Protection of Wages on Insolvency Fund

The Hong Kong government is going to amend the Protection of Wages on Insolvency Fund legislation to allow payments to be made to employees of insolvent companies in respect of unpaid holiday pay.  Employees who are owed wages, wages in lieu of notice and severance pay by insolvent employers may apply for ex gratia payments from the Protection of Wages on Insolvency Fund.

At the moment, the PWIF only provides for payment, up to certain limits, in respect of arrears of wages (HK$36,000), pay-in-lieu of notice (HK$22,500) and severance pay (HK$50,000 plus 50% of the amount in excess of HK$50,000).

However, at the moment there is no provision for an employee to receive anything from the PWIF in respect of their accrued holiday pay.  An employee can claim for holiday pay in the liquidation and although they rank as a preferential creditor any payment is subject to there being sufficient realisations from the Company’s assets to make such a payment.

The proposed amendments were gazetted on 30 June 2011 and will be introduced to Legco on 13 July 2011.

This amendment will improve the position of the employees of insolvent companies, although it appears that the maximum additional payment that can be made as a result of this amendment will be limited to HK$10,500.

Assuming the amendment bill is passed this will help to bring a greater degree of consistency regarding the way in which the claims of employees are dealt with.