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What are the Implications of Relaxing the "418" Contract Rule on HR Challenges in Hong Kong?

Updated: Feb 27

In a significant shift, the Hong Kong Government has announced plans to ease the stringent "418" continuous contract requirement under the Employment Ordinance (EO). The relaxed "418" rule will be reintroduce as the "468" rule. This change aims to extend benefits to a wider pool of employees, but it also presents new challenges for HR departments across the city.

hong kong government to relax 418 continuous contract requirement under the employment ordinance.

What is HK418 Rule?

The "418 Rule," formally known as the "Continuous Contract Rule," is a regulation established by the Hong Kong Labour Department. It outlines the criteria for determining whether an employment contract in Hong Kong is classified as "continuous" or "non-continuous."

The classification between continuous and non-continuous contracts is significant as it impacts the entitlements and protections available to employees under Hong Kong's employment laws. Compliance with the 418 Rule is crucial for companies operating in Hong Kong to ensure they meet their legal obligations and provide fair treatment to their employees.

Current scenario under the 418 rule:

Under the existing regulations, employees must work for the same employer for at least 18 hours per week over four consecutive weeks to be deemed under a "continuous contract" of employment. This status entitles them to statutory benefits such as statutory holiday pay, paid annual leave, sick leave allowance, statutory maternity, paternity leave and so on.

What are the proposed changes?

The proposed relaxation of the "418" requirement will redefine the criteria for continuous contracts. Instead of focusing solely on weekly hours, the new rule will consider the aggregate working hours over four weeks, with a threshold set at 68 hours. This broader scope means more part-time and casual workers will qualify for statutory benefits.

Labour support initiatives announced by Hong Kong labour advisory board.

What makes it important?

Compliance with the Continuous Contract Rule is not solely a legal requirement but also a moral obligation. By upholding principles of equity and fairness in the workplace, employers can cultivate an environment built on trust and mutual respect while safeguarding the rights of their workforce. Adhering to this rule not only protects employees but also reinforces the framework for a sustainable and healthy work culture.

What are the impacts for HR?

1) Policy Review and Update:

HR departments will need to review and update existing policies and procedures to ensure compliance with the amended EO. This includes revising employee handbooks, contracts, and internal guidelines to reflect the new requirements.

  • Employee Handbooks: Update to reflect changes in employment requirements, entitlements, and benefits.

Paid annual leave, sickness allowance and statutory holiday pay.

  • Contracts: Align with the amended EO, updating clauses related to entitlements, benefits, and statutory rights.

  • Internal Guidelines: Revise to ensure consistency with new policies and procedures, covering areas like hiring, onboarding, performance management, and termination.

Employment benefits according to the relevant eligibility criteria.

2) Time and Attendance Tracking:

Accurate tracking of employee working hours will become even more critical under the revised "418" regulations. HR teams may need to invest in new time keeping software to monitor and record employee hours effectively.

  • Compliance with Legal Requirements: Accurate tracking is vital for EO compliance. HR must record hours for benefits eligibility.

  • Avoidance of Disputes and Legal Issues: Detailed records mitigate disputes over entitlements, reducing legal risks.

Employment benefits including paid annual leave, sickness allowance for part time workers.

  • Selection of Time keeping Systems or Software: Consider advanced timekeeping systems for automated tracking and payroll efficiency.

JustLogin attendance software offers a streamlined solution for tracking employee working hours. With the user-friendly interface and advanced features, it automates time tracking, integrates seamlessly with payroll systems, and provides real-time insights into workforce productivity. This empowers HR teams to improve efficiency, accuracy, and compliance in managing time and attendance.

Relevant legislative amendment work by legislative council.

3) Benefit Administration:

With more employees eligible for statutory benefits, HR will face increased administrative burdens in processing and managing these entitlements. From calculating holiday pay to coordinating maternity leave, HR professionals must ensure timely and accurate benefit administration.

  • Increased Administrative Burdens: HR manages a higher volume of benefit claims and ensures regulatory compliance.

