713 Ordinance | Holiday = No Work = Base Salary?

713 Ordinance | Holiday = No Work = Base Salary?

Chapter catalogue

  1. 【713 Ordinance】
  2. Employees under different pay systems
  3. CalculateBasic salary 
  4. Does the commission include holiday pay?
  5. Excluding “excluded” periods and wages
  6. What days should or should not be counted?

Said at that time, and to celebrate the festival, every year there are so many big and small festivals, for our workers, it is a good time to rest, travel. In the end, can I have a holiday to get paid? If you work on commission, do you get the basic salary for holidays?  

“Holidays = no work, no labor.” It’s been instilled into our common sense that “more work, more gain,” but what about sick days? How many days, with pay? If it’s paid leave, how much is it appropriate to pay the employee? Think of these will go to a lot of data, documents. Although many companies now hand over these administrative work or calculations to the outsourced enterprises to calculate and manage, this law is still very complicated, and it will be very time-consuming for HR to inquire about relevant materials and learn if they are not familiar with them. In this article, we will break down the rules one by one.  

【713 Ordinance】

First of all, the “legislation” just mentioned refers to the Employment (Amendment) Ordinance 2007 in Hong Kong. It is commonly known as “Ordinance 713” because it came into force on July 13 of that year. Details of the Ordinance can be found on the Government website. After this regulation came into force,  

The statutory entitlements concerned shall be calculated on the basis of average wages for 12 months, irrespective of the remuneration system of an employee, including monthly, daily, or piece-by-piece, etc. The period and wages “excluded” shall be excluded from the calculation of average wages. 

Breaking down the regulations, we can divide them into the following three parts: 

  • There is no limitation on the salary system. Will the calculation method of commission and bonus system be different from that of fixed monthly salary?  
  • How is the “average salary(ADW)” calculated?  
  • What are “not included” periods and wages? How do you calculate it?

Employees under different pay systems

In the commission system, which is different from fixed monthly salary and annual salary, what has always been emphasized is “pay more for more work”, which encourages employees to draw commissions or commissions according to the overall performance of the employees or the company. In the mixed commission system, the salary is calculated by “commission + basic salary”. The problem is that if an employee takes time off, he or she has not done any work, so he or she has to be paid a minimum salary or take a day off from his or her salary. This may seem reasonable, but it is wrong for HR to use this approach when calculating salary. Either form of employment is based on the average salary for the last 12 months, and this “salary” includes:  

  •  Basic salary,   
  • Allowances (e.g. Recurrent Transport Allowance, Worktime Award, Commissions, Overtime Pay)  
  • Tips, service charges  

Remove the following items:  

  • The value of accommodation (utilities and coal), education and training, food or medical care provided by the employer  
  • Contributions to an employee retirement scheme (e.g. MPF)  
  • Commissions, bonuses, allowances, etc. of an incentive nature or discretionary nature  
  • Remuneration payable upon completion and termination of the contract  

CalculateBasic salary 

Even the employees of the commission system, at the time of calculation holiday pay, should also be calculated by the average salary for the past 12 months (if less than 12 months shorter period to calculate), assuming that I’m doing right now salary (Payroll) in May 2018, with ABC three employees, they employed in three different kinds of salary system, paid vacation. 

In addition, we assume that he has not been paid less than his full salary in the past 12 months, so the period and amount to be excluded are “0”.  

Employee A (fixed monthly salary) :  

Total salary =HK$150,000  

Average daily pay: HK$150,000/365 =HK$410.96  

Employee B (on a commission-only basis) ‘s salary for the last 12 months is: Months + Salary  

Total salary =HK$208,430  

Average Daily Salary: 208,430/365 =HK$571.04 (commission/day)  

Employee C (base salary + commission system) : month + base salary + commission  

Total salary =HK$163,620  

Average Daily Pay: HK$163,620/365 =HK$448.27 [(commission + base salary)/ day]  

When the employee takes sick days, the employee should be paid at his average daily wage. So if the employee is on extended sick leave or maternity leave, do I have to recalculate the average daily wage every day? The answer is no.  

