Introduction

The Employment Ordinance (Cap.57) (“Ordinance”) is the primary legislation governing the relationship between an employer and an employee. It establishes a framework that outlines the rights, benefits and protections provided to employees to whom the Ordinance applies. Section 70 provides that any term of a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred upon the employee by the Ordinance shall be void. The Ordinance, therefore, sets out a mandatory minimum standard for the eligible employees that employers must comply.

The Ordinance covers all employees, whether full-time, temporary or part-time.¹ Irrespective of the number of hours they work each week, all employees are entitled to statutory holidays, wage protection and protection against anti-union discrimination. However, only employees employed under a continuous contract of employment are entitled to all the statutory benefits under the Ordinance subject to the relevant provisions.

What is the “418 rule”?

The “418 rule” refers to certain provisions of the Ordinance, which provides that an employee who works for the same employer for at least 18 hours per week for four or more consecutive weeks is deemed to be employed under a “continuous contract” for the purpose of the Ordinance and, as a result, eligible for certain rights, benefits and protections.

What is the significance of the “418 rule”?

It is important for an employee to be employed under a continuous contract as the rights, benefits and protections provided under the Ordinance depend on length of the continuous contract.  For example, an employee has to be under a continuous contract:

·           before he is entitled to rests days,

·           for 1 month or more before he is entitled to sickness allowance,

·           for a period of 3 months preceding the holiday before he is entitled to holidays with pay,

·           for not less than 12 months before he is entitled to paid annual leave,

·           for not less than 24 months before he is entitled to employment protection or severance payment,

·           for not less than 5 years before he is entitled to long service payment.

It is therefore not surprising that the meaning of “continuous contract” under the Ordinance has been the subject matter of litigation over the years. In Leung Wan Kee Shipyard Ltd v Lik Shau Foo & Ors [1995] 3 HKC 229, a Labour Tribunal appeal, the five employee respondents were carpenters employed by the employer appellant. They were first employed on various dates in the 1980s. In 1994, the employer dismissed the employees and they filed various claims with the Labour Tribunal, including claims for long service payment. The Labour Tribunal awarded long service payments to the employees. The employer appealed against the award made in favour of the second, third and fourth respondents. The employer argued that there were breaks in the continuity of employment of those respondents and that the presiding officer did not direct his mind to the statutory meaning of “continuous contract” and thus failed to direct the parties to advance the relevant evidence.

The High Court (as it was then known) addressed the meaning of “continuous contracts” by referring to David Hot Blocking Press Ltd v Ho King Yam (unreported Judgment dated 30th January 1995 in Labour Tribunal Appeal No. 56 of 1994):

“… it should be apparent that the concept of ‘continuous employment’ is not a concept that can be deduced from the wording itself. In other words, the exercise of finding the meaning of ‘continuous employment’ is not an exercise to find out the plain and obvious meaning of the word ‘continuous’. It is a statutory concept and the meaning thereof could only be found in the statute rather than construction of the words. Put it in another way, the use of the word ‘continuous’ is generic as well as descriptive.” (emphasis added)

Applying David Hot Blocking Press Ltd, the High Court went on to say:

“Because the statutory concept has its meaning in the statute, in order to decide if there is a statutory ‘continuous contract’, the Labour Tribunal must focus on the important and key provisions at paras 2 and 3(1) of the First Schedule.

…

What is important to always bear in mind when dealing with the issue of break in the ‘continuous contract’ is that it is the statutory concept and statutory requirements and statutory exceptions which matter. Everything else such as artificiality or harshness or unconscionability are irrelevant and only likely to cause confusion and misdirection.” (emphasis added)

Subsequent decisions such as Wong Man Kwan and others v Chun Shing Holdings Ltd (unreported, HCLA29/2002), Lui Lin Kam and others v Nice Creation Development Ltd (unreported, HCLA106/2002) and Wong Man Sum v Wonderland Sea Food Restaurant O/B Long Yield Co Ltd [2005] HKCU 753 were made based on the same interpretation. It follows that the law on continuous contract of employment is firmly rooted in the statutory provisions. It is settled law that in deciding whether a person is in a continuous employment during a period of not less than four weeks before the relevant date, the employee must have worked for at least 18 hours in each of these weeks, unless the case falls within the exceptions provided under the Ordinance.

