Friday, 30 November 2012

Hong Kong Updates- Employment

The long-running Cathay Pacific case has finally reached and been decided on by the Court of Final Appeal (CFA).There are two parts to the decision – firstly, clarification of the formula for calculating statutory holiday and annual leave pay under the old (preamendment) Employment Ordinance (EO). But, more importantly, the question was decided of which leave days are included in the calculation according to the statutory formula where payment is made in lieu of the leave being taken.

This affects a large proportion of employers, as the EO prescribes only 7 days’ annual leave and many employers (particularly employers which are foreign-owned) grant more than 7 days annual leave to their employees.

In the case, it was decided that, unless made clear in the contract, the presumption is that all annual leave, including the excess leave granted, will be treated in the same way. In other words, any payment in lieu for such leave will be calculated using the full statutory calculation, which would be higher than a simple “salary
per day” calculation.

Employers should therefore consider when drafting their employment contracts whether they intend that all
leave (i.e. including the excess over the EO minimum) should be paid out at the higher rate and, if not, they
should make this clear in the contract.

Conversely, employers should review their contracts for existing employees to see if they (the employers)
are complying with these contracts.

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