The Employment Ordinance (Cap. 57) in 2026: the 417/468 Rule, the End of MPF Offsetting, and a HKD 43.1 Minimum Wage

Three things in Hong Kong employment law moved at once in 2026. The continuous contract threshold fell from 18 hours a week to 17, with an alternative of 68 hours across four weeks. Offsetting of an employer’s mandatory MPF contributions against severance and long service payments has been abolished for service after 1 May 2025. And the statutory minimum wage has stood at HKD 43.1 an hour since 1 May 2026 — the first rate produced by a formula rather than settled by negotiation.

Note the two dates that published commentary almost always collapses into one. The Employment (Amendment) Ordinance 2025 (27 of 2025) came into operation on 28 December 2025, not 18 January 2026. What happens on 18 January 2026 is that the new test starts to bite, because paragraph 2A(2)(b) of the First Schedule to Cap. 57 preserves the old 18-hour threshold for the first three weeks after commencement. Anyone planning a roster change from 18 January will overlook three weeks in which the old test still governs.

All three changes press on the same group: part-time and irregular-hours staff. A part-timer whose hours hover around the threshold used to break continuity in any weak week, losing with it paid holidays, annual leave, sickness allowance and any claim to severance. The new test largely removes that fragility — and the end of MPF offsetting makes dismissing the same person more expensive.

Change	Before	After	Date
Continuous contract threshold	4 weeks of 18 hours each	4 weeks of 17 hours each, or 68 hours in aggregate over four weeks	Ordinance in operation 28 December 2025; new test applies from 18 January 2026
MPF offsetting against SP/LSP	Employer mandatory contributions offset the whole payment	Mandatory contributions offset only the portion for service before 1 May 2025	1 May 2025
Statutory minimum hourly wage	HKD 42.1	HKD 43.1	1 May 2026
Hou­rs-re­cord monetary cap	HKD 17,200 a month	HKD 17,600 a month	1 May 2026
Ceiling on severance and long service payments	HKD 390,000	HKD 390,000 (unchanged since 1 October 2003)	—
Monthly wage cap in the payment formula	HKD 22,500	HKD 22,500 (unchanged)	—

None of the three changes touched a qualifying period. Three months for statutory holiday pay, twelve months for paid annual leave, forty weeks for maternity and paternity leave pay, twenty-four months for severance and five years for long service payment all stand as they were. Only the gateway moved — the definition of what counts as a continuous contract at all.

The Legislative Base: Which Instruments Actually Govern This in 2026

The three changes rest on three different ordinances and three separate amendment chains. What follows is confined to instruments in force, with the date of enactment and the date of commencement stated separately.

Level 1. The principal ordinances

Instrument	What it governs	Provisions that matter here
Employment Ordinance (Cap. 57)	Employment relations: wages, leave, termination, severance and long service payments	First Schedule (continuous contract), s. 25 (payment on termination), Parts VA and VB (SP and LSP), s. 31ZEA, Schedule 11, Seventh Schedule, Ninth Schedule, s. 63C
Minimum Wage Ordinance (Cap. 608)	The statutory minimum wage	s. 4 (hours worked), s. 8 (entitlement to the minimum wage), s. 9 (the rate), s. 10 (additional remu­nera­tion), Schedule 3 (the rate)
Mandatory Provident Fund Schemes Ordinance (Cap. 485)	Mandatory retirement savings	The definitions of mandatory and voluntary contribution in s. 2(1), on which Cap. 57 draws

Level 2. The amending instruments and their chains

Instrument	Enacted	In operation	What it did
Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (4 of 2022)	Passed 9 June 2022; assented 16 June; gazetted 17 June 2022	1 May 2025— the “transition date” defined in s. 2 of Cap. 57	Abolished offsetting of employer mandatory MPF contributions against SP and LSP; inserted s. 31ZEA and Schedule 11; replaced ss. 31I and 31IA; repealed Table B of the Seventh Schedule
Commencement Notice to 4 of 2022	Gazetted 29 November 2024, tabled in LegCo 4 December 2024	—	Appointed 1 May 2025 as the commencement date
Employment (Amendment) Ordinance 2025 (27 of 2025)	Passed 18 June 2025; gazetted 27 June 2025	28 December 2025	Inserted paragraph 2A of the First Schedule to Cap. 57: a 17-hour weekly threshold, a 68-hour four-week alternative, and the transitional rule in 2A(2)
Minimum Wage Ordinance (Amendment of Schedule 3) Notice 2026 (L.N. 17 of 2026)	Adopted by the CE in Council 10 February 2026; gazetted 20 February; tabled 25 February 2026	1 May 2026	Set the rate at HKD 43.1 an hour
Employment Ordinance (Amendment of Ninth Schedule) Notice 2026 (L.N. 16 of 2026)	Same dates	1 May 2026	Raised the hours-record cap to HKD 17,600 a month

The amendment chain of Schedule 3 to Cap. 608 can be read off the face of the Schedule itself: L.N. 145 of 2010, L.N. 186 of 2012, L.N. 6 of 2015, L.N. 10 of 2017, L.N. 8 of 2019, L.N. 3 of 2023, L.N. 30 of 2025 and L.N. 17 of 2026. The Ninth Schedule to Cap. 57 has been amended in parallel: L.N. 148 of 2010, L.N. 187 of 2012, L.N. 7 of 2015, L.N. 12 of 2017, L.N. 11 of 2019, L.N. 4 of 2023, L.N. 25 of 2025 and L.N. 16 of 2026.

A note on currency, and on where the operative text lives

The “$” sign in every provision of Cap. 57, Cap. 608 and Cap. 221 quoted here means Hong Kong dollars. Verbatim quotations keep the sign and the statute’s own comma grouping; this article uses HKD in its own prose.

The operative consolidated text of both ordinances sits on the Hong Kong e-Legislation portal, and that — not the regulator’s guides — is the primary source. The Labour Department’s guides are a good secondary source, but in two places examined below they state the rule differently from the statute itself.

What a “Continuous Contract” Is, and Why It Gates Everything Else

A continuous contract is the status of an employment contract on which access to almost every substantive right under the Employment Ordinance depends. It confers no right by itself: it opens a door behind which each right carries its own qualifying period.

The definition sits not in the body of Cap. 57 but in its First Schedule, to which sections 3 and 75 refer. That is a structural detail with a practical consequence: the 2025 amendments were made to the Schedule rather than to the sections, so no section of the Ordinance reads any differently than before.

A two-stage construction: four weeks, and then hours

Paragraph 2 of the First Schedule sets the first stage: “Subject to the following provisions, where at any time an employee has been employed under a contract of employment during the period of 4 or more weeks next preceding such time he shall be deemed to have been in continuous employment during that period.”

Paragraph 2A sets the second stage — which of those weeks count at all. This is the paragraph inserted by the Employment (Amendment) Ordinance 2025, and it carries the new threshold.

Paragraph 2A(1) reads: “A week (except one to which subparagraph (2) applies) does not count for the purposes of paragraph 2 unless — (a) the employee has worked for 17 hours or more in that week; or (b) the employee — (i) has been employed by the employer concerned during the period of 3 weeks next preceding that week; and (ii) has worked for 68 hours or more in the period comprising that week and the 3 weeks described in sub-sub-subparagraph (i).”

The statute’s “does not count unless” is a positive requirement expressed negatively: a week counts if either (a) or (b) is satisfied. Misreading it is expensive, so it is worth restating affirmatively — a week counts if 17 or more hours were worked in it, or if the employee was already employed by the same employer through the three preceding weeks and worked 68 hours or more across the four.

A “week” here is not any seven days

Paragraph 7 of the First Schedule defines a week as “a week ending with Saturday”. That is a fixed calendar window running Sunday to Saturday, not a rolling seven-day period measured from the hire date.

The practical consequence, and it is routinely missed: rosters must be tested against calendar weeks ending on a Saturday, not against weeks running from the date of engagement. An employee who starts on a Wednesday may fail the 17-hour test in the first partial calendar week purely because that week began three days before the employment did.

This is why the Employment (Amendment) Ordinance 2025 came into operation on a Sunday, 28 December 2025.The commencement date is aligned to the start of a calendar week so that the old and new thresholds never divide a single week between them.

A 17-hour threshold is not “part-time”

Seventeen hours a week is a little over two eight-hour days. The provision is aimed not at someone working three days a week but at someone working one or two shifts on a fluctuating roster.

An employee who reliably works 20 hours a week was, and remains, on a continuous contract under either threshold. The change matters only where hours are unstable and individual weeks fall below the line.

The 417/468 Rule: How the Count Actually Works

The test has two alternative limbs, and the second rescues only those weeks that failed the first. “417” is four weeks of 17 hours; “468” is four weeks and 68 hours in aggregate. The Labour Department officially calls the whole mechanism the “468 rule”; practitioners more often write “417/468”, and the second label is the more accurate because it shows both stages.

Limb one: 17 hours in the week

A week counts if the employee worked 17 hours or more in it. No further condition attaches — no minimum service, nothing about the surrounding weeks. Each week is tested on its own.

Structurally this is the same test that operated before 28 December 2025, with the threshold at 17 hours rather than 18. One hour is not much on its own; it works in combination with the second limb.

Limb two: 68 hours across four weeks — and its two hidden conditions

A week in which fewer than 17 hours were worked still counts if the employee worked 68 hours or more across a four-week period made up of that week and the three weeks immediately preceding it.

The first hidden condition: the employee must already have been employed by the same employer throughout all three preceding weeks. Subparagraph 2A(1)(b)(i) is drafted as a free-standing requirement, not as a description of the period. Where (i) is not met, (ii) does not apply at all.

From which follows a rule that changes the arithmetic for new hires: the 68-hour rescue is unavailable in the first three weeks of employment. Through those three weeks every week must reach 17 hours on its own, however many hours were worked in the others. The Labour Department states this expressly in its own education tool.

The second hidden condition: the window always looks backwards, never forwards. The four-week period is the failing week plus the three before it. Extra hours in the weeks that follow do not repair a weak week.

What that looks like in figures

Week (ending Saturday)	Hours worked	Limb (a): ≥17 hrs	Limb (b): four-week total	Does the week count?
Week 1	20	Yes	not tested	Yes
Week 2	20	Yes	not tested	Yes
Week 3	20	Yes	not tested	Yes
Week 4	10	No	20 + 20 + 20 + 10 = 70 ≥ 68	Yes
Week 5	10	No	20 + 20 + 10 + 10 = 60 < 68	No
Week 6	22	Yes	not tested	Yes

Continuity breaks in week 5 even though the employee worked exactly the same hours as in week 4. The difference is that by week 5 one of the strong weeks has dropped out of the four-week window. That is what makes the second limb less generous than it first appears: it carries a single dip, not a run of them.

Hours with the same employer aggregate across contracts

Paragraph 6 of the First Schedule: any reference to hours in which an employee has worked means hours in which he has worked for his employer, whether or not the hours were worked under the same or another contract of employment with that employer, and whether or not they were consecutive hours.

The practical consequence: splitting an engagement into two parallel contracts with the same legal entity, so that each sits below the threshold, does not work. Hours aggregate by employer, not by contract.

Paragraph 5 adds a second anti-avoidance rule: where a trade, business or undertaking is transferred from one person to another, the employee’s period of employment at the time of the transfer counts as a period of employment with the transferee, and the transfer does not break continuity. A change of employer on a sale of the business does not reset service.

Two Dates: 28 December 2025 and 18 January 2026

The Employment (Amendment) Ordinance 2025 came into operation on 28 December 2025; the new test began to apply on 18 January 2026. These are not the same event, and exactly three weeks separate them.

