People, Risk & Compliance – From Culture to Control

The current labour issues arising in Hong Kong can be surmised into a wider protection of employee rights. Employers are expected to manage employees in an increasingly transparent way by complying recent legislative reforms. These include redefining employees under continuous contract, abolishing Mandatory Provident Fund (MPF) offsetting arrangements, and implementing the eMPF platform.

Defining “Continuous Contract”: from “418” to “417/468” 

Effective from 18 Jan 2026, the Employment (Amendment) Ordinance has lowered the qualifying threshold for defining “continuous contract”. The previous “418 rule” requiring employees to work 18 hours for 4 consecutive weeks has been replaced. Following the new ordinance, an employee is now required to work for at least 

1. 17 hours for 4 weeks, or  
2. 68 hours within a four-week period to meet the criteria.  

The reform is intended to enhance statutory employment protection for workers with flexible work arrangements, including part-time, freelance, and digital platform workers, who may not satisfy minimum weekly hour requirements despite maintaining an ongoing working relationship. 

Mandatory Provident Fund Reforms 

The abolition of the MPF offsetting arrangement came into effect on 1 May 2025 under the Employment and Retirement Schemes Legislation (Offsetting Arrangement Amendment) Ordinance 2022. Since then, employers are no longer permitted to use their mandatory MPF contributions to offset severance payments and long service payments. On 29 March 2026, The MPFA announced a proposal to introduce a two-tier surcharge mechanism aimed at strengthening compliance with MPF contribution obligations. Under the proposal, employers who fail to settle outstanding MPF contribution arrears within the prescribed period may be subject to an additional surcharge. The proposal remains under consultation and is subject to further stakeholder engagement before implementation. 

The rollout of the eMPF platform also requires employers to ensure their payroll and HR systems are compatible with the platform. With approximately 73% of employers and 41% of scheme members using the platform by the end of June, eMPF is expected to become the primary platform for MPF administration in Hong Kong.

Multinational Employers 

For multinational organisations operating in Hong Kong, these developments underscore the importance of maintaining robust compliance processes and closely monitoring legislative changes. Employment and retirement protection reforms may require updates to employment contracts, workforce classifications, payroll systems, and termination procedures. 

Employers may face compliance challenges in adapting to the regulatory landscape, including: 

• Misclassification of workers: Businesses engaging part-time, freelance, or platform workers may inadvertently fail to identify individuals who now meet the revised continuous contract threshold, potentially resulting in non-compliance with statutory employment benefits and protections. 
• Payroll and record-keeping deficiencies: Employers will need accurate timekeeping and attendance records to monitor whether workers satisfy the new 4-17 or 68-hour continuous contract requirements. 
• Termination and severance payment calculations: Following the abolition of the MPF offsetting mechanism, employers must review termination procedures and budgeting processes to ensure severance payments and long service payments are calculated and funded correctly. 
• eMPF implementation risks: Organisations with legacy payroll or HR systems may face integration challenges when transitioning to the eMPF platform. 

Sector-specific regulatory developments should also be closely monitored. In particular, the Labour and Welfare Bureau has proposed the introduction of a legislative framework governing work injury compensation for digital platform workers. As the sector continues to expand, employers engaging such workers should remain alert to future legislative developments and assess the potential implications for their workforce structures, insurance arrangements, and risk management practices. 

Key Takeaways 

Hong Kong's employment law framework continues to evolve towards greater worker protection and enhanced employer accountability. The expansion of the continuous contract regime, the abolition of MPF offsetting arrangements, and the rollout of the eMPF platform collectively increase employers' compliance obligations and administrative responsibilities. 

To mitigate legal and operational risks, employers should: 

• Review workforce arrangements to identify workers who may now qualify as employees under the revised continuous contract requirements. 
• Implement robust systems for tracking working hours and maintaining employment records. 
• Update payroll, severance, and long service payment processes to reflect the abolition of MPF offsetting. 
• Ensure HR and payroll systems are fully compatible with eMPF requirements and that relevant personnel receive appropriate training. 

Proactively addressing these issues will help employers reduce regulatory risk, avoid potential employment disputes, and maintain compliance in an increasingly employee-centric legal environment.