Enhancements on the Statutory Minimum Wage Review Mechanism

On 30 April 2024, the Hong Kong Chief Executive-in-Council has announced its acceptance of the recommendations by the Minimum Wage Commission (MWC) to enhance the statutory minimum wage (SMW) review mechanism. The enhancements can be summarised as follows:

• The current biennial review of the SMW rate will be changed to an annual review.

• A new formula will be applied to calculate the SMW adjustment rate, which ties the rate to (i) inflation, measured by Consumer Price Index; and (ii) the ‘sharing economic prosperity’ (SEP) factor, calculated based on the growth rate of the real Gross Domestic Product, with upper and lower bounds set.

  This new formula ensures that the SMW adjustment rate will not be lower than the inflation rate, thereby safeguarding the purchasing power of grassroot employees. The SEP factor allows for a higher SMW adjustment rate during periods of favourable economic growth, enabling employers and employees to share in economic prosperity.

The first SMW rate derived from the new review mechanism is expected to take effect on 1 May 2026. This new mechanism will be evaluated in five to ten years after implementation.