The authority for the commencement date is the editorial note to paragraph 2A of the First Schedule to Cap. 57 in the consolidated text on e-Legislation: “Operation date: 28 December 2025”. The date 18 January 2026 appears nowhere in the legislation.

A second and independent route reaches the same date — the formula announced when the Bill was gazetted: the amendment ordinance comes into operation “on the first Sunday after six months upon its gazettal”. Gazettal was 27 June 2025; six months later is Saturday 27 December 2025; the first Sunday after that is 28 December 2025. Three weeks on falls Sunday 18 January 2026.

Where 18 January comes from: paragraph 2A(2)

Paragraph 2A(2) reads: “A week falling within either of the following descriptions does not count for the purposes of paragraph 2 unless the employee has worked for 18 hours or more in that week — (a) a week beginning before the date on which the Employment (Amendment) Ordinance 2025 (27 of 2025) comes into operation (pre-amendment week); (b) a week that is one of the first 3 weeks immediately following the last pre-amendment week.”

Subparagraph (b) is the deferral mechanism. For the first three weeks after commencement the old 18-hour threshold still governs — and with no 68-hour alternative at all, because subparagraph (2) removes those weeks from subparagraph (1) entirely.

The reasoning is plain: the 68-hour limb needs a three-week look-back, and before 28 December 2025 that look-back does not exist. Rather than write a complex transitional formula for windows straddling the reform, the legislature simply postponed the new test by three weeks.

The arithmetic

Calendar week (Sun–Sat)	Status under paragraph 2A	Applicable threshold
Week ending 27 December 2025	Pre-amendment week, para. 2A(2)(a)	18 hours
28 December 2025 – 3 January 2026	First of the three weeks, para. 2A(2)(b)	18 hours
4 – 10 January 2026	Second of the three weeks, para. 2A(2)(b)	18 hours
11 – 17 January 2026	Third of the three weeks, para. 2A(2)(b)	18 hours
From 18 January 2026	An ordinary week, para. 2A(1)	17 hours, or 68 hours across four weeks

The first week to which the new test applies begins on Sunday 18 January 2026. By then the three-week look-back sits wholly inside the period governed by the new Ordinance, and the 68-hour limb becomes operable.

Why this is not pedantry

The difference bites in one scenario, and it is not a rare one: an employee whose continuity is in question for a week between 28 December 2025 and 17 January 2026. A week of, say, 17.5 hours in that window does not count, because the 18-hour threshold governs. An employer working from “the new rule applies from 28 December” will err in its own favour and underpay.

The opposite error is equally available. Commentary that calls 18 January 2026 “the commencement date” is describing an Ordinance that had by then been in force for three weeks. For interpretive purposes — deciding which version of the Schedule governs facts arising in late December, for instance — commencement and first application give different answers.

The Labour Department’s guidance is substantively correct but frames the rule around 18 January 2026 without naming the commencement date at all. That is a divergence between the regulator’s guide and the statute; a legal opinion should cite paragraph 2A(2)(b) of the First Schedule rather than a date taken from a press release.

What happens to service accrued before the reform

The amendments are not retrospective: for employment periods before 28 December 2025 continuity is determined on the former 18-hour weekly threshold. Each week is tested against the threshold in force when that week began.

Service itself is neither reset nor recalculated. Paragraph 2A changes only the rule for counting individual weeks; accrued service, qualifying periods and rights that had already arisen before the reform stand as they were.

Which Hours Count as Worked for the 417/468 Test

For the purposes of paragraph 2A, hours in which an employee did not in fact work still count as worked in defined circumstances. The rule sits in paragraph 3 of the First Schedule, replaced in full by the Employment (Amendment) Ordinance 2025.

Paragraph 3: hours deemed to have been worked

If in any hour the employee is, for the whole or part of the hour: (a) incapable of work in consequence of sickness or injury, provided that any such incapability in excess of 48 hours is supported by a certificate issued by a registered medical practitioner, registered Chinese medicine practitioner or registered dentist; (ab) absent from work due to the employee’s compliance with a Cap. 599 requirement; or (b) absent from work in circumstances such that, by law, mutual arrangement or the custom of the trade, business or undertaking, he is regarded as continuing in the employment of his employer for any purpose — that hour counts as an hour in which he has worked.

Three consequences follow, and each changes the arithmetic. First, sickness does not break continuity: sick hours count towards the 17-hour and 68-hour thresholds. Second, a certificate is required only where incapacity exceeds 48 hours; a short absence counts without documentation. Third, subparagraph (ab) on Cap. 599 requirements (the Prevention and Control of Disease Ordinance) was inserted by Ord. 5 of 2022 and remains in the text — quarantine absence is treated as work.

Subparagraph (b) is the widest of the three and the least determinate. “Custom of the trade” is an evaluative standard; whether a particular absence counts is resolved on the facts, not from the roster.

Paragraph 4: strikes and lock-outs

Where an employee is absent from work for the whole or part of any hour because of a strike (which is not illegal) in which he takes part, or because of a lock-out by his employer, that hour does not count as an hour in which he has worked, but the continuity of his period of employment is not treated as broken by any such absence.

Two rules in one, pulling in opposite directions. Strike hours do not count towards the threshold, so a strike week can fail the 17-hour test. But continuity of service is expressly preserved: the employee does not start counting again from zero.

Cap. 608 defines hours differently, and the difference matters

“Hours worked” for minimum wage purposes is defined in section 4 of the Minimum Wage Ordinance and does not mean the same thing as “hours in which the employee has worked” in the First Schedule to Cap. 57.

Section 4 of Cap. 608 reads: the hours worked by an employee in a wage period include any time during which the employee is, in accordance with the contract of employment or with the agreement or at the direction of the employer — (a) in attendance at a place of employment, irrespective of whether he or she is provided with work or training at that time; or (b) travelling in connection with his or her employment excluding travelling (in either direction) between his or her place of residence and his or her place of employment, other than a place of employment that is outside Hong Kong and is not his or her usual place of employment.

Situation	Counts for the 417/468 test (Cap. 57, First Sch., para. 3)	Counts as “hours worked” for the minimum wage (Cap. 608, s. 4)
Attendance at the workplace with no work provided	Yes, under para. 3(2)(b) where a ground applies	Yes, expressly under section 4(a)
Absence through sickness	Yes, subject to the certificate condition	No
Absence to comply with a Cap. 599 requirement	Yes, under para. 3(2)(ab)	No
Taking part in a lawful strike	No, under para. 4	No
Commuting between home and work	No	No, expressly excluded by section 4(b)
Travel on business during the day	On the facts, para. 3(2)(b)	Yes, expressly under section 4(b)
Paid annual leave, a statutory holiday, a rest day	Yes, as a continuation of employment	No — these are not hours worked

The same employee in the same week can have two different “hours” figures under the two ordinances. A week of sickness counts towards the continuous contract but creates no obligation to pay the minimum wage for those hours: sickness allowance is payable instead, on its own rules.

The practical point for record-keeping: one timesheet is not enough. Records must allow both the hours actually worked and the hours deemed worked under paragraph 3 to be reconstructed — otherwise the two tests cannot be run off the same data.

What Continuous Contract Status Unlocks: The Map of Rights and Qualifying Periods

Continuous contract status opens the door to entitlements, but each entitlement carries its own qualifying period, and the 2025 reform touched none of them. The Labour Department says so directly: after the amendments the other provisions of the Employment Ordinance continue to operate as they did, and the existing eligibility criteria for the various statutory benefits remain unchanged.

Entitlement	Continuous contract required	Additional qualifying period
Rest days	Yes	None; not less than one rest day in every seven days
Statutory holidays — the day off itself	No — every employee is entitled	—
Statutory holiday pay	Yes	Not less than 3 months immediately preceding the holiday
Paid annual leave	Yes	12 months
Sickness allowance	Yes	Paid sickness days accrue at 2 per month in the first 12 months, then 4 per month, capped at 120 days
Maternity leave	Yes	Immediately before the leave commences
Maternity leave pay	Yes	Not less than 40 weeks immediately before the scheduled leave
Paternity leave	Yes	Immediately before the day of leave
Paternity leave pay	Yes	Not less than 40 weeks immediately before the day of leave
End of year payment	Yes	Throughout the payment period
Severance payment	Yes	Not less than 24 months
Long service payment	Yes	Not less than 5 years
Protection against unreasonable dismissal	Yes	Not less than 24 months

Note the statutory holiday rows: the day off itself is owed to every employee regardless of continuous contract status, while pay for that day requires a continuous contract of at least three months. Conflating the two is a common defect in HR policies.

The number of statutory holidays: the reform that is often forgotten

Since 1 January 2026 Hong Kong has 15 statutory holidays: Easter Monday was added to the list this year. The increase is carried by the Employment (Amendment) Ordinance 2021 and brings the statutory holidays up in stages to match the general holidays.

Year	Holiday added	Total statutory holidays
Before 2022	—	12
From 2022	Birthday of the Buddha	13
From 2024	The first weekday after Christmas Day	14
From 1 January 2026	Easter Monday	15
From 2028	Good Friday	16
From 2030	The day following Good Friday	17

This is a further change landing in 2026, and it raises the cost of every employee who has newly acquired a continuous contract under the new test.

As at August 2026 section 39(1) of Cap. 57 contains exactly fifteen paragraphs, of which (l) the Birthday of the Buddha, (m) the first weekday after Christmas Day and (n) Easter Monday were added by the Employment (Amendment) Ordinance 2021. The lettering runs from (a) to (n), yet there are fifteen paragraphs rather than fourteen: an inserted paragraph (da) Labour Day, added in 1997, sits between (d) and (e). Counting by the last letter gives the wrong answer here. Good Friday and the day following it do not yet appear in the section; those provisions commence in 2028 and 2030.

Paragraph (h) repays a careful reading: it is one holiday, not two — “the Chinese Winter Solstice Festival or Christmas Day, at the option of the employer”. The choice belongs to the employer, and it does not give the employee both days.

Buying out a holiday is prohibited. Section 40A(1): no payment of holiday pay under section 40, or other sum, may be made in lieu of granting a holiday. There is one narrow exception: under section 40A(2), where the contract is terminated and an alternative or substituted holiday under section 39(2), (2A) or (3) was granted before termination but falls after it, the holiday pay for that day is payable as soon as practicable and in any case within seven days of the day of termination.

The practical consequence: an arrangement of “work the holiday and take double pay” contravenes section 40A even where the employee agrees to it. The employer must grant an alternative holiday under section 39(2) within 60 days before or after the statutory holiday, having given notice, or agree a substituted holiday within 30 days under section 39(3).

The economic effect of the two reforms compounds. An employee who before 18 January 2026 routinely failed the threshold now passes it — and with the continuous contract comes pay for every statutory holiday, paid annual leave after twelve months, and the accrual of paid sickness days.

Counting 24 months and five years after the reform

Qualifying periods are measured in continuous service, not in weeks that counted. Where continuity breaks, the twenty-four months or five years start again from the moment a continuous contract next arises.

Which is why relaxing the test has a delayed but substantial effect. An employee on an irregular roster who previously broke continuity two or three times a year, and so never reached twenty-four months, can now accumulate service qualifying for severance — and, after five years, for a long service payment.

The End of MPF Offsetting: What Was Actually Abolished, and What Survives

Offsetting against severance and long service payments was not abolished — the employer’s mandatory MPF contributions were removed from the list of items that may offset, and everything else on that list stayed. “Abolition of MPF offsetting” is accurate as a political slogan and inaccurate as a description of the provision.

