Is it Legal to Ask Employees to Take Unpaid Leave in Hong Kong?

Running into Problems

A large proportion of the world’s economies have entered a recession as the Covid-19 pandemic continues to devastate. With lockdowns being extended in multiple countries, the pain is expected to continue for businesses and employees alike.

Hong Kong’s unemployment rate has hit 4.2%, a number not seen in over a decade. Although this is relatively low compared with the rest of the world, the number is expected to continue rising in the coming months.

Unemployment rates have seen increases throughout the year

As reported in our Job Index, the city has shifted to an employer-driven market for supporting roles, as job postings decrease and applicant numbers increase. Although support and operation roles have been hit hard, profit-generating positions are still seeing relatively strong demand.

This has been a positive sign for HK’s job market, as we can expect improvement in the future in all other job roles as the virus situation improves. Even though the job market is weaker and revenue has been severely impacted, businesses in HK are choosing alternative cost-cutting measures instead of laying off staff.

April saw a harsh decrease in job postings and a sharp increase in applications
Source: Links International Job Index

Unpaid Leave a Legal Cost-Cutting Measure?

As stated in the South China Morning Post, the Hong Kong Retail Management reported that firms getting workers to take unpaid leave was the most popular cost-cutting measure. By cutting work week by just one day, companies are able to save around 20% on wages.

Although this could be an effective way for businesses to reduce costs, employees may question whether this method is legal. In fact, without a mutual agreement and consent from the employee, any changes to the clause of the contract, including taking unpaid leave, is considered against the law.

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Employees Fear Redundancy if They Defy

Although technically employees are required to give consent beforehand, many are afraid to challenge their bosses in fear of losing their job. Many feel as though they have no choice but to take unpaid leave due to a lack of other options. Voicing their concerns and defying orders have almost become taboo in many Asian workplaces.

Being laid off in difficult economic times is not a viable option for many workers, as they may not be able to land another job in the near future. The shift to an employer-driven job market (particularly in support roles) is especially problematic, as there will be a large number of candidates fighting for each available position.

Protect Your Employees & Your Company

In the case which your employee challenges you in your decision to place them on unpaid leave, you may have to compensate them. It is important to protect your company in this situation. Conflict between employer and employee can be extremely detrimental to your business not only in the short-term but in the long-term too. Employer branding is taking a bigger role in companies. Building a great brand is now deeply embedded in successful corporations.

Employers should be communicating clearly with employees before making any decision on unpaid leave. Don’t leave a bad impression and hurt the company atmosphere without conversing with employees. Transparency is key. Employers that are willing to communicate openly about their struggles will receive more respect and empathy from their staff.

Company leaders showing a willingness to explain to staff will show exceptional management skills that cater to the well-being of their staff. Employees should also place themselves in the shoes of employers by understanding that placing them on unpaid leave is a way of retaining them during economic hardships.

Learn more about how Employee Assistance Programmes (EAP) can help your business.

Government Assistance – Wage Subsidy Schemes

Governments around the world have or are deliberating whether to implement subsidy schemes to support businesses and workers. Singapore, New Zealand and Australia have all introduced a support scheme to stop an unemployment crisis. Hong Kong has recently updated its Employment Support Scheme (ESS) to encompass more employees. Learn more about HK’s wage subsidy scheme, here.

If your company has no choice but to make people redundant, employers should consider outplacement services to help affected employees. Connect them to future opportunities to reduce resentment and protect your employer branding. See how Links International outplacement service can benefit both employer and employee.

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Links HR Outsourcing – Voted Best HR Outsourcing Partner in Hong Kong

3 Key Takeaways

Job Market is Shifting Towards Employer-Driven

Unemployment is rising and the number of job postings is reducing. As more candidates battle for the same job, employers will have more choice from the expanding talent pool. Learn more about the Hong Kong Job Market with our Job Index.

Forcing Unpaid Leave Without Consent Should be Reconsidered

Many companies are choosing to place employees on unpaid leave as a way cost-cutting. However, employers should know that if staff do not give consent this would be against the law. Any changes to a contract without a mutual agreement should, therefore, be avoided.

Protect Your Brand & Care for Your Employees

When making cost-cutting measures its important to factor in the impact on your employer brand. It is important to be transparent in your approach. Clear communication will result in employees empathising with your situation and have a better understanding that your procedures are to retain their services.

Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcingvisa applicationEmployer of Record (EOR), outplacement,  recruitment and more! Contact us for more information on how we can help leverage your HR function.

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