any decision to regulate working hours by way of legislation before a consensus had been reached in society would seriously undermine labour relations and harmony of the overall society. It might also hinder the implementation of the policy concerned. The Administration considered that it was too early to discuss any draft bill or legislative timetable on the regulation of working hours at this stage.

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Government's policy study on standard working hours

4.8 Members had enquired the Administration on several occasions

about the timeline and progress of the policy study on standard working hours and whether it would expedite the policy study. For example, at the Council meeting of 1 December 2010, a Member enquired the Administration, among other things, whether work of the different parts of the policy study would be undertaken concurrently to reduce the time required for the study. The Administration replied that it would conduct the policy study in a progressive and orderly manner. While the Administration had embarked on the study on the experience of other places in regulating working hours, it had to thoroughly consider the methodology for collecting data on the working hours situation of the local work force. The Administration would not commence the study on local working hours situation prematurely, as it had to first consider the impact of the implementation of statutory minimum wage on the labour market. The Administration also advised that it would maintain dialogue with stakeholders in the process of the policy study and report on the progress at an appropriate time.

4.9 At the meetings of the Panel on Manpower held on 20 October 2011

and 11 July 2012, the Administration had briefed members on the progress of the policy study. At the meeting held on 11 July 2012, some members had expressed concern about the determination of the Administration in implementing standard working hours in Hong Kong and the implementation timetable for taking forward the proposal.

4.10 The Administration advised that the previous ExCo had

recommended passing the report of the policy study which was completed in June 2012 to the current term Government for consideration as legislating for standard working hours was a highly complex and controversial issue. The Administration indicated that it would report to the Labour Advisory Board and the Panel on Manpower on the findings of the study once the current ExCo had studied the report. It would also set up a special committee comprising government officials, representatives of labour unions and employers' associations, academics and community leaders in due course to follow up on the policy study.

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4.11 At the motion debate on "Legislating for the regulation of working

hours" at the Council meeting of 17 October 2012, the Administration advised that the special committee set up to follow up on the policy study had to be given sufficient time to study and analyze the issues related to standard working hours. The special committee would adopt a pragmatic approach in studying the issues and put forward policy recommendations that could best suit the overall interests of Hong Kong. According to the experience of other places in legislating for standard working hours, it would take some time to complete the process from commencement of discussion on the subject, to reaching a consensus among the parties concerned and legislating for the working hour regime. The Administration considered that it would be unrealistic to set out a timeframe of one or two legislative sessions for the special committee and society as a whole to complete all the discussions, and the Administration to draft a bill on regulating working hours.

Prepared by Ivy CHENG

13 December 2012

Tel: 3919 3114

Information notes are compiled for Members and Committees of the Legislative Council. They are not legal or other

professional advice and shall not be relied on as such. Information notes are subject to copyright owned by the

Legislative Council Commission (the Commission). The Commission permits accurate reproduction of information

notes for non-commercial use in a manner not adversely affecting the Legislative Council, provided that

acknowledgement is made stating the Research Division of the Legislative Council Secretariat as the source and

one copy of the reproduction is sent to the Legislative Council Library.

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References

1. GovHK. (2008) Press Releases: LCQ7 - Standard working hours.

4 June. Available from:

04/P200806040133.htm [Accessed December 2012].

2. GovHK. (2010) The 2010-11 Policy Address - Sharing Prosperity for

a Caring Society. Available from: http://www.policyaddress.gov.hk /10-11/eng/pdf/policy.pdf [Accessed December 2012].

3. GovHK. (2011) The 2011-12 Policy Address - From Strength to

Strength. Available from: http://www.policyaddress.gov.hk/11-12/eng/p df/Policy11-12.pdf [Accessed December 2012].

4. GovHK. (2012a) Press Releases: Government releases Report of the

Policy Study on Standard Working Hours. 26 November.

Available from:

quotesdbs_dbs17.pdfusesText_23