The mechanism sits in the replaced section 31I of Cap. 57, inserted by the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (4 of 2022).

Section 31I as it stands: a closed list of three items

Section 31I applies where an employee becomes entitled to a severance payment and any of the following is met: (i) because of the operation of the employee’s contract of employment, one or more gratuities based on length of service have been paid to the employee; (ii) because of the operation of that contract, one or more employer-funded (specified) ORS benefits have been paid to the employee; (iii) one or more employer-funded (voluntary) MPFS benefits are being held in one or more mandatory provident fund schemes in respect of the employee, or have been paid to or in respect of the employee.

The severance payment is then reduced by the aggregate of those gratuities and benefits to the extent that the aggregate relates to the years of service for which the severance payment is payable.

Employer mandatory MPF contributions are simply absent from that list. There is no exception and no proviso — the category was deleted from the section outright.

Category of payment	Offsets under section 31I as it stands
Contractual gratuities based on length of service	Yes
Employe­r-fu­nded (specified) ORS benefits	Yes
E­mploye­r-funded (voluntary) MPFS benefits — the employer’s voluntary contri­butio­ns	Yes
E­mploye­r-funded (mandatory) MPFS benefits — the employer’s mandatory contri­butio­ns	No
Employe­r-fu­nded (basic portion) exempt ORS benefits	No
The employee’s own contributions	No, and they never did

From which follows a point that reshapes remuneration design: an employer’s voluntary MPF contribution still offsets a severance payment in full, while the mandatory contribution does not. An employer that historically contributed above the statutory minimum has kept the offset on that excess.

Both categories are defined in section 2 of Cap. 57 by reference to the Mandatory Provident Fund Schemes Ordinance (Cap. 485). An employer-funded (voluntary) MPFS benefit means accrued benefits held by the approved trustee of an MPF scheme in respect of the employee and attributable to a voluntary contribution by the employer as defined in section 2(1) of Cap. 485. The mandatory contribution is defined in the same place.

The mirror provision: section 31IA

Section 31IA runs the other way: where a severance payment has already been paid, the aggregate of the corresponding gratuities and benefits is reduced by the amount of that severance payment. It is the same anti-double-counting protection applied to the opposite sequence of events — where the MPF benefit is paid out after the dismissal.

In the modified version that applies to a “specified employee”, both sections carry an express anti-duplication rule: an item used to reduce one portion of the payment cannot be used again to reduce the other.

What this does to the cost of a dismissal

The economic substance of the reform: the employer’s mandatory MPF contribution has stopped being an advance against severance and become a free-standing cost. Before 1 May 2025 an employer paying 5% of an employee’s income into MPF was in effect building a reserve against which it later discharged severance. After 1 May 2025 the two obligations came apart.

For long service the difference accumulates slowly, because offsetting is abolished only for service falling after 1 May 2025. An employee with twenty years’ service dismissed in 2026 has one year of non-offsettable service and nineteen years of offsettable service.

How Severance and Long Service Payments Are Now Calculated: A Two-Part Sum

For an employee whose service straddles 1 May 2025, the payment is the sum of two separately computed portions resting on two different wage figures. This is not a pro-rating of one amount but two independent calculations.

The mechanism is switched on by section 31ZEA of Cap. 57 and delivered through Schedule 11, which does not replace Parts VA and VB but “modifies” them for a defined class of employee. The drafting device is unusual: sections 31G and 31V read exactly as before, and the modified versions are printed in Schedule 11.

First, these are two mutually exclusive payments, not one

Severance and long service payments are distinct entitlements with different triggers, and one employee on one termination receives only one of them. The statute says so: section 31R(1)(a)(i) gives a long service payment to an employee who “is dismissed and his employer is not liable to pay him a severance payment by reason thereof”.

Section 31B(1): an employee employed under a continuous contract for not less than 24 months ending with the relevant date is entitled to a severance payment where he (a) is dismissed by his employer by reason of redundancy, or (b) is laid off within the meaning of section 31E. There is no other route: a dismissal for any other reason generates no severance payment.

Section 31B(2) defines redundancy: a dismissal is by reason of redundancy where it is attributable wholly or mainly to the employer having ceased, or intending to cease, to carry on the business for the purposes of which the employee was employed or in the place where he was employed — or to the requirements of that business for employees to carry out work of a particular kind, or in that place, having ceased or diminished, or being expected to cease or diminish.

Section 31R(1) gives a long service payment to an employee with not less than five years of continuous service at the relevant date in three cases. First, the employee is dismissed and the employer is not liable to pay severance. Second, the employee terminates the contract on health grounds in the circumstances specified in section 10(aa). Third, the employee terminates the contract and at the relevant date is not less than 65 years of age with not less than five years under that contract.

Parameter	Severance payment (SP)	Long service payment (LSP)
Minimum service	24 months	5 years
Trigger	Redundancy or lay-off — s. 31B(1)	Dismissal with no SP liability; termination on health grounds; termination at 65 — s. 31R(1)
Arises on the employee’s own resignation	No	Yes — on health grounds and on age
Arises on the employee’s death	No	Yes, in favour of a beneficiary — s. 31RA
Employee must claim it	Yes — s. 31N, or the entitlement is lost	No
Payment deadline	2 months from receipt of the claim	7 days from termination

A conclusion that changes the risk assessment: a long service payment can arise from an employee’s own notice of retirement, with no claim from them and a seven-day deadline. An employer that thinks of both payments as “the redundancy settlement” misses the likeliest way LSP arises at all.

A proviso on health-grounds termination: the employer may, at its own expense, require the employee to undergo a further medical examination for a second opinion (section 31R(3)). That right is forfeited unless the examination is arranged within 14 days of the employer receiving a copy of the section 10(aa) certificate and the employee is notified in writing at least 48 hours beforehand (section 31R(4)). An employee who without reasonable excuse refuses the examination forfeits the long service payment (section 31R(5)); where the two opinions conflict, the Commissioner rules (section 31R(6)).

The base formula for an ordinary employee

Section 31G(1) of Cap. 57: the amount of a severance payment is calculated by allowing (a) in the case of a monthly rated employee, two-thirds of his last full month’s wages, or two-thirds of $22,500, whichever is less; or (b) in any other case, 18 days’ wages based on any 18 days chosen by the employee and occurring during his last 30 normal working days, or two-thirds of $22,500, whichever is less — for every year (and pro rata for an incomplete year) of employment under a continuous contract.

Two-thirds of HKD 22,500 is HKD 15,000, and that is the ceiling on the payment for any single year of service.

Section 31G(2) gives the employee an election: he may have his wages averaged over the twelve months immediately preceding the relevant date. For an employee on irregular earnings that can beat the last full month — or lose to it. The election belongs to the employee, not to the employer.

The modified formula for a “specified employee”

Modified section 31G(1) in Schedule 11: the amount of the severance payment is the sum of the amounts under paragraphs (a) and (b).

Portion of the payment	Service multiplier	Wage multiplier
Portion for service before 1 May 2025 (pre­-transi­tion portion)	Years of service before the transition date	Two-thirds of the last full month’s wages for the pre­-transi­tion employment period, capped at two-thirds of HKD 22,500
Portion for service from 1 May 2025 (po­st-tra­nsition portion)	Years of service from the transition date	Two-thirds of the last full month’s wages for the whole employment period, capped at two-thirds of HKD 22,500

The wage figure fixed for the pre-transition portion is frozen at the last full month before the transition date. Pay rises after 1 May 2025 do not inflate that portion. For the employer this caps the growth of the historic liability; for a long-serving employee on a rising salary it materially reduces the payment against the former position.

Two provisos the regulator’s guidance does not carry

The first: where the pre-transition period is shorter than a month, the input is not the “last” but the first full month’s wages for the whole employment period. For a monthly rated employee that is subparagraph (a)(i)(B) of the modified section 31G(1); for everyone else, subparagraph (a)(ii)(B) does the same thing with the first 30 normal working days. The provision exists for people hired in April 2025.

The second, and the more consequential: where the employee elects twelve-month averaging, the “specified period” differs between the two portions. For the pre-transition portion it is the twelve months immediately preceding the transition date — or the whole pre-transition period if that is shorter than twelve months; for the post-transition portion it is the twelve months immediately preceding the relevant date. That follows directly from the modified section 31G(6).

The practical consequence: an employee electing averaging elects it for both portions at once, but two different sets of twelve months are averaged. A calculation that takes the same twelve months before termination for both portions is wrong.

A 1990 proviso that is still live

Modified section 31G(7): for an employee employed under a continuous contract otherwise than by way of manual labour, whose average monthly wages during the twelve months immediately preceding the commencement of the Employment (Amendment) Ordinance 1990 (41 of 1990) exceeded $15,000, a reference to the pre-transition employment period does not include any period of employment falling before 1 January 1980.

The provision reaches a narrow group — well-paid non-manual employees with unbroken service since the 1970s — but for that group it cuts a whole decade out of the reckonable service.

The same machinery for long service payments

The modified section 31V in Schedule 11 reproduces the modified section 31G word for word: the same two portions, the same wage inputs, the same two-thirds of HKD 22,500 per year of service, the same excess-removal rule and the same definition of the “specified period” for averaging. The only difference is the cross-reference: a long service payment is payable under section 31R(1) or section 31RA(1).

There is a separate branch for the death of an employee: a long service payment under section 31RA is paid to a beneficiary, and Schedule 11 modifies sections 31YA, 31YB and 31YC for that case. The offsetting rule inside them is the same — five categories against the pre-transition portion and three against the post-transition portion.

Section 31YC deals with the awkward case where the long service payment is due to one person while the MPF benefits or the contractual gratuity go to another. There, the second person receives only what would remain after a reduction under section 31YB computed as if that person had received the long service payment. The provision closes off avoidance by splitting entitlements between beneficiaries.

The HKD 390,000 Ceiling, and the Rule That Makes It Eat the Non-Offsettable Portion First

The maximum severance or long service payment is HKD 390,000, and that figure has not moved since 1 October 2003. The ceiling is set not in the body of the section but in Table A of the Seventh Schedule to Cap. 57, and it is keyed to the date of termination (the relevant date).

Relevant date	Maximum amount
Before the commencement of the Employment (Amendment) Ordinance 1995 (5 of 1995)	Total wages earned in the 12 months preceding the relevant date, or HKD 180,000, whichever is less
On or after the commencement of 5 of 1995 but before 1 October 1995	HKD 210,000
1 October 1995 – 30 September 1996	HKD 230,000
1 October 1996 – 30 September 1997	HKD 250,000
1 October 1997 – 30 September 1998	HKD 270,000
1 October 1998 – 30 September 1999	HKD 290,000
1 October 1999 – 30 September 2000	HKD 310,000
1 October 2000 – 30 September 2001	HKD 330,000
1 October 2001 – 30 September 2002	HKD 350,000
1 October 2002 – 30 September 2003	HKD 370,000
On or after 1 October 2003	HKD 390,000

Table B of the Seventh Schedule, which carried a separate ceiling for long service payments, was repealed by section 20 of Ordinance 4 of 2022. Both payments now answer to a single table.

The rule for removing the excess: modified section 31G(3)

Where the payment would exceed the ceiling, the excess is removed as follows: (a) if the pre-transition portion would by itself exceed the ceiling, that portion is reduced to the ceiling and the post-transition portion is reduced to zero; (b) in any other case the pre-transition portion is not reduced, and the post-transition portion is reduced to the difference between the ceiling and the pre-transition portion.

The economic effect: the ceiling always consumes first the portion that cannot be discharged by MPF offsetting.The pre-transition portion is protected — it is reduced last, and only where it exceeds HKD 390,000 on its own.