  • Complexity of Benefit Calculations: Accurate calculation of benefits like holiday pay and sick leave is crucial, considering factors like employment status and working hours.

Shorter working hours under same employer to be eligible under a "continuous contract" of employment.

  • Coordination of Benefit Programs: HR must coordinate benefit programs effectively, collaborating with external service providers when necessary.

  • Compliance with Regulatory Requirements: Stay updated on regulations to ensure compliance and maintain detailed records.

  • Investment in Technology and Resources: Consider investing in technology and additional staff to manage the increased workload efficiently.

Clear communication and education are essential to ensure employees understand their entitlements and benefits under the amended EO.

4) Recruitment and Retention Strategies:

The expanded eligibility for statutory benefits may impact recruitment and retention strategies. Employers may need to adjust compensation packages and perks to remain competitive in attracting and retaining talent, especially in industries reliant on part-time or casual workers.

  • Attraction of Top Talent: Employers can attract high-caliber candidates by offering competitive compensation packages and perks, including enhanced benefits.

HR professionals to enhance their skills and capabilities in benefit administration.

  • Enhancement of Employer Branding: Comprehensive benefit packages enhance employer branding and reputation, making employers more attractive to job seekers seeking stability and support.

  • Competitive Advantage in Recruitment: Offering attractive benefits gives employers a competitive edge in recruitment, especially in industries reliant on part-time or casual workers.

  • Adjustment of Compensation Packages: Employers may need to adjust compensation packages to remain competitive, aligning with market rates and employee expectations.

HR professionals must be accessible to address any questions or concerns raised by managers or employees.

Adapting to the Relaxation of the Continuous Contract Requirement with JustLogin!

In the fast-paced world of HR management, staying compliant with local regulations is paramount. For companies operating in Hong Kong, adhering to the Continuous Contract Rule set forth by the Hong Kong Labour Department is crucial. This rule dictates the classification of employees into Continuous Contract or Non-Continuous Contract categories, each with its own set of benefits and statutory rights.

At JustLogin, we understand the complexities of HR compliance, which is why we've integrated the Hong Kong Continuous Contract feature into our payroll solution. Here's how it works and why it sets us apart:

  • Seamless Integration: Our payroll solution seamlessly incorporates this feature, ensuring companies meet compliance requirements effortlessly. By activating the Hong Kong "713 E(A)O 2007 Compliant Policy" and subscribing to the Attendance Module, companies can leverage this feature seamlessly.

  • Efficient Configuration: Configuring this feature is straightforward with JustLogin. Administrators can enable it within the system and assign employee types through the Pay Info Page or User Admin section. This eliminates the need for manual classification, saving time and reducing errors.

Employers who offer comprehensive benefit packages, including expanded statutory benefits, gain a competitive advantage in recruitment.

  • Automated Notifications: Once an employee is identified as Continuous Contract, JustLogin automatically sends email notifications to key stakeholders, including Super Admins, Payroll Administrators, and People Administrators. This ensures everyone stays informed about the employee's contract type, facilitating smooth HR operations.

  • Flexibility and Control: Administrators retain the flexibility to override automation if necessary. By selecting "Non-Continuous Contract" as the Employment Status and ticking the "Override Continuous Contract Automation" checkbox, companies maintain control over employee classification while benefiting from automation.

  • Enhanced Compliance and Efficiency: Companies can trust JustLogin to ensure HR processes comply with Hong Kong labour regulations. Our feature not only ensures adherence to the Continuous Contract Rule but also enhances operational efficiency by automating employee contract identification.

While the relaxation of the Continuous Contract requirement signifies progress in promoting employee welfare, it presents challenges for HR departments in Hong Kong. By proactively addressing these challenges and implementing robust HR practices, organizations can navigate regulatory changes effectively while supporting their workforce.

Justlogin is the preferred choice for companies seeking to streamline HR compliance in Hong Kong. With our intuitive Payroll solution and this feature, companies can focus on strategic HR initiatives while leaving compliance complexities to us.

Ready to simplify your HR processes and ensure compliance with ease? Choose JustLogin today.

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