DLA Piper: flexible workforces

By Julia Gorham, Partner, Head of Employment—Asia, DLA Piper

Changes in the modern workforce are now happening more radically and rapidly than ever.

According to a report published by the International Labour Organisation in 2015, informal employment, very short term contracts, contingent freelance workers, homeworking and irregular working hours are becoming more and more widespread. These changes in patterns of work, coupled with the rise of peer to peer platforms, are fundamentally changing the meaning of “workforce” and “work”, as more people are now holding multiple jobs concurrently or challenging the traditional employment model.

These changes enable organisations to access to a larger talent pool of millennials or parents returning to work under 'returnships' or similar programmes. These changes also potentially increase retention of existing staff (who may otherwise leave a company for new challenges or increased flexibility as their personal drivers change over time), and they can also have a positive impact on a culture of diversity and inclusion as well as creating family-friendly workplaces.

Hong Kong currently lags behind other developed nations in its lack of legislation or even guidance on flexible working, non-standard forms of employment and on family-friendly employment rights.  Hong Kong working culture still reveres 'desk time' and 'face time' with employees working some of the longest hours in the developed world.

Although there are few statutory provisions on flexible working and family-friendly employment rights, there are some hidden statutory thresholds and risks under the Hong Kong Employment Ordinance (Cap 57) ("EO") that forward-thinking organizations looking to implement flexi-work need to be mindful of.

Independent contractor and misclassified employees

Labelling an on-demand worker as an independent contractor does not necessarily mean that the individual would be viewed by Hong Kong law as an independent contractor.

In Hong Kong, as in many common law jurisdictions, the legal test to differentiate whether a person is an employee or an independent contractor is to examine the facts of the relationship and not just the label given to it.  Therefore, the law examines all of the features of the parties’ relationship against a list of factors and decides whether, as a matter of overall impression, the relationship is one of employment.  Relevant factors include the degree of control that the company can exert over the individual, the extent to which the individual is an integral part of the company, whether the company has any obligation to provide work, and whether the individual is running his own business and needs to manage his own time schedule and financial risks.

Even if an on-demand worker is contracted as an “independent contractor”, if the overall impression of the work relationship between the company and the on-demand worker is one of employment, the "independent contractor" label could be disregarded by Hong Kong court in determining the worker’s rights and benefits.

Misclassifying an on-demand worker as an independent contractor instead of an employee can lead to disputes over annual leave, statutory holiday pay and sickness allowance, Mandatory Provident Fund contributions,  employees' compensation insurance, and statutory long service or severance pay. If the on-demand worker is ultimately found by the court to be an employee, the company's risk exposure may include a record of criminal conviction and the criminal penalty can include fines.

Record-keeping

For casual or a-typical workers, one key challenge faced by many companies is how to keep a proper record of the hours and days they have worked, in order to comply with payment obligations and minimum wage requirements (where applicable).  In Hong Kong, the Minimum Wage Ordinance provides for the statutory rate of minimum wage (the current minimum wage will rise from HK$32.5 to HK$34.5 per hour from 1 May 2017) as well as certain time recording obligations.

The other common record keeping challenge faced by many companies is how practically to monitor if casual workers, across a range of work sites, do in fact work 18 hours or more each week for 4 consecutive weeks - at which time they are regarded by law as "continuously employed" and therefore entitled to certain minimum statutory entitlements such as rest days The entitlements to paid statutory holidays and paid vacation also apply to employees who are "continuously employed".

Contract drafting & holiday pay issues

When engaging casual workers and contingent workers with no base salary, a common pitfall is to assume that their remuneration (whether in the form of commission or otherwise) would cover statutory holiday pay.

In 2015, a fitness and beauty centre was criminally prosecuted for not paying statutory holiday pay to one of its employees. This employee had no base salary but was remunerated for the hours worked in the form of commission and would receive an additional sum of HKD10,000 as her minimum commission each month.  The case asked if the minimum commission was inclusive of statutory holiday pay - the employee argued that the company had failed to pay her any statutory holiday pay, while her employer argued that her minimum commission was inclusive of her holiday pay.  The company was convicted and fined for contravening the EO in not paying the employee’s holiday pay because the contract did not expressly provide that commission would cover statutory holiday pay.

Dealing with flexible-working requests

Unlike other jurisdictions, such as the UK where all employees have a statutory right to request flexible working, dealing with requests in Hong Kong will currently depend on the organisation's internal policies.  Although there is no current trend of claims in Hong Kong, it is conceivable that employees may in the future try to argue that failure to consider a request for flexible working amounts to discrimination, for example under the Sex Discrimination or Family Status Discrimination Ordinance provisions, for example because women generally have a greater responsibility for the care of immediate family members such that an organization's refusal to grant flexible indirectly impacts a greater proportion of women.

For the time being, when dealing with flexible-working requests, the business should look at each request on a case-by-case basis, whether it is able to tailor arrangements to the employee and their role, as well as the overall impact to the business and number of other flexible arrangements ongoing.  This can be hard to balance the idea that a precedent has been set in the past by agreeing to flexible work for some employees, against the objective needs of the business not to have all staff working flexibly, if there is a reasonable concern regarding business impact.

Most forward thinking organisations have already embraced remote-working technology to facilitate a degree of ad hoc flexible working but they should also look at their overall technology and Human Resources strategies in anticipation of an increase in more formal requests for flexible working.  This will include reviewing the use of remote technology, data security, bring your own device "BYOD" schemes, the need for homeworking desk assessments for those working formally at home and insurance etc.

The Benefits

As an employer, there are many benefits of having flexible-work arrangements. Employee engagement is the obvious benefit but commercially many businesses also see an economic benefit in allowing staff to work at home to improve productivity through positivity and empowerment, as well as sometimes a cost saving on office space or related infrastructure requirements.  From a health and safety perspective, additional flexibility may reduce tension and stress within the workplace for those balancing home life and work, creating a more positive environment for all.

As such, flexible forms of work and related arrangements will boost retention and rehire rates, which will benefit successful companies due to the high cost of training new staff and the shortage of skilled labour in Hong Kong.

Despite the lack of statutory provisions for implementing such policies, it is a wise business decision to introduce them as there are definite advantages that will generate growth.