Change 1: The threshold for continuous contracts has been lowered from 18 hours to 17 hours

“A ”continuous contract” serves as a key threshold under Hong Kong’s Employment Ordinance (Chapter 57): Only employees who meet the definition of a continuous contract are entitled to the full range of statutory benefits, including statutory holiday pay, annual leave, sick pay, severance pay, and long-service payment.

Under the revised provisions, if an employee is continuously employed by the same employer for four weeks or more and works at least 17 hours per week (previously 18 hours), this constitutes a continuous contract; at the same time, a new alternative calculation method—a total of 68 hours over four weeks—has been introduced. The effective date of the amended regulations differs from the date on which the new test applies,Specific dates and provisions are subject to the announcements made by the Labor Department.The

The impact on employers is immediate: the practice of circumventing continuous employment contracts by scheduling ”only 17 hours per week” is no longer effective. Industries that rely heavily on part-time workers—such as retail, food service, warehousing, and platform-based delivery—need to review their work schedules and adjust their calculations for annual leave and statutory holidays accordingly.

Change 2: Elimination of MPF Offsetting

”MPF ”offset'" refers to an arrangement whereby an employer uses the accrued benefits derived from its mandatory contributions to offset severance pay or long-service payments owed. As described in Legislative Council documents, this arrangement has been in effect sinceConversion Date (May 1, 2025)Effective Date of Repeal: As of this date, employers may no longer use accrued benefits from mandatory contributions to offset severance pay or long-service pay accrued by employees during their periods of employment on or after the transition date.

To facilitate the policy transition, the Labor Department has launched a 25-year subsidy program to help employers cover related expenses. The program includes a cap on employer contributions and gradually reduces the subsidy rate over time to help employers adapt gradually. The government estimates that the annual related expenses of most small, medium, and micro enterprises will fall within the lower subsidy tiers.

There are two things the employer needs to redo: First, recalculate the severance pay and long-service allowance.Actual Cash ExpendituresFirst, the portion that was previously offset must now be paid in cash; second, review the Mandatory Provident Fund contribution records and accounts to distinguish between periods of employment before and after the transition date.

Change 3: The statutory minimum wage has been adjusted to 43.1 Hong Kong dollars

Effective May 1, 2026, Hong Kong’s statutory minimum wage was adjusted to HK$43.1 per hour, and an annual review mechanism was introduced, replacing the previous practice of biennial reviews. The rate previously in effect was HK$42.1 per hour,The specific applicable rates are subject to the announcements made by the Labor Department and the Minimum Wage Commission.The

Annual reviews mean that wage costs become less predictable. It is recommended that companies set aside a wage adjustment range in their annual budgets and include a clause in employment contracts specifying that wages will be adjusted ”in accordance with the statutory minimum wage,” to avoid having to renegotiate contracts every time an adjustment occurs.

Four Things Employers Should Do Now

1. Reschedule the work hours. Recalculate the scope of employees under continuous-term contracts based on the 17-hour standard, and simultaneously update the accruals for annual leave and statutory holidays.
2. Recalculate severance costs. Calculate the cash outflows for severance pay and long-service awards that may occur over the next two years, on a net-of-offset basis.
3. Update the compensation system. Check whether current wages fall below the new minimum wage, particularly for piece-rate and commission-based positions.
4. Reinforcement Record. Payroll and time records must be retained in accordance with legal requirements; these serve as the basis for resolving labor disputes and for inspections by the Department of Labor.

It should be noted that all three of the above changesQualification Period Not Related to Any Type of Entitlement: The three-month pay for statutory holidays, the 12-month paid annual leave, the 40-week pay for paternity and maternity leave, the 24-month severance pay, and the five-year long-service payment all remain unchanged; the only change is the criterion for determining whether a contract is ”continuous.”

Qicaiying can assist Hong Kong-based companies in conducting employment compliance reviews, revising compensation systems, and integrating MPF accounting. Specific regulations are subject to the official texts issued by the Hong Kong Labor Department, the Mandatory Provident Fund Schemes Authority, and relevant ordinances.