From which follows a counter-intuitive result: the longer an employee’s service before 1 May 2025, the less that employee gains from the abolition of offsetting. For a very long-serving employee whose payment already hits the ceiling, the non-offsettable portion is reduced to zero or nearly so.

A worked example where the reform gives the employee nothing

An employee on HKD 40,000 a month with 30 years’ service, 28 of them before 1 May 2025. The wage input is capped at HKD 22,500, so each reckonable year is worth HKD 15,000.

Pre-transition portion: 28 × 15,000 = HKD 420,000, which already exceeds the HKD 390,000 ceiling. Under paragraph (a) of the modified section 31G(3) that portion is reduced to HKD 390,000 and the post-transition portion is reduced to zero.

The result: the entire payment falls in the portion against which the employer’s mandatory MPF contributions still offset. In this scenario abolition delivers the employee nothing and costs the employer nothing.

Neither threshold — the HKD 22,500 in the formula nor the HKD 390,000 ceiling — has been indexed for decades, which makes this scenario steadily more common. The ceiling has stood at HKD 390,000 since 1 October 2003, and the HKD 22,500 figure survives unchanged in section 31G as amended by Ordinance 4 of 2022. Over the same period the statutory minimum wage has risen from HKD 28 to HKD 43.1.

Who Is a “Specified Employee”, and Why Anyone Hired After 1 May 2025 Sits Outside the Scheme

The two-part calculation applies only to employees who satisfy all three conditions in section 31ZEA of Cap. 57 at once. For everyone else the ordinary, unmodified sections 31G, 31I, 31V and 31Y govern.

Section 31ZEA(2) reads: Parts VA and VB have effect in relation to such an employee with the modifications set out in Schedule 11 if — (a) the employee’s employment under the continuous contract commenced before the transition date; (b) the relevant date for the termination of the employment falls on or after the transition date; and (c) either or both of the following conditions are met: (i) contributions are payable by the employer to an occupational retirement scheme because of the operation of that contract; (ii) contributions are payable by the employer to a mandatory provident fund scheme under the Mandatory Provident Fund Schemes Ordinance (Cap. 485).

Situation	Does Schedule 11 apply	How the payment is computed
Employment began before 1 May 2025, termination after it, MPF or ORS contributions payable	Yes	Two portions; mandatory contributions offset only the pre­-transi­tion portion
Employment began on or after 1 May 2025	No	Ordinary section 31G; mandatory MPF contributions offset nothing at all
Employment began before 1 May 2025 but termination occurred before that date	No	Parts VA and VB as in force immediately before the transition date — as if the amendments made by 4 of 2022 had never been made (s. 31ZEA(3))
Employer pays no MPF and no ORS contributions	No	Ordinary section 31G; there is nothing to offset in any event

The key point: an employee hired on or after 1 May 2025 has no pre-transition portion at all, and the employer’s mandatory MPF contributions offset no part of that employee’s payment. For those employees the reform operates in full from day one.

The mirror of the same provision: section 31ZEA(3) preserves the old regime for terminations that took effect before 1 May 2025, directing that Parts VA and VB apply “as if the amendments to this Ordinance made by the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (4 of 2022) had not been made”. It is the date of termination — not the date of the dispute and not the date of payment — that fixes the applicable version.

Condition (c) looks like a formality; it is not

Schedule 11 applies only where the employer is obliged to contribute to an MPF scheme or to an occupational retirement scheme. Some categories of employee are exempt from MPF — and for them the two-portion construction never switches on.

The practical consequence: the check is not only of dates but of whether a contribution obligation actually existed across the relevant period. An MPF-exempt employee who nonetheless qualifies for severance has the payment computed under the ordinary section 31G, no matter when they were hired.

Terms worth keeping apart

The “transition date” is a Cap. 57 term defined in section 2 as the date on which Ordinance 4 of 2022 came into operation — 1 May 2025. It relates exclusively to the abolition of MPF offsetting.

The “relevant date” is a separate Cap. 57 term, and both the Seventh Schedule ceiling and the wage-averaging period turn on it. The two must not be conflated: in the modified section 31G they operate in different paragraphs of the same formula.

Neither has anything to do with the commencement of the Employment (Amendment) Ordinance 2025. The three reforms of 2025–2026 run on three different dates, and no one date is common to them all.

The 25-Year Government Subsidy: How Much the State Pays on the Employer’s Behalf

The Subsidy Scheme for Abolition of MPF Offsetting Arrangement (SSA) reimburses an employer for part of the severance or long service payment attributable to service after 1 May 2025. It runs for 25 subsidy years, each running from 1 May to 30 April.

Subsidy year 1 ran from 1 May 2025 to 30 April 2026; year 25 ends on 30 April 2050. The Government’s total commitment is stated in official material as HKD 33.6 billion; the June 2022 press release gave HKD 33.2 billion in 2021 prices.

Two scales and a HKD 500,000 threshold

The subsidy ratio depends on whether the accumulated non-offsettable portion of payments made by that employer during the subsidy year exceeds HKD 500,000. One scale applies within the threshold and another beyond it; an application straddling the threshold is split pro rata.

Subsidy year	Period	Ratio within the HKD 500,000 threshold	Ratio beyond the threshold
1–3	1 May 2025 – 30 April 2028	50%, or the amount exceeding an employer cap of HKD 3,000 per employee	50%
4	2028–29	45%, or the amount exceeding HKD 25,000	45%
5	2029–30	40%, or the amount exceeding HKD 25,000	40%
6	2030–31	35%, or the amount exceeding HKD 25,000	35%
7	2031–32	30%, or the amount exceeding HKD 50,000	30%
8	2032–33	25%, or the amount exceeding HKD 50,000	25%
9	2033–34	20%, or the amount exceeding HKD 50,000	20%
10–11	2034–36	20%, no cap	15% (year 10), 10% (year 11)
12–13	2036–38	15%	5% (year 12), nil(year 13)
14–19	2038–44	10%	nil
20–25	2044–50	5%	nil

The subsidy is the greater of two amounts: the sum produced by applying the ratio, or the amount exceeding the stated cap on the employer’s share. That construction matters more than the percentages: on small payments the ratio governs, on large ones the cap does.

How the cap on the employer’s share works

The official worked example from the employer guidance notes: in subsidy year 6, at a 35% ratio and a net non-offsettable payment of HKD 65,000, the ratio gives HKD 22,750 while the amount above the HKD 25,000 cap is HKD 40,000; the subsidy is the greater — HKD 40,000.

In the first three years the cap on the employer’s share is only HKD 3,000 per employee. On any payment of consequence the employer therefore bears HKD 3,000 and the subsidy covers the rest — whatever the headline 50% ratio suggests.

The claim procedure

The employer pays the employee first and applies for the subsidy afterwards. The Labour Department puts it plainly: employers should first pay SP or LSP to employees in accordance with the Employment Ordinance before submitting applications for disbursement of the subsidy.

Applications must be made within three months of the date of effecting payment; late applications are not accepted. They are filed through the TransitionEase portal, or by email, fax, post, in person or by drop box. A bulk template covers up to 30 cases, a decision normally follows within 30 working days, and the subsidy is paid into the employer’s bank account.

Offsetting the pre-transition portion is a separate exercise that runs through the eMPF Platform, not through the SSA. They are two distinct actions with two distinct counterparties: reimbursement from the Government, and a withdrawal of accrued benefits from the trustee.

What the first year’s statistics show

According to the LegCo reply of 29 April 2026, as at March 2026 there had been 20,790 employer applications, of which 16,793 had been processed. Of those processed, 15,504 were approved — 92.3% — with 646 refused (3.9%) and 643 withdrawn (3.8%); HKD 42.24 million had been disbursed, averaging HKD 2,700 per approved application. The 92.3% is a share of applications processed, not of applications received: against the total received the approval rate is 74.6%, the difference being the roughly four thousand applications still in hand at the reporting date.

An average subsidy of HKD 2,700 confirms what the formula implies: in the early years the non-offsettable portion is small, because service after 1 May 2025 is still measured in months. The real load on the scheme arrives in ten to fifteen years, by which time the ratio will have fallen to 10–20%.

A separate route exists for employees: 14 shortfall applications had been made, of which 2 were approved for a total of HKD 12,000. The Government undertook to make up any shortfall so that no employee would be worse off because of the policy change.

A HKD 43.1 Minimum Wage: the First Rate Produced by a Formula

Since 1 May 2026 Hong Kong’s statutory minimum hourly wage has been HKD 43.1. The rate was set by the Minimum Wage Ordinance (Amendment of Schedule 3) Notice 2026 (L.N. 17 of 2026) and written directly into Schedule 3 to Cap. 608.

It is the first rate arrived at by applying a formula rather than by a negotiated review. The previous rate of HKD 42.1, effective 1 May 2025, was set under the old mechanism.

The full history of the rate, read off Schedule 3 itself

Rate	Effective from	Instrument
HKD 28	1 May 2011	L.N. 145 of 2010
HKD 30	1 May 2013	L.N. 186 of 2012
HKD 32.5	1 May 2015	L.N. 6 of 2015
HKD 34.5	1 May 2017	L.N. 10 of 2017
HKD 37.5	1 May 2019	L.N. 8 of 2019
HKD 40	1 May 2023	L.N. 3 of 2023
HKD 42.1	1 May 2025	L.N. 30 of 2025
HKD 43.1	1 May 2026	L.N. 17 of 2026

There is no 2021 entry: HKD 37.5 stood for four years, from 1 May 2019 to 30 April 2023. That is the only pause in the series, and it was among the arguments for moving to an annual review.

The formula

The annual rate of adjustment in the SMW, expressed as a percentage, equals headline CPI(A) inflation subject to a lower bound of zero, plus an economic growth factor. The growth factor is the difference between the real GDP growth rate in the latest year and the trend real GDP growth rate over the latest decade, multiplied by 20%, and it is bounded between zero and one percentage point.

The new mechanism was adopted by the Chief Executive in Council on 30 April 2024 and moved the review from a two-yearly to an annual cycle.

The formula cannot produce a reduction: a floor of zero applies both to the inflation component and to the growth factor. The adjustment it yields can be nil, but it cannot be negative.

An important qualification about the status of that floor: it is a property of the formula, not a prohibition in Cap. 608. The Ordinance in fact provides expressly for the opposite.

Section 16(1)(a) of Cap. 608: the Chief Executive in Council may, by notice published in the Gazette, amend Schedule 3 so as to specify an hourly wage rate in column 1 or to increase or reduce** the then current rate specified in that column.** The power to cut the rate is on the face of the statute.

Section 16(2) adds a second point: in exercising that power the Chief Executive in Council may have regard to any recommendation included in a report under section 12(1) but is not bound by the recommendation. The formula operates through the Minimum Wage Commission’s recommendation, and that recommendation binds nobody.

The accurate formulation is therefore: the operative review mechanism does not produce reductions, but the legal power to reduce is expressly conferred by section 16(1)(a). “The rate cannot go down” is wrong as a statement of law.

Section 16(3) settles a further question: the power under subsection (1) confers power to fix only a single hourly wage rate applicable to all employees. Hong Kong cannot have sectoral, regional or age-based minimum wage rates.

The 2026 computation on the inputs published by the Minimum Wage Commission: CPI(A) inflation 1.9%, real GDP growth 3.5%, trend growth over the decade 1.2%. That gives 1.9 + (3.5 − 1.2) × 20% = 2.36%, and 42.1 × 1.0236 ≈ HKD 43.1, matching the announced increase of 2.38%.

