Hong Kong

Impact date: 21 March 2025 The Insolvency Fund (the “Fund”) was set up to offer ex-gratia payments to employees of insolvent businesses who are owed wages, wages in lieu of notice, severance payments and payments of untaken annual leave and/or statutory holidays. Effective from 21 March 2025, the maximum amount of ex gratia payment on severance payment under the Fund will be increased from the first HK$100,000 plus 50% of any excess entitlement to the first HK$200,000 plus 50% of any excess entitlement.

Impact date: 1 May 2025 The Hong Kong Government has passed new legislation to abolish the use of accrued benefits of employers’ mandatory pension contributions to offset statutory severance and long service payments, with effect from 1 May 2025 (the “Transition Date”). After the abolition comes into effect:

• The accrued benefits derived from employers’ MPF mandatory contributions cannot be used to offset employees’ severance payment and long service payment in respect of the years of service starting from the Transition Date but can continue to offset the employees’ severance payment or long service payment in respect of the years of service before the Transition Date
• The accrued benefits derived from employers’ MPF voluntary contributions and gratuities based on employees’ years of service can continue to offset employees’ severance payment or long service payment (irrespective of the years of service before or after the Transition Date)

Impact date: 1 May 2025 The Hong Kong Government has launched a 25-year subsidy scheme (totaling over HK$33 billion) to support employers in adapting to the abolition of the MPF offsetting arrangement. There will be a specified share ratio in respect of the amount of severance payment or long service payment payable to an employee by an employer each year.

For the first three years, from 1 May 2025 to 30 April 2028, employers’ liability for the post-transition portion is capped at HK$3,000 per employee, subject to a HK$500,000 threshold per employer. Where an employer’s total expenses for severance payment or long service payment in a year exceeds HK$500,000, the amount of severance payment or long service payment payable is assessed against a share ratio instead of a capped amount. The Hong Kong Government will reimburse the expenses in excess to the employers. Starting from the fourth year, the liability cap increases and the subsidies phase out over 25 years.

Impact date: Awaited On 1 February 2024, the Labour Advisory Board (“LAB”) reached a consensus to relax the “continuous contract” requirement, currently under which an employee is entitled to comprehensive employment benefits under the Employment Ordinance (such as rest days, paid sick leave, statutory holiday pay, paid annual leave, maternity leave, paternity leave, severance pay, long service pay) if employed by the same employer for four weeks or more and has worked for 18 hours or more each week (the “418 Rule”). The LAB has agreed to revise the requirement by using the aggregate working hours of four weeks as the basis of calculation, and setting the four-week working hour threshold at 68 hours. It is expected that an Amendment Bill to the Employment Ordinance will be introduced to the Legislative Council for scrutiny upon completion of drafting.

On 11 April 2025, the Hong Kong Government gazetted the Employment (Amendment) Bill 2025 seeking to amend the 418 Rule. It is proposed in the Bill that an employee will be considered as being under a “continuous contract” if he/she works with the same employer: (i) continuously for four weeks or above, for 17 hours or more per week, or (ii) for an aggregate of 68 hours or more during a four-week period.

The Bill was introduced into the Legislative Council for first and second readings on 16 April 2025.