Legal Update: Key Points on Employment Issues from 2024 Policy Address

In the 2024 policy address by the Chief Executive of Hong Kong SAR, a number of notable employment related issues were mentioned. We summarise the key issues below:

Statutory Severance/ Long Service Payment

• Currently, an employer can set off the value of its mandatory provident fund contribution against any statutory severance or long service payment payable to an employee.

• From 1 May 2025, the above arrangement of setting-off will be abolished for amounts accruing after that date.

• In the following 25 years, the government will set aside over HK$33 billion to subsidise a proportion of the employers’ liabilities for severance payments and long service payments at an annually decreasing share/rate.

• The phasing out of the MPF set-off mechanism will greatly, over time, also increase the relevance and significance of the concept of “unreasonable dismissal” under the Employment Ordinance. This generally applies to employees with over 2 years of service, who are not redundant and where the employer does not have a “valid reason” for the termination under section 32K of the Employment Ordinance. Such employees are entitled to the equivalent of statutory severance pay as part of their terminal payments for unreasonable dismissal. To date this entitlement has been largely academic due to the MPF set-off mechanism. However, that will now start to change.

Protection of Wages on Insolvency Fund

• The Fund was set up to provide ex-gratia payment to employees of insolvent businesses who are owed wages, wages in lieu of notice, severance payment and payments for untaken annual leave and/or statutory holidays. .

• Currently, the specified limit of ex-gratia payment from the Fund in respect of severance payment is HK$100,000 plus half of the employee’s entitlement in excess of HK$100,000.

• It is proposed that the coverage and the payment ceiling of the ex-gratia severance payment under the Fund should be reviewed.

Statutory Minimum Wage

• The last review of statutory minimum wage took place on 1 May 2023 which increased its rate from HK$37.50/hr. to HK$40/hr.

• It is proposed that starting from 1 May 2026, the statutory minimum wage will be reviewed on an annual basis.

Employment Ordinance

• Currently, certain statutory entitlements under the Employment Ordinance require an employee to be employed under a “Continuous Contract” (i.e. a minimum of 18 hours each week for 4 or more weeks, also known as the 418 rule). These include benefits such as:
• statutory paid annual leave;
• sickness allowance;
• a rest day in every period of 7 days; and
• maternity and paternity leave pay.

• It is proposed that the above requirement of being employed on a “Continuous Contract” should be relaxed to an aggregate of 68 hours of employment over a 4-week period.

Russell Bennett and Mark Chiu

For more information on employment matters, please contact:

Russell Bennett

Partner | Email

Mark Chiu

Consultant | Email

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.