It is quite common for a former employee, post termination, to make claims for unpaid statutory holiday pay or annual leave pay. This is what happened in the case of 甘建霖 對 Ray White (Hong Kong) Limited [2025] HKCFI 728

Mr Kan worked as a senior client manager for Ray White, a company engaged in the sale and marketing of overseas properties. After his employment was terminated, he made a claim against Ray White at the Labour Tribunal for outstanding statutory holiday pay and annual leave pay between 2017 and 2023. Ray White did not dispute its liability to pay the outstanding payment – the only issue in dispute was for how much it was liable.

Since Mr Kan's remuneration comprised a monthly base salary and commission, Ray White argued that in calculating the outstanding statutory holiday pay and annual leave pay, the amount of commission should be added to the base salary for the purpose of calculating whether any Qualifying Sum (defined below) could be deducted. Mr Kan, on the other hand, asserted the commission should not be added.

The key statutory provisions are sections 41(6) and 41C(6) of the Employment Ordinance. Section 41(6) states that:

" If, pursuant to the terms of his contract of employment or any other agreement, or for any other reason, an employee is paid by his employer a sum of money in respect of a holiday taken by him [("Qualifying Sum")], the holiday pay payable to the employee in respect of that holiday is to be reduced by the sum.

Section 41C(6) is an identical provision, save that it applies to annual leave pay.

Essentially, what these provisions mean is that if an employer has already paid a sum of money to their employee in respect of a holiday or annual leave (i.e. the Qualifying Sum), then any holiday pay or annual leave pay shall be reduced by the amount of the Qualifying Sum. This ensures the employee is not paid twice for the holiday or annual leave.

At the Labour Tribunal, the Presiding Officer found against Ray White and in favour of Mr Kan. It held that the commissions could not form a part of the Qualifying Sum because they were earned on deals struck by Mr Kan while he was at work and not when he was on leave.

Ray White appealed to the High Court and won.

In coming to its decision, the High Court relied heavily on the findings made by Chief Justice Ma (as he was then) in Cathay Pacific Airways Ltd v. Kwan Siu Wa Becky and Others (2012) 15 HKCFAR 615:

• The definition of "wages" in section 2(1) of the Employment Ordinance covers contractual commission.
• Employees who are engaged on a monthly basis are generally to be treated as being paid for each day of that month, including non-working days.

Thus, if an employee is engaged on a monthly basis and earns contractual commission, they are paid commission for every single day of the month, including days on which they are on annual leave and statutory holidays.

Having found that Mr Kan's commissions were paid in respect of every day of the month including annual leave days and statutory holidays, Ray White was entitled to count the commission as a part of the Qualifying Sum and deduct it from the outstanding sum payable to Mr Kan, thus significantly reducing the quantum payable.

This judgment is the latest case that makes it clear that employees engaged on a monthly basis are paid for every day of the month, including rest days, leave days and holidays. In 2019, the District Court in Mak Wai Man & Ors v. Richfield Realty Limited [2019] 2 HKLRD 759 restated this principle, citing the Cathay Pacific case.

It is therefore important for employers to bear this in mind when faced with claims for unpaid holiday pay. Employers should also revisit the definition of "wages" in section 2(1) of the Employment Ordinance when calculating termination payments to ensure that the calculation of the average daily wage or average monthly wage includes all components of wages and does not include items which are specifically excluded, such as discretionary or gratuitous bonuses.