The hours-record threshold

From 1 May 2026 an employer must keep records of total hours worked only for employees whose wages for the wage period are less than HKD 17,600 a month. The threshold sits in the Ninth Schedule to Cap. 57, to which section 49A refers, and was raised from HKD 17,200 by the Employment Ordinance (Amendment of Ninth Schedule) Notice 2026 (L.N. 16 of 2026).

The threshold and the rate are reviewed as one package and take effect on the same day, but they are made by different authorities under different ordinances, and the distinction is worth holding on to.

Instrument	What it amends	Enabling provision	Who makes it
L.N. 17 of 2026	Schedule 3 to Cap. 608 — the minimum hourly wage rate	Section 16(1) of Cap. 608	The Chief Executive in Council
L.N. 16 of 2026	The Ninth Schedule to Cap. 57 — the hours-record threshold	Section 49A(6) of Cap. 57	The Commissioner for Labour

The decision on the rate was taken by the CE in Council on 10 February 2026; both notices were gazetted on 20 February and tabled in LegCo on 25 February 2026. They are published together because both figures answer to one policy, not because one authority sets them.

The threshold is not applied on a flat monthly basis: section 49A(3)(ea) requires wages for the wage period to be compared with the Ninth Schedule amount, or with the amount bearing the same ratio to it as the length of the wage period bears to the month in which it falls — and, where the wage period straddles two months, calculated by the number of its days falling in each. For a fortnightly wage period the threshold is therefore roughly half of HKD 17,600, not HKD 17,600.

The duty the offsetting abolition created, and which almost nobody writes about

Over and above the general record-keeping duty, section 49A(1A) requires an employer who engages a “specified employee” to keep and maintain at all times a record, covering the “specified period”, of the wages paid to the employee in respect of each wage period and of the employee’s wage period. The provision was inserted by section 17 of Ordinance 4 of 2022 and exists precisely so that the pre-1 May 2025 portion of a payment can still be computed ten or twenty years from now.

The “specified period” is defined in section 49A(8) and tracks the “specified period” of the modified section 31G(6): where the pre-transition employment period is not less than 12 months, the 12 months immediately preceding the transition date; where it is shorter, that period itself — and where it covers less than a month, or less than 30 normal working days, the first month or the first 30 normal working days of the whole employment period.

Set that against the general rule and the oddity of the duty becomes visible. Section 49A(1) requires only the wage and employment history for the preceding 12 months, and section 49A(2)(b) requires retention for six months after the employment ends. Section 49A(1A) is tied neither to a rolling window nor to a retention period: the record of the 12 months before 1 May 2025 must be kept at all times while that employee remains on the payroll.

Non-compliance costs twice over. Formally it is a contravention of section 49A, which section 63D(1) makes a “minor offence” carrying a fine at level 3 — HKD 10,000. Practically, losing those records makes the pre-transition portion impossible to compute correctly and, in a dispute, makes the employee’s figures impossible to rebut.

Section 49A(4) adds two further duties tied to the minimum wage. For an employee outside Cap. 608 under section 7(4) as a student intern, the employer must keep the document issued by the institution showing that the period of work is arranged or endorsed by it in connection with the relevant programme. For an employee outside Cap. 608 under section 7(5) as a work experience student, the employer must keep the statutory declaration the employee provided under section 3(b) of Cap. 608, together with a document from the institution showing that at the commencement of the employment the employee was enrolled on a qualifying programme.

How the minimum wage is tested for a wage period

Section 8(1) of Cap. 608: an employee is entitled to be paid, in respect of any wage period, wages of not less than the minimum wage. Section 8(2): the minimum wage for a wage period is the amount derived by multiplying the total number of hours (including any part of an hour) worked in the wage period by the minimum hourly wage rate.

The test runs over the wage period as a whole, not over a single day or a single shift. An employee whose week varies in intensity compares total wages for the period against total hours multiplied by the rate.

Where wages fall short, the contract of employment is taken to provide that the employee is entitled to additional remuneration equal to the difference (section 10 of Cap. 608). The provision operates automatically, whatever the contract says.

Rest days, statutory holidays, annual leave, maternity and paternity leave and sick days are not hours worked, and payments for them are excluded from wages when testing against the minimum wage. Those payments survive as free-standing Cap. 57 entitlements computed on their own rules.

Who is outside the minimum wage

Cap. 608 does not reach live-in domestic workers — by section 7(3) — nor student interns and work experience students during exempt student employment. Separately outside its scope are persons to whom the Employment Ordinance itself does not apply: family members living with the employer, seafarers under crew agreements, and registered apprentices under the Apprenticeship Ordinance.

The distinction between the two student categories matters and should not be blurred, because the Ordinance excludes them by different subsections. Section 7(4) of Cap. 608 excludes a student intern outright. Section 7(5) excludes a work experience student only during a period of exempt student employment.

Section 3 of Cap. 608 sets the conditions for that period: a work experience student and the employer may agree to treat a continuous period of up to 59 days during the contract of employment as a period of exempt student employment if (a) no period during another contract of employment to which the student was a party, and that commenced in the same calendar year, was a period of exempt student employment; and (b) the student provides the employer, before the current contract commences, with a statutory declaration (or a copy) verifying that fact.

Three practical points follow. First, the exemption is not automatic — it requires agreement between the parties. Second, the statutory declaration must be obtained before the contract starts, not during the engagement. Third, the one-period-per-calendar-year limit operates across all employers, and the only way an employer can check it is through that declaration.

The practical point: an employee in that second category is not outside Cap. 608 altogether — only for a bounded period. From the sixtieth day, or on a second period in the same calendar year, the minimum wage applies in full.

Persons with disabilities are covered but may elect a productivity assessment under Schedule 2 to Cap. 608. The election belongs to the employee, not to the employer.

Penalties, and an Asymmetry in Liability That Is Rarely Noticed

Failing to pay a long service payment carries a fine of up to HKD 350,000 and three years’ imprisonment; failing to pay a severance payment carries a fine of HKD 50,000. The sevenfold difference has nothing to do with the gravity of the conduct and everything to do with the fact that the two payments fall under different timing provisions.

Where the gap comes from

Section 25(1) of Cap. 57: subject to section 31O, where a contract of employment is terminated any sum due to the employee shall be paid to him as soon as is practicable and in any case not later than 7 days after the day of termination.

Section 25(2)(ba) expressly includes among those sums “any long service payment due to the employee”. A long service payment is therefore a sum caught by the seven-day deadline in section 25.

Section 63C: any employer who wilfully and without reasonable excuse contravenes section 23, 24 or 25 commits an offence and is liable to a fine of $350,000 and to imprisonment for 3 years.

Severance payment is carved out of that structure: section 25(1) applies “subject to section 31O”. Section 31O(1) supplies its own deadline — not later than two months from receipt of a notice under paragraph (b) of section 31N — unless, before that period expires, either party has made the severance payment the subject of a claim filed with the Registrar of the Minor Employment Claims Adjudication Board or the Registrar of the Labour Tribunal.

Section 31O(3)(a): an employer who without reasonable excuse fails to comply with subsection (1) is guilty of an offence and liable on conviction to a fine at level 5.

Payment	Deadline	Timing provision	Mental element	Penalty
Long service payment (LSP)	7 days from termination	ss. 25(1) and 25(2)(ba)	Wilfully and without reasonable excuse — s. 63C	HKD 350,000 and 3 years’ impri­sonme­nt
Severance payment (SP)	2 months from receipt of the employee’s written claim	s. 31O(1)	Without reasonable excuse — s. 31O(3)(a)	Fine at level 5 — HKD 50,000
Paying severance otherwise than as permitted	—	s. 31O(2)	Without reasonable excuse — s. 31O(3)(b)	Fine at level 3 — HKD 10,000
Wages at the end of a wage period	7 days after the end of the wage period	s. 23	Wilfully and without reasonable excuse — s. 63C	HKD 350,000 and 3 years
Failing to keep wage and employment records	—	s. 49A	s. 63D(1)	Fine at level 3 — HKD 10,000

The asymmetry is subtler than a sevenfold gap

The Employment Ordinance expresses several of its penalties as fine levels rather than amounts, and the levels are fixed by Schedule 8 to the Criminal Procedure Ordinance (Cap. 221).

Level	Amount	Where it appears in this article
Level 1	HKD 2,000	—
Level 2	HKD 5,000	—
Level 3	HKD 10,000	s. 63D(1) — contravention of s. 49A on records; s. 31O(3)(b) — paying severance otherwise than as permitted
Level 4	HKD 25,000	—
Level 5	HKD 50,000	s. 31O(3)(a) — failing to pay severance on time
Level 6	HKD 100,000	Matches the penalties for dismissing a pregnant employee and for termination during paid sick leave

The Labour Department’s guides print the converted amounts, so the levels are invisible there. Working from the statute, the figure has to be derived through Schedule 8 to Cap. 221 each time rather than read off the section.

The mental elements differ, and they differ in the direction opposite to the penalties. For long service payment, section 63C requires the failure to be wilful and without reasonable excuse. For severance, section 31O(3)(a) requires only the absence of a reasonable excuse — no wilfulness need be proved.

The practical consequence: a merely disorganised, negligent delay in paying a long service payment falls outside section 63C altogether, while precisely the same delay on a severance payment is a completed offence. The higher maximum on LSP is bought with materially harder proof.

The triggers differ too. The seven-day LSP clock runs automatically from the date of termination, with no act by the employee at all. The two-month SP clock starts only on receipt of a written claim — and the entitlement itself is lost under section 31N unless, within three months of the relevant date or such extended period as the Commissioner may agree, the payment has been agreed and paid, or the employee has claimed in writing, or the question has been filed with the MECAB or the Labour Tribunal.

Hence the point for a termination procedure: on a long service payment an employer can fall into default without receiving a single document from the employee; on severance it cannot. Running both on one two-month workflow creates exposure precisely where LSP is in play.

The most underrated scenario is not redundancy but retirement. Under section 31R(1)(b) an employee who resigns at 65 or over with at least five years’ service becomes entitled to a long service payment; the seven-day clock in section 25 runs from the date of termination, and no claim from the employee is needed. An employer with no procedure for this walks into section 63C through an ordinary letter of resignation.

Both figures are statutory maxima rather than tariffs, and setting them side by side as a measure of relative gravity in ordinary cases is misleading. What matters in practice is not the sevenfold gap but that LSP carries the possibility of imprisonment and severance does not.

The same provisions fix the sequence for the subsidy: the SSA application follows payment, and the LSP deadline is seven days. Waiting for the subsidy is not a reasonable excuse for delay.

Other penalties under the Employment Ordinance

The amounts below are taken from the Labour Department’s “A Concise Guide to the Employment Ordinance” in the version finalised in December 2025. The guide itself gives no section numbers, and none are stated here where they were not checked against the statute — the exception being the record-keeping offence, which was: section 49A imposes the duty and section 63D(1) makes its contravention a “minor offence” carrying a fine at level 3.

Contravention	Fine
Failing to grant rest days, or compelling work on a rest day	HKD 50,000
Failing to grant a statutory holiday or to pay holiday pay	HKD 50,000
Failing to grant annual leave or to pay annual leave pay	HKD 50,000
Failing to pay sickness allowance	HKD 50,000
Unlawful termination during paid sick leave	HKD 100,000 plus payment in lieu of notice, seven days’ wages in compensation and accrued sickness allowance within 7 days
Failing to grant maternity leave or to pay maternity leave pay	HKD 50,000
Dismissal of a pregnant employee	HKD 100,000 plus payment in lieu of notice, one month’s wages in compensation and full maternity leave pay within 7 days
Failing to grant paternity leave or to pay paternity leave pay	HKD 50,000
Failing to keep wage and employment records (ss. 49A and 63D(1))	HKD 10,000 — a fine at level 3

Compensation for unreasonable and unlawful dismissal is capped at HKD 150,000, and failure to comply with an order for reinstatement or re-engagement attracts an award of three times the employee’s average monthly wages, capped at HKD 72,500. These are civil remedies rather than offences: no fine attaches.

