Understanding the Proposed Updates on the “468 Rule” in Hong Kong

Under the existing Employment Ordinance, an employee who has been employed continuously by the same employer for four weeks or more, with at least 18 hours worked in each week, regardless of a full-time or part-time status, is regarded as being employed under a continuous contract.

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”.

Long-standing Criticisms

The “418 rule” has long been criticized as a loophole that employers can exploit to avoid fulfilling the statutory obligations to provide employment benefits and protections to employees who work shorter working hours. For instance, employers can limit their employees’ weekly working hours to fewer than 18 hours in one week during each four-week period.

In addition, the “418 rule” has also been criticised for being misaligned with current working arrangements, given the increasing numbers of slashies, gig workers, and self-employed workers being hired. According to data from the Hong Kong Special Administrative Region Government Census and Statistics Department, the number of self-employed individuals in Hong Kong reached 220,000 in 2022, which is 6% of the total working population of 3.657 million. This change in the workforce necessitated a review of the current regulations to ensure workers remain protected.

Potential for Change

In an attempt to alleviate the longstanding issues with the '418 rule' and to provide benefits and protections to more employees, the Labour Advisory Board announced on 1 February 2024, that changes will be made to the “418 rule”. Under the proposed changes, employees will be treated as being employed under a continuous contract of employment if they work a total of 68 hours in four weeks, instead of 18 hours a week for four weeks (the new "468 rule"). This means that after working 68 hours in four weeks, these employees, who are often causal workers, would be entitled to the same employment benefits and rights as any other employee.

Looking Ahead

Despite the Government of the Hong Kong SAR's commitment to amending the “418 rule,” there is a possibility that some employers may attempt to bypass the new “468 rule” by scheduling employees to work fewer than 68 hours in four weeks. To maintain and improve conditions for workers, ongoing vigilance and potential further regulatory adjustments may be required.

The Government of the Hong Kong SAR may need to consider more effective measures to ensure employers provide statutory employment benefits to their employees who work less than 68 hours in a four-week period. Potential measures could include paying benefits on a pro-rated basis or passing legislation to regulate employers who attempt to avoid their obligations.

The proposed new “468 rule” has yet to come into effect, and it remains to be seen how the Government will address employers who seek to circumvent the new requirements. Employers should monitor the development of the new “468 rule” and reassess the legal, operational, and financial implications once the requirements come into effect. It will be important for employers to plan their future workforce structures and terms of employment contracts to ensure compliance with the legislative amendment.