For the first time in 26 years, subsidies that cover outstanding wages from insolvent employers may see higher payment ceilings from next Friday (17 June) according to an announcement by Secretary for Labour and Welfare, Law Chi-kwong.
A resolution proposing an increase to the ceiling for ex gratia payments to employees is set to be tabled at the upcoming Legislative Council meeting. The ex-gratia payments that are covered by the Protection of Wages on Insolvency Fund include: arrears, wages in lieu of notice, severance pay and pay for unused annual leave and statutory holidays.
According to Law, the payment caps have not been adjusted for 26 years due to major factors such as the 1997 financial crisis and the 2003 SARs outbreak. During those events, the number of applications to the fund skyrocketed, causing the fund to fall into a deficit for several years.
The was also another delay in 2013 after a judicial review of the calculation methods for ex gratia severance payments. After three years, the court of final appeal’s ruling sparked a discussion about the cancellation of the mandatory provident fund’s offsetting mechanism.
As the legal work to cancel the offsetting mechanism nears an end, the adjustment of the payment ceilings now has the chance to be revised according to Law adding that he hopes the bill will be passed in the upcoming meeting.
Each type of ex-gratia payment is subject to a specific cap with the proposed changes highlighted below:
| Type of payment | Current Cap (HK$) | Proposed Cap (HK$) |
| Arrears | 36,000 | 80,000 |
| Wages in lieu of notice | 22,500 | 45,000 |
| Unused annual leave & Statutory Holidays | 10,500 | 26,000 |
Paul Arkwright
Publisher