Who is liable besides the company

On wilful non-payment of wages, officers of a body corporate are liable to the same penalties as the body itself where the offence was committed with their consent or connivance, or is attributable to their neglect. A director’s exposure here is personal and criminal, not merely corporate.

Comparing Employment Scenarios, and a Step-by-Step Algorithm for Employers

What the same employee costs in Hong Kong in 2026 turns on three variables: weekly hours, the start date relative to 1 May 2025, and length of service. Four typical configurations are set out below.

Parameter	12 hrs/week, stable	17–20 hrs/week, fluctuating	Hired before 1 May 2025, full-time	Hired after 1 May 2025, full-time
Continuous contract under the 417/468 test	No	Yes, in most weeks	Yes	Yes
Statutory holiday pay (15 days in 2026)	No	Yes, after 3 months	Yes	Yes
Paid annual leave	No	Yes, after 12 months	Yes	Yes
Sickness allowance	No	Yes	Yes	Yes
Minimum wage of HKD 43.1 an hour	Yes — independent of continuous contract status	Yes	Yes	Yes
Hours records required	Yes, where wages < HKD 17,600/month	Yes, where < HKD 17,600/month	Same test	Same test
Severance payment on redundancy or lay-off	No	Yes, after 24 months	Yes	Yes
Long service payment on retirement at 65	No	Yes, after 5 years	Yes	Yes
Mandatory MPF contributions offset the payment	—	Pre-1 May 2025 service only	Pre-1 May 2025 service only	Not at all
Eligible for the SSA subsidy	—	On the non-o­ffse­ttable portion	On the non-o­ffse­ttable portion	On the whole payment

The two payment rows describe different, mutually exclusive termination scenarios rather than two payments at once: on any one termination an employee receives either severance or a long service payment, never both.

The minimum wage row matters more than the rest: entitlement to HKD 43.1 an hour depends on neither continuous contract status nor the number of hours worked. Someone working one shift a month is fully covered.

A Step-by-Step Algorithm: What an Employer Should Do in 2026

Stage 1. Rebuild the records

Step 1. Move timekeeping onto calendar weeks ending on a Saturday. Paragraph 7 of the First Schedule to Cap. 57 defines a week that way; counting from the hire date will give the wrong answer.

Step 2. Separate hours actually worked from hours deemed worked under paragraph 3 of the First Schedule.Sickness, absence to comply with a Cap. 599 requirement, and absence in which the employee is regarded as continuing in employment all count towards the 417/468 test but are not hours worked for Cap. 608.

Step 3. Automate a two-limb test on every week. First: were 17 hours worked. Second: if not, was the employee employed throughout the three preceding weeks and did the four-week total reach 68 hours.

Step 4. Flag the first three weeks of every new hire separately in the system. In that window the 68-hour limb is unavailable and each week must reach 17 hours on its own.

Stage 2. Check the historic data

Step 5. Test the weeks from 28 December 2025 to 17 January 2026 against 18 hours, not 17. Paragraph 2A(2)(b) preserves the old threshold for the first three weeks after commencement.

Step 6. Determine for each employee whether they are a “specified employee” under section 31ZEA. Three conditions must hold together: employment beginning before 1 May 2025, a relevant date on or after it, and an obligation to contribute to MPF or an ORS.

Step 7. Build and permanently retain the “specified period” wage record for every specified employee. This is not prudence but a duty under section 49A(1A) of Cap. 57: the record of wages paid in respect of each wage period, and of the wage period itself, for the 12 months immediately preceding 1 May 2025 must be kept at all times while the employee remains on the payroll. Keeping only the last full month is not enough — if the employee elects averaging, all twelve are needed.

Stage 3. Rebuild the termination procedure

Step 8. Split the deadlines: long service payment within 7 days of termination, severance payment within 2 months of a written claim. Merging them creates criminal exposure under section 63C.

Step 9. Compute the payment as two separate blocks and apply the excess-removal rule in the modified section 31G(3). Any excess over the HKD 390,000 ceiling comes off the portion for service after 1 May 2025.

Step 10. Where the employee elects twelve-month averaging, use two different periods: the twelve months before 1 May 2025 for the first portion, and the twelve months before termination for the second.

Step 11. Process the offset of the pre-transition portion through the eMPF Platform, flagging LSP or SP entitlement in the termination section. Cessation of employment and final contributions must be reported by the 10th day of the calendar month following the last day of employment.

Step 12. File the SSA subsidy application through the TransitionEase portal within three months of the date payment was actually made. Late applications are not accepted.

Stage 4. The recurring obligations

Step 13. Refresh the minimum wage rate and the hours-record threshold each year by 1 May. Both instruments are made in February and take effect on 1 May; the formula rate may stand still, but it cannot fall.

Step 14. Check HR policy against the current year’s number of statutory holidays. There are 15 in 2026, there will be 16 in 2028 and 17 in 2030.

Step 15. Fold the HR calendar into the corporate one. An employer’s labour obligations in Hong Kong run on the same annual cycle as its corporate ones — the annual return, the audit and the disclosure of controllers: the Significant Controllers Register in Hong Kong.

Common Mistakes and What Each One Costs

Mistake 1. Treating 18 January 2026 as the commencement date. The Employment (Amendment) Ordinance 2025 has been in force since 28 December 2025; 18 January is the date the new test begins to apply. The cost: weeks from 28 December to 17 January are tested against 18 hours, and an employer applying 17 hours to them will find continuity where there is none — or, more often, err the other way on a later recalculation of the employee’s rights, with back pay for holidays, annual leave and sickness allowance.

Mistake 2. Counting weeks from the hire date rather than the calendar. Paragraph 7 of the First Schedule defines a week as ending with Saturday. The cost: shifting the window by a few days changes both the 17-hour result and the four-week totals; on inspection by the Labour Department the employer’s calculation simply cannot be reproduced.

Mistake 3. Applying the 68-hour limb in a new hire’s first three weeks. Subparagraph 2A(1)(b)(i) requires the employee to have been employed by the same employer throughout all three preceding weeks. The cost: the employer believes continuity has arisen, builds rosters and obligations on it, when in fact any early week below 17 hours does not count at all.

Mistake 4. Reading “abolition of MPF offsetting” literally. What was abolished is offsetting of the employer’s mandatory contributions, and only against service after 1 May 2025; the employer’s voluntary contributions and contractual gratuities still offset, and against both portions. The cost: an employer that fails to claim the voluntary-contribution offset overpays; an employee expecting an unreduced payment receives less and files at the tribunal.

Mistake 5. Computing the payment on a single twelve-month average before termination. The modified section 31G(6) prescribes different averaging periods for the two portions. The cost: overstatement of the pre-transition portion for an employee on a rising salary, and an overpayment the subsidy cannot recover — the SSA covers only the non-offsettable portion.

Mistake 6. Running long service and severance payments on one workflow. LSP falls under the seven-day deadline in section 25 and the criminal penalty in section 63C; SP falls under the two-month deadline in section 31O and a HKD 50,000 fine. The cost: up to HKD 350,000 and three years’ imprisonment, with personal exposure for officers who consented, connived or were negligent.

Mistake 7. Waiting for the subsidy before paying the employee. The sequence runs the other way: pay first, then apply within three months. The cost: double — late payment with all its sanctions, and loss of the subsidy once the three months expire, since late applications are not accepted.

Mistake 8. Splitting an engagement across two contracts with one legal entity. Paragraph 6 of the First Schedule aggregates hours by employer regardless of how many contracts there are. The cost: the structure does not work, and on inspection it reads as an avoidance attempt — which does not improve the employer’s position in a dispute.

Mistake 9. Assuming the minimum wage depends on continuous contract status. Entitlement to HKD 43.1 an hour arises under Cap. 608 irrespective of contractual status or hours worked. The cost: wilful non-payment of wages is a section 63C offence carrying HKD 350,000 and three years’ imprisonment, not an administrative slip.

Mistake 10. Stopping hours records at wages above HKD 17,200. From 1 May 2026 the threshold is HKD 17,600 a month. The cost: a HKD 10,000 fine for failing to keep records, plus the evidential loss — without a timesheet the employer cannot rebut the employee’s figures on either the minimum wage or the 417/468 test.

Mistake 11. Equating hours under Cap. 57 with hours under Cap. 608. Sickness counts towards the continuous contract but is not an hour worked for minimum wage purposes; attendance with no work provided is the reverse, expressly an hour worked under section 4 of Cap. 608. The cost: either paying the minimum wage on sick hours, or breaking continuity where none was broken.

Mistake 12. Assuming the offsetting reform increases every employee’s payment. The modified section 31G(3) removes any excess over the HKD 390,000 ceiling from the non-offsettable portion first. The cost: a mis-set reserve — for long pre-May-2025 service the additional burden may be nil, while for someone hired after that date no offsetting is available at all.

Mistake 13. Ignoring paragraph 4 on strikes. Strike hours do not count towards the threshold, but continuity of service is expressly not broken. The cost: an employer who concludes that a strike reset the service clock will refuse severance and lose — the provision preserves continuity in terms.

Mistake 14. Testing “specified employee” status on dates alone. Section 31ZEA(2)(c) also requires an obligation on the employer to contribute to MPF or an ORS. The cost: applying Schedule 11 to an MPF-exempt employee produces an error in either direction and, on a subsidy claim, a refusal.

Mistake 15. Not keeping the permanent “specified period” wage record. Section 49A(1A) of Cap. 57, inserted by section 17 of Ordinance 4 of 2022, requires the wages for the 12 months immediately preceding 1 May 2025 to be kept at all times for every specified employee. The cost: formally a level 3 fine of HKD 10,000 under section 63D(1); practically, an inability to compute the pre-transition portion and, in a dispute, an inability to rebut the employee’s figures. Neither the general 12-month rule in section 49A(1) nor the six-month retention in section 49A(2)(b) covers this duty.

Mistake 16. Assuming an employee is owed both payments. Section 31R(1)(a)(i) gives a long service payment only where the employer is not liable for a severance payment. The cost: a double payment that cannot be recovered, and an inflated SSA claim that will be refused. Severance arises only on redundancy or lay-off under section 31B(1); long service payment arises on a dismissal carrying no severance liability, on health-grounds termination, and on retirement at 65.

Mistake 17. Having no procedure for a long service payment on retirement. Under section 31R(1)(b) an employee who resigns at 65 or over with at least five years’ service becomes entitled to a long service payment, and the seven-day clock in section 25 starts automatically. The cost: section 63C exposure of up to HKD 350,000 and three years’ imprisonment arises not from a redundancy but from an ordinary resignation letter that HR processes as routine.

Mistake 18. Buying out a holiday instead of granting the day. Section 40A(1) expressly prohibits holiday pay or any other sum in lieu of granting a holiday, and the employee’s agreement changes nothing. The cost: a HKD 50,000 fine for failing to grant a statutory holiday, plus the surviving obligation to grant an alternative holiday within 60 days under section 39(2) or a substituted holiday within 30 days under section 39(3).

