Chairman's Message
Chairman's Message - Balancing the Rights of Employees and Employers to Promote Healthy Economic Development

Mr YUEN Mo (Chairman of the 52nd terms of office) June 2022


It is our wish to see all parties working hand in hand to overcome the challenges that are arising in the post-epidemic era and from shifting global situations.


The severe blow dealt to the Hong Kong economy by the COVID-19 epidemic is evident. The local employment market has inevitably suffered as a result. Recent policy developments, including the commencement of a new round of the review of the statutory minimum wage rate, and the imminent passing of the bill to abolish the “offsetting” arrangement under the Mandatory Provident Fund (MPF) System, are only going to add to the burden on businesses. As the HKSAR government refines its policies to better protect the rights of employees, we hope that it is also giving due consideration to the financial capacity and operational needs of employers. Ultimately, it is our wish to see all parties working hand in hand to overcome the challenges that are arising in the post-epidemic era and from shifting global situations.


A challenging outlook for businesses

The Hong Kong economy saw a marked deterioration in the first quarter of this year because of the fifth wave of the epidemic. Business sentiment has improved following the gradual stabilization of the epidemic situation, but the economic outlook is still challenging. Risks including the Russian-Ukrainian war, volatile geopolitical situation, inflation and interest rates have continued to increase. On top of all these, quarantine-free travel between Hong Kong and the Mainland is yet to be implemented. Hong Kong businesses are thus forced to adopt an extra prudent approach when making future plans.


In recent years, the HKSAR government has implemented statutory paternity leave and extended statutory maternity leave, and has been progressively increasing statutory holidays. Many Hong Kong SMEs are only enjoying meager profit margins. The upcoming abolition of the “offsetting” arrangement under the MPF system is going to further increase the labor costs for businesses. In the long run, it will have an impact on Hong Kong’s employment market.


Assessing the capacity of businesses at the same time

The local unemployment rate has risen to a 10-month high of 5.4%, with the number of unemployed nearing 210,000. The unemployment rates of most major sectors have gone up, especially among the lower-skilled.


With so many uncertainties ahead, particularly due to the epidemic and global political and economic situations, unprecedented pressure is weighing on the business environment, and business operations are becoming increasingly difficult. If the HKSAR government can freeze the minimum wage in the coming year, it will ease the burden on businesses brought by labor costs, so that sufficient jobs can be offered to meet the needs of the employment market.


In fact, since the implementation of the statutory minimum wage in May 2011, the hourly wage has increased from the initial HKD28 to the current HKD37.5, a cumulative increase of 33.9%, which is higher than the inflation rate in the same period. In addition, government data shows that for the four industries with the lowest median hourly wages, the figures were all above HKD45. At this stage, there is no urgency of drastically adjusting the statutory minimum wage.


Currently, workers earning the minimum wage only account for about 0.5% of the city’s workforce. Freezing the minimum wage will unlikely have a major impact on the rights and interests of grassroots employees, but it will certainly ease the burden on employers.


As for the abolition of the “offsetting” arrangement under the MPF system, even though the government has promised to provide businesses with subsidies for a certain period of time, employers will still be the ones to bear the cost in the long run. For SMEs, this additional burden will be particularly heavy. We hope that the authorities will closely monitor the operating conditions of businesses after the “offsetting” arrangement is abolished, and provide support to SMEs whenever necessary. The authorities may consider providing tax incentives, and explain the specific arrangements in detail to encourage businesses to get prepared.


In summary, when devising labor policies, the authorities need to not just safeguard the rights of employees, but also ensure employers have the capacity to bear new costs. By gauging the impact of policy changes in a comprehensive manner, it should strive for a balance between a better labor protection system and economic and business development.