Employment (Amendment) Bill 2025

An employer may easily get around the 418 rule by breaking the continuity of the employment. For example, an employer may reduce the working hours of an employee in any one week to less than 18 hours so as to break the continuity of at least 18 hours per week for four consecutive weeks. Even if the employee has worked (in aggregate) 72 hours for four consecutive weeks but he worked less than 18 hours in any one of these four weeks, this would break the continuity of employment.  Accordingly, he will not satisfy the 418 requirement and he will not be considered as employed under a continuous contract. As a result, the employee will not be entitled to the full range of rights, benefits and protections under the Ordinance.

Recognising these limitations, changes in the labour market and employment pattern, the Government resumed the review of the 418 rule in 2021. Following discussions and consensus reached in the Labour Advisory Board, the Employment (Amendment) Bill 2025 (“Bill”) was published in the Gazette on 11 April 2025 and introduced to the Legislative Council for the first reading on 16 April 2025. It is currently at the second reading stage.

The Bill proposes to reduce the threshold for a continuous contract from 18 hours to 17 hours. In addition, an employee will be deemed to be under a continuous contract if he has worked for an aggregate of at least 68 hours during a period of four consecutive weeks. In other words, if an employee works less than 17 working hours in any given week, he will still be regarded as employed under a continuous contract provided that the total working hours of that week and the three weeks immediately preceding it reach 68 hours. The new “468 rule” offers greater flexibility for employees to satisfy the continuous contract requirement, by counting on a four-week basis rather than a weekly basis. Subject to the Bill’s approval, the amendment will take effect on the first Sunday after six months upon its gazettal. It is anticipated that the amendments will come into effect in around mid-October 2025.

Takeaways

The 418 rule has been part of the Ordinance for decades. It has been one of foundation stones of Hong Kong’s contemporary employment law. Over the years, the 418 rule has been criticised for being too rigid and excluding workers with fluctuating working hours (e.g. retail, catering, and food and beverage industries). Indeed, some employers have been operating their businesses for decades by arranging their employees to work in fluctuating working hours so as to avoid triggering the 418 rule. This is not uncommon. It is party of their business model with a view to cut costs and increase competitiveness.    

The amendments will take effect after the Bill goes through the legislative process. The new 468 rule will become the requirement, replacing the existing 418 rule. This change is inevitable and the question for businesses is how they respond to the change. It is crucial for employers to closely monitor its implications for payroll arrangements and operational practices. The new 468 rule will likely change existing employees’ rights, benefits and protections, in particular, for businesses that have been operating on the premises that they will not trigger the existing 418 rule. These employers should review their payroll systems and staffing arrangements so as to ensure compliance and eliminate or reduce the risk of unintentional violations of the Ordinance (when amendment takes effect). As always, if in doubt, it is advisable to seek legal advice.

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¹ The Employment Ordinance covers all employees, whether temporary or part-time, except the following:

(a)     a family member who lives in the same dwelling as the employer;

(b)     an employee as defined in the Contracts for Employment Outside Hong Kong Ordinance;

(c)      a person serving under a crew agreement under the Merchant Shipping (Seafarers) Ordinance, or on board a ship which is not registered in Hong Kong; and

(d)     an apprentice whose contract of apprenticeship has been registered under the Apprenticeship Ordinance, other than certain provisions of the Employment Ordinance.

 

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E: employment@onc.hk                                                    T: (852) 2810 1212 W: www.onc.hk                                                                    F: (852) 2804 6311 19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2025