Mistake 19. Applying the HKD 17,600 threshold to a weekly or fortnightly wage period without pro-rating. Section 49A(3)(ea) requires wages for the wage period to be compared with an amount proportionate to that period’s length relative to the month. The cost: an employer applying the full monthly threshold to a fortnightly period concludes that no hours record is needed, and collects a level 3 fine plus the loss of its evidential position on the minimum wage.

Who These Changes Matter Most To, and When to Get Professional Review

Who the reform hits hardest

Employers with a large share of staff on irregular rosters: retail, food and beverage, logistics, security, cleaning, tutoring and events. These are the sectors where weeks routinely fell below 18 hours, and where the new test moves a substantial part of the workforce into continuous contract status.

Companies with long average service planning redundancies. For them the 417/468 test matters less than the interaction of the HKD 390,000 ceiling with the excess-removal rule: the calculation may leave a nil non-offsettable portion, or it may not.

Employers who hired in April 2025. For those employees the pre-transition period is shorter than a month, and the rarely used provision on the first full month’s wages for the whole employment period applies.

Groups moving staff between legal entities. Paragraph 5 of the First Schedule preserves continuity on a transfer of a business and paragraph 6 aggregates hours by employer; both constrain how freely people can be moved.

Who it barely touches

Employers with standard full-time staff on stable rosters. The 417/468 test changes nothing for them: a forty-hour week clears any threshold.

Employers hiring only from 1 May 2025 onwards. Those employees have no pre-transition portion, Schedule 11 never engages, and the ordinary section 31G governs — simpler, but with no offsetting of mandatory contributions at all.

Households employing live-in domestic workers. They sit outside Cap. 608 by virtue of section 7(3), though the Employment Ordinance still applies to them.

When professional review is warranted

Where service crosses both 1 May 2025 and the HKD 390,000 ceiling. The interaction of the two rules is not arithmetic: the answer depends on which portion breaches the ceiling.

Where the employee elects twelve-month averaging. Two different averaging periods, a cap inside each, and pro-rating for incomplete years leave enough room for error to justify an independent check.

Where continuity was broken and later restored. The twenty-four-month and five-year qualifying periods start again, and locating the break requires a week-by-week recomputation that accounts for the transitional rule in 2A(2).

Where a restructuring will move staff between group companies. Paragraph 5 of the First Schedule on transfer of a business applies to the substance of the arrangement, not to the form of the transaction.

Adjacent subjects that tend to arise in the same project are covered separately: stamp duty on share transfers in Hong Kong and Hong Kong fund structures — the OFC and the LPF.

Where the Hong Kong company is only now being formed, the employment architecture is better designed alongside the corporate one than after it. Incorporation, taxation and annual compliance are covered here: Hong Kong company registration in 2026.

Frequently Asked Questions

When exactly did the 417/468 rule take effect in Hong Kong?

The Employment (Amendment) Ordinance 2025 (27 of 2025) came into operation on 28 December 2025. The new test began to apply on 18 January 2026, because paragraph 2A(2)(b) of the First Schedule to Cap. 57 preserves the former 18-hour threshold for the first three weeks after commencement.

How many hours a week are needed for a continuous contract in 2026?

Seventeen hours a week. Where a particular week falls short, it still counts provided the employee was employed by the same employer throughout the three preceding weeks and worked 68 hours or more across the four weeks.

Does the 68-hour rule apply from the first day of employment?

No. Subparagraph 2A(1)(b)(i) requires employment with the same employer throughout the three preceding weeks, so in the first three weeks each week must reach 17 hours on its own.

What counts as a “week” for the 417/468 test?

A week ending with Saturday, as defined in paragraph 7 of the First Schedule to Cap. 57. That is a calendar window running Sunday to Saturday, not seven days from the hire date.

Has MPF offsetting been abolished entirely?

No. What was abolished is offsetting of the employer’s mandatory contributions, and only against the portion of the payment attributable to service after 1 May 2025. The employer’s voluntary contributions, contractual gratuities and employer-funded (specified) ORS benefits still offset.

Can MPF be offset against the payment of an employee hired in 2026?

No. Such an employee is not a “specified employee” under section 31ZEA of Cap. 57, has no pre-transition portion, and the employer’s mandatory MPF contributions offset no part of the payment.

Which wage figure is used for the portion covering service before 1 May 2025?

The last full month’s wages for the period before the transition date, capped at HKD 22,500 for the purposes of the formula. Where the pre-transition period is shorter than a month, the first full month’s wages for the whole employment period are used instead.

How much does the Government reimburse an employer on a 2026 dismissal?

In the first three subsidy years, 50% of the non-offsettable portion or the amount exceeding an employer cap of HKD 3,000 per employee, whichever is greater. The claim is filed through the TransitionEase portal within three months of the payment actually being made.

What is the minimum wage in Hong Kong in 2026?

HKD 43.1 an hour from 1 May 2026, under Schedule 3 to the Minimum Wage Ordinance (Cap. 608) as amended by L.N. 17 of 2026. The previous rate of HKD 42.1 applied from 1 May 2025.

Can the Hong Kong minimum wage go down?

The operative mechanism does not produce reductions: the annual review formula carries a floor of zero on both the inflation component and the economic growth factor, so the computed adjustment can be nil but not negative. That is a property of the formula adopted by the Chief Executive in Council rather than a prohibition in Cap. 608 — the rate is set by subsidiary legislation amending Schedule 3, and the Ordinance does not bar a lower figure.

Must hours be recorded for an employee earning HKD 20,000 a month?

No. From 1 May 2026 the duty to record total hours worked arises only where wages are less than HKD 17,600 a month, under the Ninth Schedule to Cap. 57.

How many statutory holidays are there in Hong Kong in 2026?

Fifteen: Easter Monday was added to the list with effect from 1 January 2026. The day off itself is owed to every employee, while pay for that day requires a continuous contract of at least three months.

Do sick days count towards the 17-hour threshold?

Yes. Paragraph 3 of the First Schedule treats hours of incapacity through sickness or injury as hours worked, and a medical certificate is required only where the incapacity exceeds 48 hours.

What is the penalty for failing to pay a long service payment?

Up to HKD 350,000 and three years’ imprisonment, but only where the failure was wilful and without reasonable excuse: section 25(2)(ba) brings a long service payment within the sums payable inside seven days under section 25, and a breach of section 25 is an offence under section 63C. By contrast, failing to pay severance is an offence under section 31O(3)(a) with no wilfulness to prove, carrying a fine at level 5 — HKD 50,000.

Does a strike break continuity of service?

No. Paragraph 4 of the First Schedule expressly preserves the continuity of the period of employment, although the strike hours themselves do not count towards the threshold.

Can an employee receive both a severance payment and a long service payment for the same termination?

No. Section 31R(1)(a)(i) gives a long service payment only to an employee who is dismissed and whose employer is not liable to pay severance. Severance arises only on redundancy or lay-off under section 31B(1) with at least 24 months’ service; a long service payment arises with at least five years’ service in the three cases set out in section 31R(1).

Is a long service payment due when an employee resigns?

Yes, in two cases. First, where the employee terminates the contract on health grounds in the circumstances specified in section 10(aa). Second, where the employee terminates the contract and at the relevant date is at least 65 with not less than five years under that contract. The seven-day deadline in section 25 applies in both.

Which records must an employer keep permanently because of the MPF offsetting abolition?

Under section 49A(1A) of Cap. 57, an employer who engages a specified employee must at all times keep a record of the wages paid in respect of each wage period, and of the wage period itself, for the 12 months immediately preceding 1 May 2025. The duty is limited neither by the rolling 12-month window in section 49A(1) nor by the six-month retention in section 49A(2)(b).

Can an employer pay an employee instead of granting a statutory holiday?

No. Section 40A(1) prohibits holiday pay or any other sum in lieu of granting a holiday. The employer must grant an alternative holiday within 60 days before or after the statutory holiday under section 39(2), or agree a substituted holiday within 30 days under section 39(3).

Key Takeaways

•          The Employment (Amendment) Ordinance 2025 (27 of 2025) came into operation on 28 December 2025, and the new test applies from 18 January 2026. The three-week gap is created by paragraph 2A(2)(b) of the First Schedule to Cap. 57, which preserves the 18-hour threshold for the first three weeks after commencement.

•          The new test has two alternative limbs: 17 hours in the week, or 68 hours across four weeks. The second requires the employee to have been employed by the same employer throughout the three preceding weeks, so it is unavailable in the first three weeks of employment.

•          A “week” under paragraph 7 of the First Schedule is a week ending with Saturday. Counting from the hire date gives the wrong answer.

•          Hours of sickness, of absence to comply with a Cap. 599 requirement, and of absence in which employment is regarded as continuing are deemed worked under paragraph 3; lawful strike hours are not, though a strike does not break continuity of service.

•          The definition of hours in section 4 of the Minimum Wage Ordinance (Cap. 608) differs from the one in the First Schedule to Cap. 57. The same employee in the same week carries two different “hours” figures under the two ordinances.

•          The abolition of MPF offsetting is the deletion of one category from the closed list in section 31I of Cap. 57.Contractual gratuities, employer-funded (specified) ORS benefits and the employer’s voluntary MPF contributions still offset; the employer’s mandatory contributions and employer-funded (basic portion) exempt ORS benefits do not.

•          For a “specified employee” under section 31ZEA the payment is computed in two portions on two wage figures: the pre-transition portion on the last full month’s wages before 1 May 2025, and the post-transition portion on the last full month’s wages before termination.

•          Where twelve-month averaging is elected the two portions use different periods: the twelve months before the transition date and the twelve months before the relevant date respectively (modified section 31G(6)).

•          The HKD 390,000 ceiling has not moved since 1 October 2003, and under the modified section 31G(3) any excess is removed from the non-offsettable portion first. For an employee with very long pre-May-2025 service the reform may deliver nothing at all.

•          An employee hired on or after 1 May 2025 sits outside Schedule 11 altogether: there is no pre-transition portion, and mandatory employer contributions offset nothing.

•          The SSA subsidy runs for 25 subsidy years from 1 May 2025 to 30 April 2050; in the first three years it is 50% or the amount exceeding an employer cap of HKD 3,000 per employee, whichever is greater. The claim follows payment and must be made within three months of it.

•          The minimum hourly wage is HKD 43.1 from 1 May 2026 (L.N. 17 of 2026), the first rate produced by a formula that by construction cannot deliver a cut. The hours-record threshold rose to HKD 17,600 a month (L.N. 16 of 2026).

•          There are fifteen statutory holidays in 2026; Easter Monday was added on 1 January 2026, Good Friday follows in 2028 and the day after it in 2030.

•          A long service payment falls under the seven-day deadline in section 25 and section 63C (HKD 350,000 and three years); a severance payment falls under the two-month deadline in section 31O(1) and a fine at level 5 — HKD 50,000. The mental elements run opposite to the penalties: section 63C requires wilfulness, section 31O(3)(a) does not. The seven-day clock runs automatically; the two-month clock starts only on a written claim, and the severance entitlement itself is lost under section 31N if the employee does not claim within three months.

•          Severance and long service payments are mutually exclusive: section 31R(1)(a)(i) gives LSP only where the employer is not liable for severance. SP arises only on redundancy or lay-off (s. 31B(1)); LSP arises on a dismissal carrying no severance liability, on health-grounds termination (s. 10(aa)) and on the employee’s own resignation at 65 or over (s. 31R(1)(b)), and in favour of a beneficiary on the employee’s death (s. 31RA).

•          Section 49A(1A), inserted by Ordinance 4 of 2022, requires an employer to keep at all times the record of wages for the 12 months immediately preceding 1 May 2025 for every specified employee. Neither the general 12-month rule in section 49A(1) nor the six-month retention in section 49A(2)(b) covers it; contravention is a level 3 fine under section 63D(1).

