Employment Update, Hong Kong - February 2007

12 February 2007

Darren FitzGerald, Ricky Leung

New legislation

Race discrimination

For many years the Government has maintained that race relations in Hong Kong were harmonious. Anti-race discrimination legislation was at best unnecessary, at worst harmful to Hong Kong’s freewheeling market economy.

Moves to anti-discrimination laws on race in other countries, Hong Kong’s experience with other anti-discrimination legislation such as the Sex Discrimination Ordinance and its pitch to position itself as Asia’s World City, have all contributed to a change of heart.

The long-awaited Race Discrimination Bill was gazetted on 1 December 2006 and introduced into the Legislative Council on 13 December 2006.

Discrimination, harassment and vilification on the grounds of race are prohibited, as is discrimination by way of victimisation.

There is a high probability that the bill will pass in its current form. It is expected to become law from mid-2007.

We can only highlight a few areas of particular interest here.


Racial discrimination is prohibited in various areas, including in relation to employment in Hong Kong.

It is unlawful for an employer to discriminate on the grounds of race against job applicants and existing employees.

Employers will need to review their policies as to how they advertise for work, the grounds on which they base recruitment decisions and ensure that employees of all races are offered equal benefits and opportunities for career development.

Expat terms

While Hong Kong, pollution aside, is certainly not a hardship post, and under Chinese rule and patronage has entrenched its role as Asia’s leading international financial centre, it is still common for companies to lure talent to Hong Kong through expat packages.

It is true that Hong Kong is competing for skilled labour with rivals such as Singapore and increasingly Shanghai, and this is one of the grounds relied on to justify the expat packages. Expat terms by definition are more favourable than those offered to the local staff.

To redress this perceived imbalance, the Bill renders preferential packages for expatriates unlawful, unless the employer can show that the skill, knowledge or experience of the overseas staff member is not readily available in Hong Kong, that this person is recruited or transferred from abroad, and that the provision of preferential terms is reasonable.

In practice employers should ordinarily be able to justify extending ex pat terms to attract people to relocate to Hong Kong. It will remain unlawful for an employer to offer an expatriate already working in Hong Kong a new job on preferential terms.

Mainland Chinese excluded

Perhaps more controversial than the inclusion of ex pat packages as a potential form of race discrimination, is the exclusion of discrimination between mainland and Hong Kong Chinese as a form of racial discrimination. The Government takes the perhaps ideologically sound premise that there is no racial difference between mainland and Hong Kong Chinese, whereas human rights groups claim that discrimination and harassment against mainland Chinese is common. This has perhaps the unintended (if not ironic) result of permitting ex pat terms to be offered, without any repercussion under the Bill, to mainland Chinese relocating to a workplace in Hong Kong staffed only by Hong Kong Chinese.


Any individual harassing, discriminating against or victimising another person is personally liable for his or her actions.

Significantly, an employer will be vicariously liable for acts prohibited under the bill done by an employee in the course of employment, regardless of whether the acts were done with the employer’s knowledge or approval. To escape liability, an employer needs to show that it took such steps as were reasonably practicable to prevent the employee from committing such acts.

If this provision comes into effect, employers will need to ensure that an appropriate office policy and training is in place to eliminate all forms of prohibited discrimination, harassment and victimisation in the work place.

We are happy to answer any questions on the legislation, and to assist with policies and training.

Revising the method for calculating statutory benefits

In light of the CFA decision of Lisbeth Enterprises Limited v Mandy Luk (as reported in the November issue of this Update), the Government is now proposing certain amendments to the Employment Ordinance to ensure that monthly calculated commissions are taken into consideration for the purposes of statutory benefits.

The proposed amendments are introduced by the Government in its Employment (Amendment) Bill 2006, gazetted on 8 December 2006. The amendments, introduced into the Legislative Council on 20 December 2006, seek to change the method of calculating the following payments under the Employment Ordinance:-

  • payment in lieu of notice

  • damages for wrongful termination of contract

  • end of year payment

  • payment for maternity leave

  • sickness allowance

  • holiday pay

  • annual leave pay

In brief, the amendments provide for a “rolling twelve month average” (meaning the daily or monthly average of the wages earned by the employee over the preceding 12 months period) method for the purpose of calculating the above entitlements.

Case update

Breaking continuity of employment for the purpose of avoiding severance pay

Section 31B of the Employment Ordinance confers on an employee the right to receive severance pay when s/he is dismissed by his/her employer by reason of redundancy or when s/he is laid off, provided that the employee has been employed under a continuous contract for a period of not less than 24 months. Many industries in Hong Kong have sought to avoid paying severance payment under Section 31B by using a series of fixed-term employment contracts of less than 24 months. At the end of a fixed-term contract, the employee is required to take a short break before taking up a new fixed-term contract.

In Wong Man Sum v Wonderland Seafood Restaurant (18 October 2006), the Court of Appeal held that a break of more than two weeks between two such fixed-term contracts is sufficient to break the continuity of employment for the purpose of disentitling an employee to severance pay. For an employment relationship to be held to be continuous in this context, a settled expectation that the employee would return to his same old job after a short break is insufficient; there must be evidence of mutual arrangement for the parties which recognise the continuous employment of the employee despite his/her absence from work.