[Hong Kong] How to Enable Average Daily Wage (ADW) Calculation

In Hong Kong, the Average Daily Wage (ADW) is a critical component for fairly calculating employee entitlements such as statutory leave pay. This mechanism ensures that employees are not disadvantaged by fluctuations in income, protecting their rights and maintaining compliance with the Employment Ordinance. The ADW is typically computed by averaging an employee’s earnings over a designated reference period, usually the preceding 12 months.

This guide provides step-by-step instructions to help you enable automated ADW calculations within the system.

1. Navigate to Manage Company > Leave. 

2. Locate the relevant leave type under Leave Types. Click Actions > Update from the dropdown menu.

3. Under the Payroll Setting section, choose one of the following options: 

• Pay full amount: The employee receives their full daily salary.

• Pay 4/5 of Average Daily Wages: The employee is entitled to 80% of their ADW.

• Pay Full Average Daily Wages: The employee is entitled to 100% of their ADW.

4. Click Save to apply the changes.

Important Notes

• Once ADW is enabled for a leave type, an ADW pay item will be automatically created.

• Click the Sync Leave Application button to synchronize approved leave into the payroll module.
  

• The ADW rate is not editable within the payroll and is calculated based on the employee’s previously approved payslips.

When the Leave Module Is Not Utilized

You can still process ADW payments by manually creating a pay item within the payroll section. Follow these steps:

1. Go to Manage Company > Payroll. 

2. Scroll down to the Pay Items List and click Create. 

3. Enter the necessary details and set the Variable Amount Type to Amount Based on Employee Average Daily Wages. Then, click Save.

4. Once created, include this pay item in the appropriate payroll runs.

For a comprehensive explanation of how ADW is calculated, including exclusions and reference periods, please refer to the full calculation guide.