In the case of continuous leave of more than one day, the first day of sick leave and maternity leave shall be counted as the due date, so that the holiday pay shall be the same for each day. According to the Labour law, the employer can pay only four-fifths of the salary for sick leave or maternity leave.  

Good introduction: Wokstem human resources system payroll function supports the automatic calculation of the 12-Month Average Daily Wages(ADW), vacation, payroll receipt, and other records! 

Does the commission include holiday pay?

In a pure commission system, “more for more” is used to its full effect. Can the employer assume that vacation pay is included in the commission?  

In 2015, a beauty and fitness center in Hong Kong was sued by the government for failing to pay statutory holiday pay to its employees. The employee claimed that the company had not paid her any statutory holiday pay, but the company claimed that the minimum commission of the employee had included holiday pay (HK$10,000 per month, no basic salary). This is a violation of the Employment Ordinance. It also means that the company cannot assume that vacation pay is included in commission or piece rate.  

Excluding “excluded” periods and wages

At the end of the clause, when calculating the average wage, to eliminate “will not be counted” during and wages, this refers to weed out during without pay wages or salary to pay in full in some cases, for example, only 4/5 compensation paid sick leave or maternity leave, when calculating the average salary will be paid on this period of days and subtract from the calculation. Let’s take employee B as an example. If he takes 10 days of sick leave this month (May 2018), he will receive the following vacation pay:  

HK$571.26 x 10 days x 4/5 =HK$4,568.32  

Because employee B was ill, he did not earn a single job this month, so the income of EMPLOYEE B this month is only HK$4,570.08. Then in June 2018, the average salary of employee B will become:  

The salary of employee B (on a pure commission basis) for the last 12 months is: month + salary + vacation salary  

Total salary =HK$212,998.32  

Average daily wage :(HK$212,998.32 — HK$4,568.32)/(365 — 10) =HK$587.13 [(commission — vacation pay)/(number of days per year — number of days paid vacation)]  

As can be seen, the average daily wage is calculated differently, excluding the 10 days of sick leave and the salary collected during that period. You will find that the average daily wage has gone up. This rule is designed to prevent the average salary of employees from being dragged down. The related situations include:  

  • Leave specified in the Employment Ordinance (i.e. rest day, statutory holiday, annual leave, maternity leave, paternity leave, or sickness leave);  
  • Sick leave at work as specified in the Employees’ Compensation Ordinance; or  
  • Leave granted with the agreement of the employer.  
  • Employees are not offered work by their employers during normal working days.

What days should or should not be counted?

In November 2017, the leading restaurant chain was found to have miscalculated its employees’ holiday pay for the past decade, by an average of 1% of their annual salary. After learning of this problem, the company has arranged for the human resources department to recalculate the holiday pay of the departing and current employees as soon as possible and make up the difference. However, after one round, the company was still greatly affected. The union also pointed out that most employees are still confused about the “holiday pay calculation” method, which we will explain in the ordinance.  

Day of rest 

The Ordinance stipulates that employees employed on continuous contracts (” 418 “Ordinance) are entitled to rest days, statutory holidays, and annual leave with pay. Rest days mean that employees are entitled to no less than one rest day every seven days, and rest days are at least 24 consecutive hours. This day may be unpaid, depending on the nature of the employee’s employment (part-time, full-time, or the content of the employment contract). In addition, the employee has the right not to work for the employer, and the employer should inform the employee in advance of the rest day arrangement:  

  • Fixed rest day: fixed a certain period, for example every Sunday is a rest day, the employer’s one-time notice or the formulation of the employee handbook to the employees can be;  
  • Non-fixed days off: usually for part-time employees, the employer must inform the employee of the arrangement before the start of each month, either orally, in writing, or by Posting a rotation form or notice.  

