Employer's Guide: 7 tips to avoid labour dispute

Businesses of almost all sectors are severely affected by the COVID-19 outbreak. Some companies have been compelled to ask their employees to take no-pay leave or even lay off workers, sparking unavoidable labor disputes. Labor disputes refer to disagreement between employer and employees related to wages, benefits, hours of work, dismissal, wage default, or fulfillment of contract.

If disputes between employers and employees arise over the above circumstances, or even developed into a legal issue, employers should pay more attention to the communication and handling measures beforehand. To avoid unnecessary labor disputes, communication between employers and employees is key, while contracts have to be written clearly with bilateral agreement.

1. Arrangement of no-pay leave in Labour Legislation guidelines

Regarding the arrangement of rest days, holidays and leave, Chapter 4 of the Employment Ordinance states that "whether a rest day is paid or not is to be agreed by employers and employees." If the company decided to let their employees to take no-pay leave, employers should first consider offering options, such as 4 days of leave per month, half a month or even a whole month.

Arrangement on no-pay leave should not be decided by either employers or employees unless specifically written in the employment contract, otherwise it could be treated as "unreasonable variation of the terms of the employment contract" which employees have the right to make a claim for remedies. In short, employers should consult and discuss with employees before making any decision on no-pay leave arrangement, and take individual employee's needs into consideration so as to maintain harmonious labor relations.


2. What does "dismissal" mean?

Chapter 9 of the Employment Ordinance listed limitations on termination of contract of employment, and calculation on termination payments like payment in lieu of notice and severance payment. What does "dismissal" mean?

An employee is taken to be dismissed by reason of redundancy if the dismissal is due to the fact that:

  1. the employer closes or intends to close his business;
  2. the employer has ceased, or intends to cease, the business in the place where the employee was employed; or
  3. the requirement of the business for employees to carry out work of a particular kind, or for the employee to carry out work of a particular kind in the place where the employee was employed, ceases or diminishes or is expected to cease or diminish.

If employees were unreasonably dismissed, meaning that employers were not based on valid reasons listed in the Ordinance such as employee's behaviours, competences, or qualifications to make the decision, employees could make a claim for remedies. Employers should also pay attention to the definition of "lay-off" under the Employment Ordinance as employers may have to make severance payments to qualified employees.

how to legally manage lay-offs in hong kong

3. What does "lay-off" mean?

In the employment contract, if it specifies that the employee's remuneration is dependent on the kind of work responsibilities that he was given, then the employee can be regarded as laid off based on the following scenarios:

  1. The number of days which no work is assigned by employers or no wages paid exceeds 1/2 of the total number of normal working days, in any 4 consecutive weeks
  2. The number of days which no work is assigned by employers or no wages paid exceeds 1/3 of the total number of normal working days, in any 26 consecutive weeks

(The days of lock-out, rest days, annual leave and statutory holidays should not be counted as normal working days mentioned above)

4. How to avoid labor disputes?

Employers can refer to the guidelines from the Labour Department to handle measures properly:

  • Try to seek other feasible measures to replace wage reduction or dismissal.
  • In terms of human resources management, employers can minimize payroll costs by employee attrition, voluntary resignation, voluntary retirement scheme, or suspending recruitment.
  • Implement measures to increase revenues or save costs. For example, employers can hold meetings on cost-saving with workers regularly, examine and reduce budgets of each department, negotiate with suppliers to reduce costs etc.

5. If wage reductions are unavoidable

If wage reductions are unavoidable, employers should have an honest and sincere discussion with the affected employees. Before rolling out the wage reduction, it is necessary for employers to get consensus from employees, otherwise employers will contravene the provisions of the Employment Ordinance with respect to timely payment of wages.

Plan early, consult from HR professionals, or get advice from the Labour Relations Division in your district. To sum up, employers should stay flexible and be patient when discussing with employees. Try to listen closely to their feedback. Proposals in written formats help to demonstrate sincerity and smoothen the discussion process.

Pay cut of employees

6. If retrenchment is unavoidable

If retrenchment is unavoidable, employers should have an honest and open discussion with the Consultative Council, Staff Association, or Trade Union within the organization to fully explain the company's plight and reasons for lay-off. Employers should especially prepare to have a detailed discussion with the affected employees with patience and understanding. It is necessary for employers to ensure the standards of lay-off are objective, fair and transparent, while the compensation given to employees under termination of employment contract should be no less than what was stated in the Employment Ordinance and related employment contract.

Besides, employers can consider granting ex gratia payments, and explain every detail clearly and calculation method to the dismissed employees. Support and caring are crucial, employers should handle their relationship with employees carefully to avoid influencing company's productivity and quality of service.

7. Voluntary Conciliation Service

If employers and employees haven't been able to solve labor disputes on their own, then either side can seek voluntary conciliation service for free. Conciliation service is designed to be a simple, time-saving and informal way to assist labors and employees outside of the government to solve issues related to Employment Ordinance, Minimum Wage Ordinance or the terms in their employment contracts.

Building a positive and healthy workplace environment is an effective way to engage with your teams. StartupCare provides comprehensive health benefits solutions for startups and SMEs along with a one-stop healthcare platform, so that you as an employer can protect your employees at ease, stay strong together under the pandemic.


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