‘418 Rule’ under Hong Kong Employment Ordinance to be Relaxed. What Does It Mean for Employers?

In February 2024, the Hong Kong Labour Department announced plans to ease the ‘418 rule’. Under the Hong Kong Employment Ordinance, employees working for the same employer for a minimum of 18 hours per week over four consecutive weeks are considered to be under a “continuous contract” of employment – irrespective of their full-time or part-time status.

Such employees are entitled to various benefits under the Employment Ordinance, including statutory holiday pay, paid annual leave, sickness allowance, statutory maternity and paternity leave, severance payment, and long service payment.

Calls for Changes to the Hong Kong Employment Ordinance’s ‘418 Rule’

The ‘418 rule’ has long come under fire for being inflexible, and main criticisms of it are that it fails to adapt to modern work structures – particularly in the expanding gig economy. Critics also argue that it neglects to offer essential benefits to individuals working less than 18 hours weekly.

Because of this, the ‘418 rule’ has often been regarded as a loophole allowing employers to circumvent the statutory requirement of providing employment benefits to employees with shorter working hours – as employers may attempt to limit weekly working hours to as to avoid fulfilling their obligations.

The ‘468 framework’ under the Hong Kong Employment Ordinance– what’s changing?

Proposed changes to the ‘418 rule’ have led to the introduction of the ‘468 framework’. Under this updated regulation, here’s what employers and employees need to take note of:

Aspect418 Rule468 Framework
Hours worked18 hours a week over 4 consecutive weeks68 cumulative hours over 4 consecutive weeks
Contract statusContinuous contractContinuous contract
Benefits under the Hong Kong Employment OrdinanceEligibleEligible

This pivotal adjustment is anticipated to extend benefits to approximately 70,000 part-time or temporary workers.

How will this benefit part-time and temporary workers?

  • Increased Job Security: The relaxation of the “continuous contract” requirement provides greater job security for part-time employees by extending certain employment rights and protections to a broader segment of the workforce.
  • Improved Work-Life Balance: Access to additional benefits can enhance the overall work-life balance for part-time employees, making their employment arrangements more attractive and sustainable in the long term.
  • Enhanced Recruitment and Retention: Offering a more comprehensive benefits package to part-time employees can help organisations attract and retain top talent in competitive job markets, ultimately contributing to the overall success of the business.

Read also: MPF Hong Kong: Everything You Need to Know on the Abolition of MPF Offsetting Arrangement

How will this impact employers in Hong Kong?

  • Administrative Adjustments: HR departments will need to review and potentially revise their administrative procedures related to employee contracts and benefits. This includes updating policies, procedures, and payroll systems to accommodate the new criteria for determining “continuous contracts.”
  • Workforce Planning: With the relaxation of the “continuous contract” requirement, HR professionals will need to reassess their workforce planning strategies. They may need to anticipate changes in staffing patterns, particularly regarding the utilisation of part-time or casual employees, to ensure compliance with the amended regulations.
  • Training and Communication: HR teams will play a crucial role in communicating the changes to employees and managers. This may involve providing training sessions or informational materials to ensure everyone understands the updated policies and how they may impact employment terms and benefits.
  • Compliance Monitoring: HR will be responsible for ensuring ongoing compliance with the amended Hong Kong Employment Ordinance. This includes monitoring employee working hours, contract statuses, and benefits eligibility to avoid any potential legal issues or disputes.

While a date has not yet been set to officially implement these changes, employers and HR leaders are advised to keep tabs on them and prepare accordingly. For the time being, the ‘418 rule’ remains the law. To learn more on this and for further developments, visit the Labour Department’s official website: https://www.labour.gov.hk/eng/major/content.php

Staying updated with changes such as this that directly impact your payroll can be a challenge. If you’re in search of a payroll and HR services expert, get in touch with us today! Links has over 25 years of experience as a leading HR outsourcing services provider in Asia, offering services such as payroll outsourcing, EOR/PEO, visa applications, outplacement, recruitment, and more.

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