Legal holiday 

Statutory holidays are paid holidays available to all employees. There are 13 statutory holidays per year:  

  • New Year’s Day (January 1st in solar calendar)  
  • The first to the third day of the Lunar New Year  
  • Tomb-sweeping Day (one of three days on April 4, 5, and 6 according to the Gregorian calendar)  
  • Labor Day (May 1st according to the Gregorian calendar)  
  • The Birthday of the Buddha (26 May)
  • Dragon Boat Festival (5th day of the 5th lunar month)  
  • Hong Kong Special Administrative Region Establishment Day (1 July)  
  • The day following Mid-Autumn Festival (August 16 by the lunar calendar)  
  • Double Ninth Festival (ninth day of the ninth lunar month)  
  • National Day (October 1st according to the Gregorian calendar)  
  • Winter or Christmas (at employer’s option)  

So are all【red SUNS】official holidays? No, “red sun” like Easter, Buddha’s birthday, is called “bank holiday”, there are 17 days a year, and only more than 12 days are called “labor leave” is the legal holiday.  

Red sun (bank holiday, 17 days) ≠ legal holiday (labor leave, 12days)  

The reason why the shops in the street are still open is that the employer has the right to ask the employees to work on the day of the legal holiday, and they need to inform the employees 48 hours in advance and give them a paid holiday.  

Paid annual leave

If an employee has been employed on a continuous contract for 12 months, he/she is entitled to paid annual leave of 7 days in the first year and up to 14 days in each successive year of service (7-14 days is the lower limit, not the upper limit, of the employment contract)  

YOS paid annual leave available days
1 7
2 7
3 8
4 9
5 10
6 11
7 12
8 13
9 or greater 14

If the number of days of annual leave does not exceed 10 days, the employer may, unless requested by the employee, grant not more than 3 days of leave separately to the employee;  If there are more than 10 days, at least 7 consecutive days of annual leave will be granted and the remaining leaves will be granted separately.  For employees on the commission, daily/monthly or piecework basis, the employer is required to pay the employee’s average daily wage (ADW) for the previous 12 months, even if the employee is on a pure commission basis (no base salary).

If an employee’s annual leave exceeds 10 days, the excess may be replaced by salary.  If the employee has been dismissed or has not renewed his/her contract with the employer, and the paid annual leave has not been used up, the remaining annual leave should be paid to the employee in lieu of wages.  

Read More:[Laying off People], You May End Up in a Lawsuit If You Don’t Pay Attention to These 5 Tips

Sick Leave 

Paid sick leave also requires the employee to be on a continuous contract, and sick leave is calculated on a progressive basis, accumulating on the 2nd day of every month in the first year. If no paid sick leave is taken in the first year, it accumulates 24 days.  Starting in the third year, the employee is entitled to four days of sick leave per month. If an employee has not taken a single day of sick leave in three years, the cumulative sick leave is:  

24 (year 1) + 24 (year 2) + 48 (Year 3) = 96 days  

This means that if he is unlucky enough to become seriously ill or injured, he can take 96 days of paid sick leave, which can be paid at 4/5 of the employee’s average salary.  The cumulative sick leave is also capped at no more than 120 days at any one time.  Note that this is “paid sick leave,” and according to labor law, an employee must take four or more consecutive days to be counted as paid sick leave.  

When calculating holiday pay, it is important to remember which days are counted and which are not.  On the basis of “remembering”, we should also understand the logic and calculation behind it.  If you combine your understanding with the use of the remuneration and human resources system of the local Labour Ordinance, you do not need to find out all the information of an employee in multiple Excel files, which can save a lot of time-consuming repetitive work and achieve twice the result with half the effort. 

Read More:

Regulation 418|Do Part-time Workers Have Paid Leave?

Non-“418”-rule Employees No Need to Enrol MPF Scheme?

Different calcualtion methods are supported

(The content and information in this article are for reference only. The accuracy and reliability of the information are subject to the latest government regulations. If you want to reprint the article or content, please contact us first or attach a link to this article, and indicate the source of reprint.)

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