What is the definition of wages under the Employment Ordinance? Does work allowance count as wages?

Sometimes employees question the salary figures, not knowing exactly how the HR department calculates them. Should the allowances given by some companies in the form of rewards be included in wages? What is the definition of salary? If you are full of question marks, you can get the answer from this article.

What is the definition of wages under the Employment Ordinance?

Hong Kong’s “Employment Ordinance” protects the rights and interests of employees, and the definition of wages is very important. As the most basic unit for calculating employees’ legal rights and interests, wages generally refer to: “The employer pays the employee in money for all the remuneration for the work he has done or will do.”

Remuneration items considered as wages include: income, allowances (including transportation allowances, attendance allowances, commissions, overtime pay), tips and service fees, etc. The regulations state that no matter how it is called, regardless of its calculation method, as long as it meets the above definition, it is wages.

What remuneration is not considered wages?

Article 2 of the Employment Ordinance lists some items that are not wages. It turns out that the value of attendance bonus, food allowance, and housing allowance cannot be regarded as wages. The following items are not part of wages:

• The value of housing, education, food, fuel, utilities or medical care provided by the employer to the employee;

• Employer contributions to employee retirement plans;

• All commissions, work allowances or work bonuses paid by the employer on a “gratuity” or “discretionary” basis;

• Non-recurring transportation allowances, the value of any transportation concessions, or actual expenses incurred by the employee for work-related transportation;

• Amounts paid by the employee to the employee for special expenses incurred due to the nature of the work;

• All end of year payments, or annual bonuses that are “incentive” or “discretionary” in nature;

• Remuneration paid upon completion or termination of an employment contract.

In addition, the employee’s end-of-year payment, maternity leave pay, paternity leave pay, severance pay, long service payment, sickness allowance, holiday pay, annual leave pay and payment in lieu of notice should all be calculated in accordance with the above definition of wages.

In addition, if the overtime salary is fixed; or the average amount in the past 12 months is not less than 20% of the average monthly salary of the employee in the same period; then the employer must also calculate the amount of the above compensation items Hourly work pay is included.

When should wages be released? What happens if there is a violation?

When an employer pays an employee’s wages, it is deemed due at the end of the last day of the wage period. It is the employer’s duty to pay all the above wages to the employee as soon as possible, generally no later than 7 days after the expiry of the wage period in any case.

If the employer fails to pay the due wages to the employee on time, in fact, the interest on the arrears of wages must be paid to the employee along with the wages. Once the employer intentionally or without reasonable excuse fails to pay wages to the employee on time. Employers may be prosecuted and, upon conviction, fined up to $350,000 and imprisoned for 3 years; if a corporation violates the law and it is proven that the offense was committed with the consent of a director, manager, secretary or other similar person of the corporation or connivance or negligence, the person shall be guilty of the same offense and shall be liable on conviction to the same penalty.

The above information is for reference only. If you have any questions about tax declaration and accounting, we welcome your inquiries.

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