'Adoption of a formula for adjusting SMW rate will enhance predictability and transparency'
Hong Kong's Chief Executive in Council has agreed to review its Statutory Minimum Wage (SMW) once a year while also adopting a new formula as recommended by the Minimum Wage Council (MWC).
Under the adopted recommendations, the new formula for implementing an annual review of SMWs will consider inflation and Economic Growth factors.
Considering inflation ensures that the rate of the SMW adjustment will not be lower than the Consumer Price Index inflation in order to maintain the purchasing power of SMW, according to the MWC.
Furthermore, considering the Economic Growth factor allows the SMW's rate of increase to be "suitably higher" than inflation when Hong Kong's economy performs well.
The first SMW rate under the new review mechanism will take effect on May 1, 2026, according to the Hong Kong government, with the new mechanism to be reviewed in five to 10 years after its implementation.
New system hits 'appropriate balance'
Labour and Welfare Secretary Chris Sun said the MWC's recommendations struck an "appropriate balance" between preventing excessively low wages and minimising the loss of low-paid jobs.
"The government agrees that the adoption of a formula for adjusting the SMW rate will enhance predictability and transparency, thereby reducing the contention of the community over the rate each SMW adjustment, and helping foster harmonious labour relations," Sun said in a statement.
MWC chairperson Priscilla Ong said they are "delighted to learn" that the Chief Executive in Council accepted their recommendations.
"The recommendations on the new review mechanism represent the unanimous consensus of the MWC," Wong said in a statement.
"The MWC believes that the new review mechanism can enhance the efficiency of reviewing the SMW rate, while complying with the policy objectives of the Minimum Wage Ordinance (Cap. 608)."
The recommendations come after the Hong Kong government in January 2023 tasked the MWC to look at how to enhance the review mechanism of the SMW, including the review cycle, how to improve efficiency, and balancing the minimum wage level and sustained economic development.
The MWC said they came up with the recommendations after extensive consultations, detailed analyses, and thorough deliberations.
"Having carefully considered the MWC's study report, the government is of the view that the MWC has ably discharged its function," Sun said. "The government also believes that the new review mechanism is in line with the overall interests of Hong Kong."
