Introduction

As we step into 2026, employers and employees are reminded that the new “continuous contract” requirement under the Employment Ordinance (Cap. 57) (“Ordinance”) will take effect on 18 January 2026, where the “468 Rule” will be the new “418 Rule”.

The 468 Rule

Under the new requirement, an employee will be regarded as being employed under a “continuous contract” if:

1.      the employee has been employed continuously by the same employer for four (4) weeks or more; and

 

2.      the employee has:

 

a.     worked for at least 17 hours in each week; or

 

b.     (where he has worked less than 17 hours in any week) he has worked for 68 hours or more in a four-week period¹ comprising that week and the three (3) weeks next preceding that week.

 

This new requirement is commonly referred to as the “468 Rule”.

Continuous contract before the 468 Rule applies: the 418 Rule

For employment before the application of the new requirement, the “418 Rule” applies. Under the 418 Rule an employee who works for the same employer for at least 18 hours per week for four (4) or more consecutive weeks is deemed to be employed under a “continuous contract” for the purpose of the Ordinance.

What is the significance?

The Ordinance is the primary legislation governing the relationship between employers and employees. 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.² 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 are entitled to all the statutory benefits under the Ordinance subject to the relevant provisions.

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 one (1) month or more before he is entitled to sickness allowance,

·           for a period of three (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 five (5) years before he is entitled to long service payment.

 

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.

The meaning of “continuous contract” under the Ordinance has been the subject matter of employment 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 (5) 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 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. Insofar as the “418 Rule” is concerned, it is settled law that in deciding whether a person is in a continuous employment during a period of not less than four (4) 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.

The 468 Rule is the new 418 Rule

Under the 418 Rule, an employer may easily get around it 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 (4) consecutive weeks. Even if the employee has worked (in aggregate) 72 hours for four (4) consecutive weeks but he worked less than 18 hours in any one of these four (4) weeks, this would break the continuity of employment. Accordingly, the employee will not satisfy the 418 Rule 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, amendments to the Ordinance were made, where under the new “468 Rule” the threshold for a continuous contract is reduced 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 (4) 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 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.

Takeaways

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 business 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 part of their business model designed to cut costs and increase competitiveness.   

With effect from 18 January 2026, the 468 Rule will be the new 418 Rule; 468 will become the new requirement, replacing the 418 Rule. Businesses will need to comply with the change. It is crucial for employers to closely monitor its implications for payroll arrangements and operational practices. The 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 old 418 Rule. Employers should review their payroll systems and staffing arrangements so as to ensure compliance and eliminate or reduce the risk of violating the Ordinance when the 468 Rule comes into effect on 18 January 2026. As always, if in doubt, it is advisable to seek legal advice. We wish you a Happy New Year.

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1.      The “468 Rule” does not apply to the first three (3) weeks of a new employment. The employee has to be employed by the employer concerned in a four-week period. As a result, during the first three weeks of a new employment, the employee has to work for at least 17 hours in each week.

 

2.      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 (Cap. 78);

(c)     a person serving under a crew agreement under the Merchant Shipping (Seafarers) Ordinance (Cap. 478), 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 (Cap. 47), other than certain provisions of the Employment Ordinance.

 

For enquiries, please feel free to contact us at:

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