22 November, 2016
Mak Wai Man v Richfield Realty Ltd (23/06/2016, HCLA 28/2015)
In brief:
The Court of First Instance (“CFI”) found that the holiday pay, annual leave pay and sickness allowance (collectively “Statutory Entitlements”) payable to employees should be reduced not only by base salary paid to an employee but also by any payment of commission.
The Labour Tribunal (“LT”) had taken the view that the Statutory Entitlements payable to employees should not be reduced by any part of the commission, because of the fundamental distinctions between the basic salary and the commission, and the fact that the calculation of payment for the paid sickness day/holiday/annual leave day based on the daily average wage (“DAW”) was irrelevant as to whether that “paid sickness day/holiday/annual leave day” had already been paid for. The CFI overturned the decision of the LT and, with reference to the legislative intent, held that the commission was earned over a period of time including sickness days/holidays/annual leave days, thus giving the employer the right to deduct the commission.
Decision:
The CFI found that “wages” inclusive of commission of a contractual nature was to be used as the basis for all calculations, in order to ensure that an employee’s take-home pay would not be affected if they enjoyed a Statutory Entitlement such as taking a statutory holiday or a period of annual leave.
On this basis, the CFI held that the distinctions between the basic salary and the commission could not justify a different treatment, thus the payment of the commission was to be deducted from the Statutory Entitlements in the same manner as the basic salary.
Take away points:
Employers should provide clear guidelines to employees regarding the methods of calculation and relevant laws applicable to their entitlements, in order to minimise exposure to potential areas of complaint and dispute by current and former employees. Employers should seek legal advice if introducing new forms of incentives for employees. Seeking clarification of relevant regulations will minimise the risk of similar claims in the future.
For further information, please contact:
Susan C. Kendall, Partner, Baker & McKenzie
susan.kendall@bakermckenzie.com
