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Hong Kong’s new Competition Ordinance (CO) is coming into effect in December.
Though not specifically targeted at employment matters, the new law restricts practices like wage-fixing, exchange of wage or benefits-related information, industry-wide negotiations that impact wages and similar employment terms, as well as non-solicitation agreements.
Kelvin Lam, managing director, Aon Hewitt Hong Kong and Tzeitel Fernandes, associate partner, Aon Hewitt listed out five key issues that HR departments should know about the new legislation.
1. Review benchmarking practices
The Competition Commission is aware that many firms participate in market benchmarking surveys for information related wages and compensation.
Many firms rely heavily on ‘informal sources’ for information on salary increase projections, allowances & benefits, and trends. Collecting sensitive information from these informal sources would be a violation of the CO.
The Commission advises that the information be shared with a disinterested third party, who would then disclose the information to the competitors in an anonymised and aggregated format to comply with the new regulations.
2. Review association and networking group memberships
Very often, firms are part of industry associations or networking groups, which meet periodically to discuss topics of interest. Under CO, many of the content such as wages or commission rates that were commonly discussed in such gatherings will be classified as sensitive information.
Networking groups need to agree on a list of topics that are ‘off limits’ in light of the CO.
The CO is clear that disclosure of competitive information does not have to be in written form or in an official setting. It can be at a social occasion, over drinks, in an elevator, or even over instant messaging services.
3. Review internal wage-determination policies
While the CO does not apply to collective bargaining between an employer and a group of employees, any union/association which represents employees of more than one employer and which negotiates with more than one employer on wages and other employment terms, could be considered anti-competitive.
Also, any wages/commission rates, etc., which are set with reference to an ‘industry norm’ need to be audited to ensure that the method used to determine the industry norm did not involve anti-competitive activity.
4. Agreements which restrict hiring
Agreements which restrict hiring from a particular competitor are considered anti-competitive, except when arising out of an M&A transaction and are only in force for a finite period.
In the case that such agreements are already in place, firms would need to terminate them in light of the new regulations.
5. Training and policy formulation
Firms will need to invest heavily in training their HR teams on the implementation of the CO. It is important for HR professionals to be able to:
- Identify sensitive information
- Guard against providing sensitive information to competitors
- Recuse themselves from discussions where competitors may be disclosing sensitive information
- Neither confirm nor deny ‘market information’ from unauthorized, non-public sources
- Use reliable, third-party sources when referencing market information in documents.
In addition to price-related information, quantity-related information like hiring strategies, headcount growth plans, etc., could also be classified as sensitive information.
It is important that firms take immediate steps to ensure that they comply with the CO to avoid reputational damage, which could have far-reaching repercussions for the firm.