Hong Kong
Commission-style profit share categorised as “wages” (case law)
Impact date: : 6 March 2026 In Caido Capital Ltd v Harmen Christiaan Overdijk & Ors [2026] HKCFI 1326, the Hong Kong Court of First Instance confirmed that commission-only earnings under a profit share arrangement can constitute “wages” under the Employment Ordinance, and that withholding such payments may amount to constructive dismissal.
The case concerned two senior hires engaged to develop a new business line on a revenue sharing basis. Under the agreed structure, 90% of revenue generated from clients they solely introduced was allocated to the company, with the remaining net profit divided equally between them and payable quarterly. From April 2015, the parties agreed to monthly payments of HK$100,000 on account of future revenue share to address cash flow needs. Following a compliance review in 2016, the company proposed revising the split to 80/20 and circulated minutes indicating that the change would apply retrospectively from 1 January 2016. The employees disputed that any agreement had been reached and subsequently resigned. During their notice periods, the company withheld the monthly payments and sought to impose compliance related conditions on the revenue share payout. One employee sought payment in lieu of notice, while the other alleged constructive dismissal based on non payment.
The court largely rejected the company’s position. It held that the monthly payments were intended to continue unless varied by agreement, and that the company remained obliged to calculate and pay the revenue share in accordance with the agreed formula, with monthly payments to be set off against final entitlements. On the evidence, the court found that the revenue split had been validly varied to 80/20 with retrospective effect through the parties’ conduct. However, the purported condition requiring a “satisfactory compliance audit” was ineffective due to lack of certainty and binding agreement. Importantly, both the revenue share and the monthly payments were held to constitute “wages” under the Employment Ordinance, as the scheme was formula-driven and analogous to commission rather than genuinely discretionary. The withholding of monthly payments during the notice period, as well as accrued revenue share, amounted to a repudiatory breach.
Employer implications/action needed Employers to take note that commission only or profit share only remuneration structures are not immune from wage protections under the Employment Ordinance. Employers should ensure that any changes to remuneration arrangements are clearly and expressly documented, and that conditions affecting payment are drafted with precision to avoid unintended exposure to wage and dismissal claims.
Employer risk Employers to beware that unilaterally withholding or suspending remuneration without valid justification may expose employers to wage-related and constructive dismissal claims, particularly where accrued entitlements are concerned.
Addition of Easter Monday as statutory holiday
Impact date: : 6 April 2026 Starting from 2026, Easter Monday will become a statutory holiday under the Employment Ordinance, bringing the total number of statutory holidays in Hong Kong to 15. This change is considered part of the Hong Kong government’s effort to gradually align the number of statutory holidays with the number of general holidays. Easter Monday is the third addition under Hong Kong’s phased expansion of statutory holidays, which will raise the total from 12 to 17 by 2030.
Employer implications/action needed All employees are entitled to statutory holidays. If a statutory holiday falls on a rest day, the employee should be granted a holiday on the day following the rest day which is not a statutory holiday, an alternative holiday, a substituted holiday or a rest day. An employee having been employed under a continuous contract for not less than three months is entitled to the holiday pay which is equivalent to the average daily wages earned by the employee in the 12-month period preceding the holiday.
The updated continuous-employment test will also expand eligibility for paid statutory holidays among part-time staff.
Employer risk Employers are strictly prohibited from paying the employee in lieu of granting a statutory holiday ("holiday buy-out"). Non compliance could lead to prosecution and, upon conviction, to a fine of HK$50,000.
Revised statutory minimum wage mechanism
Impact date: 1 May 2026 In its Policy Address of 17 September 2025, the Hong Kong Government confirmed the adoption of a new statutory minimum wage (SMW) review mechanism, replacing the former biennial review cycle with a formula based annual adjustment system. Under this revised approach, the Minimum Wage Commission will apply an endorsed formula to generate more regular and predictable wage reviews that better reflect prevailing economic conditions and labour market trends. The first minimum wage rate determined under the new mechanism is expected to take effect on 1 May 2026.
This reform represents a significant structural shift intended to enhance the responsiveness of the wage floor and reduce the lag between economic changes and SMW adjustments. It also signals the likelihood of more frequent, formula driven updates to the minimum wage level. In line with the new mechanism, the Chief Executive in Council has accepted the Commission’s recommendation to raise the statutory minimum wage to HK$43.10 per hour, subject to approval by the Legislative Council.
Employer implications/action needed For employers, the new system introduces a predictable annual review cycle, which, while more administratively demanding, helps businesses prepare more systematically for payroll changes. Annual SMW adjustments may also influence internal pay scales, contractor pricing, and costs of labour. Employers should monitor announcements on the new minimum wage level and the methodology under the revised mechanism.
Employer risk Non compliance with the new minimum wage level could lead to underpayment claims, criminal liability and reputational damage.
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