•          Section 40A(1) prohibits buying out a statutory holiday: a payment in lieu of granting the day is unlawful even with the employee’s agreement.

•          Fine levels are fixed by Schedule 8 to Cap. 221: level 3 is HKD 10,000, level 5 HKD 50,000 and level 6 HKD 100,000. The Employment Ordinance states levels, not amounts.

•          None of the 2025–2026 changes touched a qualifying period: three months, twelve months, forty weeks, twenty-four months and five years all stand.

Summary

The Employment Ordinance (Cap. 57) is Hong Kong’s principal employment statute, and three changes have landed in it and in related instruments across 2025 and 2026. First, the Employment (Amendment) Ordinance 2025 (27 of 2025), passed by the Legislative Council on 18 June 2025, gazetted on 27 June 2025 and in operation from 28 December 2025, inserted paragraph 2A of the First Schedule and replaced the former “418” test with a “417/468” test: a week counts if the employee worked 17 hours or more in it, or if the employee was employed by the same employer throughout the three preceding weeks and worked 68 hours or more across the four-week period comprising that week and those three. Paragraph 2A(2)(b) preserves the old 18-hour threshold for the first three weeks after commencement, so the new test in practice applies from 18 January 2026; a week is defined in paragraph 7 as ending with Saturday. Second, the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (4 of 2022) came into operation on 1 May 2025, the “transition date” defined in section 2 of Cap. 57. It removed the employer’s mandatory MPF contributions from the closed list in section 31I; contractual gratuities, employer-funded (specified) ORS benefits and the employer’s voluntary contributions continue to offset. For a “specified employee” under section 31ZEA — employment commencing before 1 May 2025, a relevant date on or after it, and an obligation to contribute to MPF or an occupational retirement scheme — the payment is computed in two portions under Schedule 11: the pre-transition portion on the last full month’s wages before 1 May 2025 and the post-transition portion on the last full month’s wages before termination, each capped at two-thirds of HKD 22,500 per year of service. The ceiling on both payments has been HKD 390,000 since 1 October 2003 under Table A of the Seventh Schedule, and under the modified section 31G(3) any excess is removed from the post-transition portion first. The Subsidy Scheme for Abolition of MPF Offsetting Arrangement runs for 25 subsidy years from 1 May 2025 to 30 April 2050 against a stated commitment of HKD 33.6 billion; in the first three years the subsidy is the greater of 50% of the non-offsettable portion or the amount exceeding an employer cap of HKD 3,000 per employee, and the claim is filed through the TransitionEase portal within three months of payment. Third, the statutory minimum hourly wage has been HKD 43.1 since 1 May 2026 under Schedule 3 to the Minimum Wage Ordinance (Cap. 608) as amended by L.N. 17 of 2026 — the first rate derived from the formula adopted by the Chief Executive in Council on 30 April 2024: headline CPI(A) inflation subject to a floor of zero, plus 20% of the difference between the latest year’s real GDP growth and the decade’s trend growth, with the growth factor capped at one percentage point. The hours-record threshold in the Ninth Schedule to Cap. 57 rose to HKD 17,600 a month on 1 May 2026 (L.N. 16 of 2026). There are fifteen statutory holidays in 2026: section 39(1) of Cap. 57 carries fifteen paragraphs lettered (a) to (n) with an inserted (da) Labour Day, paragraph (h) supplying a single holiday — the Chinese Winter Solstice Festival or Christmas Day at the employer’s option — while section 40A(1) prohibits buying a holiday out. Severance and long service payments are mutually exclusive: the first arises only on redundancy or lay-off under section 31B(1) with at least 24 months’ service, the second with at least five years’ service in the cases set out in section 31R(1), including the employee’s own termination on health grounds and on reaching 65. Section 49A(1A) requires an employer to keep at all times the record of wages for the 12 months immediately preceding the transition date for every specified employee. Failure to pay a long service payment is an offence under section 63C carrying HKD 350,000 and three years’ imprisonment where the failure is wilful, because section 25(2)(ba) brings it within the sums payable inside seven days; failure to pay severance is an offence under section 31O(3)(a) with no wilfulness required, carrying a fine at level 5 — HKD 50,000 — against a two-month deadline running from a written claim and a three-month cut-off under section 31N. Failing to keep wage and employment records is an offence under sections 49A and 63D(1) carrying a fine at level 3, HKD 10,000. The qualifying periods are unchanged: three months for statutory holiday pay, twelve months for paid annual leave, forty weeks for maternity and paternity leave pay, twenty-four months for severance and five years for long service payment.

Sources

Primary texts are cited from the official portals: Hong Kong e-Legislation (elegislation.gov.hk), the Labour Department (labour.gov.hk), the Minimum Wage Commission (mwc.org.hk), the Mandatory Provident Fund Schemes Authority (mpfa.org.hk) and government press releases (info.gov.hk).

Legislation in force

1.        Employment Ordinance (Cap. 57) — First Schedule, “Continuous Employment”, including paragraphs 2, 2A, 3, 4, 5, 6 and 7

2.        Cap. 57, section 2 — definitions, including “transition date”, “employer-funded (voluntary) MPFS benefit” and “employer-funded (specified) ORS benefit”

3.        Cap. 57, section 25 — payment on termination, including subsection (2)(ba) on long service payment

4.        Cap. 57, section 31G — amount of severance payment

5.        Cap. 57, section 31I — severance payment to be reduced by gratuities and benefits

6.        Cap. 57, section 31ZEA — application of Parts VA and VB to certain employees

7.        Cap. 57, section 23 — time of payment of wages

8.        Cap. 57, section 31B — right to a severance payment and the definition of redundancy

9.        Cap. 57, section 31N — claims for severance payments and the three-month cut-off

10.    Cap. 57, section 31O — making of severance payment, with level 5 and level 3 fines

11.    Cap. 57, section 63C — offences relating to time and payment of wages

12.    Cap. 57, section 31R — right to a long service payment, including retirement at 65 and health-grounds termination

13.    Cap. 57, section 39 — the statutory holidays, alternative and substituted holidays

14.    Cap. 57, section 40A — restriction on pay in lieu of holiday

15.    Cap. 57, section 49A — record-keeping duty, including subsection (1A) on specified employees

16.    Cap. 57, section 63D — minor offences, including contravention of section 49A on records

17.    Cap. 57, Seventh Schedule, Table A — maximum severance and long service payments

18.    Cap. 57, Ninth Schedule — monetary cap on keeping records of hours worked

19.    Cap. 57, Schedule 11 — modifications to Parts VA and VB for specified employees

20.    Minimum Wage Ordinance (Cap. 608), section 4 — hours worked

21.    Cap. 608, section 8 — employees to be paid at least the minimum wage

22.    Cap. 608, section 3 — exempt student employment and the 59-day limit

23.    Cap. 608, section 7 — application of the Ordinance and its exclusions

24.    Cap. 608, Schedule 3 — prescribed minimum hourly wage rate and its amendment chain

25.    Criminal Procedure Ordinance (Cap. 221), Schedule 8 — levels of fines

26.    Employment (Amendment) Ordinance 2025 (27 of 2025) — text of the Ordinance

The Labour Department

27.    Revising the “continuous contract” requirement — the Department’s statement of the change

28.    Frequently asked questions on the Employment (Amendment) Ordinance 2025

29.    Education tool for computing continuous contract status

30.    A Concise Guide to the Employment Ordinance — index

31.    Concise Guide, chapter 4 — rest days, holidays and leave

32.    Concise Guide, chapter 11 — severance and long service payments

33.    Employment Ordinance at a Glance — entitlements and qualifying periods

34.    Increase of statutory holidays — the Employment (Amendment) Ordinance 2021

35.    Frequently asked questions on statutory holidays

36.    Statutory holidays for 2026

37.    Abolition of MPF offsetting — the Department’s topic page

38.    Text of the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022

39.    The Department’s dedicated site on the abolition of offsetting

40.    Arrangements for service before 1 May 2025

41.    Arrangements for service from 1 May 2025

42.    Frequently asked questions on the abolition of offsetting

43.    Statutory minimum wage — the current rate

44.    Statutory Minimum Wage: Reference Guidelines 2026

45.    Statutory Minimum Wage: Concise Guide 2026

46.    Coverage of the statutory minimum wage — questions and answers

47.    Exempt student employment and work experience students

The subsidy scheme and retirement savings

48.    Subsidy Scheme for Abolition of MPF Offsetting Arrangement — official site

49.    Key characteristics of the subsidy scheme

50.    Subsidy ratios and caps on the employer’s share, year by year

51.    Guidance notes for employers on the subsidy scheme

52.    Extracts from the Employment Ordinance for the purposes of the subsidy scheme

53.    How to apply for the subsidy

54.    MPFA — long service and severance payments

55.    eMPF — employer questions on cessation of employment

The Minimum Wage Commission and government material

56.    Report of the Minimum Wage Commission 2026

57.    Minimum Wage Commission — latest material

58.    Adoption of the improved review mechanism for the minimum wage, 30 April 2024

59.    Decision on the HKD 43.1 rate, 10 February 2026

60.    The HKD 43.1 rate and HKD 17,600 threshold take effect, 1 May 2026

61.    Decision on the HKD 42.1 rate, 18 February 2025

62.    Labour Advisory Board consensus on the 68-hour threshold, 1 February 2024

63.    Gazettal of the Bill amending the continuous contract requirement, 11 April 2025

64.    Passage of the Employment (Amendment) Ordinance 2025, 18 June 2025

65.    Statement that the new requirement applies from 18 January 2026, 29 December 2025

66.    Gazettal of the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022, 17 June 2022

67.    Appointment of 1 May 2025 as the transition date, 29 November 2024

68.    LegCo reply on the subsidy scheme, 21 May 2025

69.    LegCo reply with subsidy scheme statistics, 29 April 2026

70.    Labour Advisory Board report 2023–24, chapter 3

71.    GovHK — general information on the jurisdiction

A methodological note on sources. Every statutory formulation in this article has been checked against the consolidated text of Cap. 57 and Cap. 608 on the Hong Kong e-Legislation portal. Where an official source contradicts itself, the divergence is shown rather than smoothed over: this applies to the commencement of the Employment (Amendment) Ordinance 2025 (28 December 2025 on the editorial note to paragraph 2A, against 18 January 2026 in the Labour Department’s guidance) and to the size of the subsidy commitment (HKD 33.6 billion in the LegCo reply, against HKD 33.2 billion in 2021 prices in the June 2022 press release). Penalty amounts given without a section number are taken from the Labour Department’s “A Concise Guide to the Employment Ordinance” in its December 2025 version and were not checked section by section against the statute; sections 2, 23, 25, 31B, 31G, 31I, 31N, 31O, 31R, 31E, 31N, 31O, 31R, 31RA, 31V, 31Y, 31YA, 31YB, 31YC, 31ZEA, 39, 40A, 49A, 63C and 63D, together with the First, Seventh and Ninth Schedules and Schedule 11 to Cap. 57, sections 3, 4, 7 and 8 and Schedule 3 to Cap. 608, and Schedule 8 to Cap. 221, were verified against the primary text. The Legal Notice number of the commencement notice appointing 1 May 2025 for Ordinance 4 of 2022 could not be established from a primary source, so that instrument is identified by title and gazettal date without a number.

Disclaimer

This material is provided for information only and does not constitute legal, tax, financial, investment or consulting advice. Before taking any decision, obtain individual professional advice addressing the specific situation, jurisdiction, status of the company and the regulators’ current requirements.

Publication date: August 2026.