Understanding the 418 Rule in Hong Kong and Its Real-world Impact on You

You might have caught wind of the recent chatter surrounding the “418 Rule” (a.k.a. “Regulation 418”), in Hong Kong’s Employment Ordinance. Curious? You’ve come to the right place. Let’s look at how this rule might affect your business and its employees. But first, let’s do a quick refresher on what the 418 Rule is.

The 418 Rule: The What and Why

Before we dive in, let’s discuss why this 418 Rule exists in the first place. Well, it was created in response to a shift in the Hong Kong employment scene (think: part-time workers, gig workers, etc), resulting in a growing desire for transparent contractual conditions. This gave rise to the need for something tangible (think: a contract) that makes sure everyone’s on the same page. There will be no unpleasant surprises, only clarity. The 418 Rule was meant to paint everything in black and white. 

However, this rule didn’t just pop up one morning. It’s a culmination of years of discussions, feedback loops, and observations that made it what it is today. Think of it as the younger cousin of the 713 Ordinance, which revolutionised the concept of overtime work in Hong Kong. The 418 Rule was meant to level the playing field with regards to employment status.

The 418 Rule and Employee Rights

At its core, the 418 rule is all about employee rights.

In simple terms, the 418 Rule determines whether an employee is considered to have the status of a “full-time employee”. To be considered one, they would need to be under what we call a “continuous contract”.

What is a Continuous Contract?

A continuous contract applies to an employee working at least 18 hours a week for the same employer for four consecutive weeks (18 x 4).

Once an employee fulfils the requirements above, they would be considered full-time employees. As full-time employees, they would get to enjoy benefits such as rest days, sick leave, and paid annual leave.

Why Does This Matter?

As simple as it sounds, there have been some instances where employers unintentionally or intentionally structure their employee work hours in a way that prevents employees from enjoying the status of a full-time employee. This also means they may not get paid fairly or enjoy the paid time-off benefits stated above.

For example, an employee might be scheduled to work more than 18 hours per week for the first three weeks of the month, but less than 18 hours in the fourth week, thereby avoiding the full-time status and associated benefits.

Let’s make this more relatable with two examples.

Distorted Examples of the “418 Rule”

The Buzz: Proposed Changes to the 418 Rule

In August 2023, the government has put forth a proposal to tweak the 418 Rule. Instead of the weekly count of 18 hours, they’re considering counting hours on a monthly basis. This essentially means that any employee that clocks 72 hours a month will get to enjoy statutory benefits as a full-time employee. 

Doesn’t that seem simple? But here’s where things become complicated. The reason why the change hasn’t been confirmed is due to a disagreement on how to set this threshold. Lawmakers are debating whether the hours worked should be set at 72 hours, or should it be reduced to 68, 64, or even 60 hours?

The Arguments Put Forth

Here are some pros and cons as to lowering the threshold:

• Pros: Currently, some people who work more than 72 hours per month are classified as “part-time” solely because they do not work 18 hours per week. With this change, they will be considered “full-time” and enjoy the benefits earned.

• Cons: Lowering the threshold could lead to lower earnings. With this change, an easier-to-achieve “full-time” status would grant them time-off benefits but lower earnings. This may force them to seek out more jobs, increasing transportation costs and resulting in mental burnout. Moreover, those with multiple full-time jobs could be caught in a legal whirlwind, especially since many employers in Hong Kong do not allow their their full-time employees to moonlight elsewhere. Lastly, given the competitive hiring landscape due to manpower shortages, this change might increase labour costs to employers.

Conclusion: What’s the Way Forward?

To be honest, we don’t know. While the government’s proposal to modify the 418 Rule appears to be a welcome step towards mending the employer-employee gap, there is a need for a fair and comprehensive examination on its implications. This has to be done by regularly checking in with those affected by the change, for a considerably long period of time. For those walking the streets of Hong Kong, like Ah Chan and Xin Mei, we hope these discussions translate into real-world benefits that are sustainable for a long time. 

As someone in charge of a business or in HR, it’s important to stay on top of these labour law changes. Adjusting schedules, re-evaluating benefits, calculating payroll, and ensuring everyone is treated fairly is a tough job. In these changing times, you’ll need smart tools to adapt swiftly. Platforms like Talenox ensure you’re on top of regulatory changes, making your HR processes a lot more accurate and streamlined.

Do you have any personal experiences or opinions about the 418 Rule? Feel free to keep this conversation going by letting us know your thoughts in the comments section below. Until next time, we’re always here to help guide you through these HR intricacies!