Talent & Tech Asia Summit 2024
Hong Kong to ease the '418 rule': What employers should keep an eye on

Hong Kong to ease the '418 rule': What employers should keep an eye on


On the recent announcement around relaxing the city's employment requirement, author Andrea Randall illustrates how this is relevant to modern work arrangements as well as the potential loophole.

Author: Andrea Randall, Partner, RPC (pictured below)

The Hong Kong government has decided to relax a longstanding employment requirement known as the '418 rule' in order to provide benefits and protections to more employees.

Under the existing arrangements, regardless of whether the employee is working full-time or part-time, employees are regarded as being engaged under a "continuous contract" when they

(a) are employed by the same employer for four weeks or more, and

(b) also work for 18 hours or more per week.

Subject to their meeting of relevant eligibility criteria under the Employment Ordinance, employees who are working under a continuous contract are entitled to a range of employment benefits and protections, including statutory holiday pay, paid annual leave, sickness allowance, statutory maternity and paternity leave, severance payment and long service payment. This is commonly known as the '418 rule'.

The 418 rule has often been criticised as a being a rigid fixture in Hong Kong's Employment Ordinance. It has been argued that the 418 rule is out of touch with modern work arrangements, especially the growing gig economy, and fails to provide basic benefits to those who work less than 18 hours a week.

Moreover, the 418 rule has long been deemed as a loophole where employers can avoid triggering the statutory obligation to provide employment benefits to employees who work shorter working hours – for instance, by limiting their weekly working hours in one week during each four-week period.

In an attempt to combat these issues, on 1 February 2024, the Labour Advisory Board announced that the 418 requirement is to be relaxed. Under the proposed changes, employees will be treated as having continuous employment if they work a total of 68 hours in four weeks, instead of 18 hours a week for four weeks (new "468 rule"). This means that upon working 68 hours in four weeks, those employees, who are often causal workers, would be entitled to receive the same employment benefits and rights as those who work longer hours for the same employer.

Whilst the government's easing of the 418 rule is a progressive step, it is almost inevitable that certain employers may try to get around the new 468 rule by arranging for employees to work less than 68 hours in four weeks, thereby defeating the legislative intent of abolishing the 418 rule.

Perhaps a more effective way forward would be if the Government required employers to provide employment benefits on a pro-rata basis.

That said, the proposed arrangement has yet to come into effect and we do not know whether the Government will include further measure to tackle attempts by employers who seek to avoid paying benefits to employees by making them work less than 68 hours in a four-week period. The Government will report to the Legislation Council and an Amendment Bill will be introduced into the Legislative Council for scrutiny upon completion of the draft.

For the moment, the 418 rule remains the law. Employers should keep an eye on the developments of the law and may wish to reassess how they structure their workforce as more information emerges.

Lead image / 123RF
Author's photo / Provided

Follow us on Telegram and on Instagram @humanresourcesonline for all the latest HR and manpower news from around the region!

Free newsletter

Get the daily lowdown on Asia's top Human Resources stories.

We break down the big and messy topics of the day so you're updated on the most important developments in Asia's Human Resources development – for free.

subscribe now open in new window