Hong Kong HR Guide
- Employment Contract
- Tax Enrollment IR56E
- MPF Enrollment
- MPF Registration for Non-HK Expatriates
- Compensation Insurance
- Employment for Age below 18
- Data Privacy
- Continuous Contract (418)
- Annual Leave
- Statutory Holiday
- Sick Leave
- Average Wage (713)
- Statutory Minimum Wage
- MPF Contribution
- Maternity Leave
- Learning and Traning
Why is it Important?
Since <Employment (Amendment) Ordinance 2007> became effective, when calculating the minimum salary amount for specific day or day-off, employer must refer to the average amount of the past 12 months and include those "wages" as defined in Employment Ordinance.
What are the Salary Types that is calculated based on "Average Wage"?
The scope as defined in <Employment (Amendment) Ordinance 2007> is as follow:
- Holiday Pay in Statutory Holiday
- Amount payable for Paid Annual Leave
- Sickness Allowance in Sick Leave
- Amount payable for Maternity Leave
- Amount payable for Paternity Leave
- End-Of-Year Payment
- Payment in lieu of Notice
- Severance Payment and Long Service Payment
When calculating salary, the above amount should be separately handled given that they are referring to 12-month average wage.
How to Calculate Average Wage?
12-Month Average Rate =
[(12-Month Total Wage) - (Wages to be Excluded)], divided by
[(Number of Days in the 12-month Period) - (Number of Days to be Excluded]
What is the Scope of Wage to be Excluded from the Calculation?
According to Employment Ordinance, the following should be excluded:
- Allowance for accomodation, education, food, etc
- Employer's contribution to retirement scheme
- Commission or bonus payable at company's discrection
- Travel allowance which is non-recurring in nature
- Payment to employees to defray their incurred expense
- End-of-year payment which is defined as payable only at company's discretion
- Gratuity payable at the end of contract
Otherwise, all renumerations, including allowance and bonus, are classified as "wage" no matter how they are calculated.
How to Calculate Number of Days in the 12-Month Period?
To avoid understating the average wage, the day where no salary is paid, or only partial amount is paid, should be excluded from the calculation.
Is the amount of Average Wage affected by Over-Time Payment?
If over-time payment is constant in nature or if the monthly average over-time payment is not less than 20% of the average wage, then over-time payment has to be included in the calculation of average wage.
Take a look at our HR system "Backstage"
<a class="btn btn-outline-success" href="/software/backstage/features/hong-kong-labour-ordinance"
Or go straight to see how Backstage applies Average-Wage in calculation of payroll.
Is there a Sample Excel for calculation of Average Wage?
Please refer to the Chinese Version below for the sample excel:
A Concise Guide to the Employment Ordinance
Appendix 1 of "A Concise Guide to the Employment Ordinance"