The revised “continuous contract” definition under Hong Kong’s Employment Ordinance, effective Jan 18, marks a significant advancement in worker protections. By shifting from the longstanding “418 rule” to the new “468 rule”, the Hong Kong Special Administrative Region government is closing a well-known loophole that allowed employers to deny statutory benefits to part-time and casual employees. While this reform is a commendable step in the right direction, it raises broader concerns about labor market dynamics, cost pressures, and sectoral transformations that deserve careful consideration.

The old “418 rule”, which had remained unchanged over the last 30-odd years, required workers to log at least 18 hours per week for four consecutive weeks to qualify as a continuous-contract employee, entitling them to paid annual leave, statutory holidays, sickness allowance, and other benefits. Labor unions have complained for a long time that some employers, especially in food and beverage (F&B), exploit this ordinance provision by scheduling employees for full-time hours in the first three weeks, then capping the fourth at 17 hours or fewer.

The new “468 rule” is designed to counter this gray-area practice: Workers now qualify if they accumulate 68 hours over any four consecutive weeks, regardless of weekly distribution. This change is unequivocally positive, extending protections to workers previously excluded and aligning the ordinance more closely with modern, irregular shift patterns. The government estimates that over 11,000 part-time or temporary workers will now gain these entitlements. However, one problem solved usually leads to the development of new challenges or unexpected consequences.

Faced with potential manpower-cost increases, with some F&B operators estimating at around 6 percent, some employers are considering plans to limit individual staff members’ work hours to 67 per month and hire additional part-timers to cover shifts. This strategy, however, overlooks a critical supply constraint. With multiple employers pursuing the same approach simultaneously, demand for part-time workers will surge while the available pool remains limited. In the F&B sector alone, approximately 17,000 outlets employ around 218,900 people, and the industry has an unemployment rate of 6.8 percent. From a mathematical perspective, this rule change alone has the potential to push this rate down to near zero. Even without any other factors, the industry’s expected surge in competition for part-timers will inevitably drive wages up, thus eroding anticipated savings and potentially neutralizing much of the cost-avoidance benefit.

Simply hiring more part-timers is not a sustainable solution, given the finite labor supply and rising wage pressures. The more viable alternatives for businesses are to differentiate their offerings to justify higher prices or to invest aggressively in automation to reduce reliance on flexible labor

The 468 rule’s impact extends far beyond the restaurant sector. As a provision of the Employment Ordinance, it applies economywide, with particular implications for roles such as event contractors, hotel staff members, private tutors, photographers, retail promoters, housekeeping personnel, and social media managers. In these often seasonal or gig-oriented sectors, part-time and casual workers frequently constitute the backbone of operations, making the reform especially pertinent.

Many part-time workers in these fields rely on multiple concurrent gigs for income flexibility. Exceeding 68 hours with one employer may trigger requirements for approval of “outside work”, complicating their arrangements. If employers across these sectors simultaneously seek more part-timers to stay below the threshold, the fundamental question arises: Is there sufficient labor supply to meet this aggregated demand? If employers take a conservative approach in approving outside work, the likely answer is no, which further amplifies wage pressures and forces employers to consider replacing manpower with technology.

Businesses will respond in varied ways. Some will absorb higher costs and attempt to pass them to customers, though in Hong Kong’s fiercely competitive landscape, especially considering the increasingly popular cross-border retail consumption, this approach is viable only for those who offer highly differentiated and personalized shopping or dining experiences.

Others will opt to expand headcount but will face elevated wages, additional training burdens, and potentially higher turnover among less-committed part-timers. This will inevitably pose challenges for upkeeping service standards, and customer satisfaction.

Forward-thinking operators, however, will accelerate investment in automation and process efficiencies. In the F&B sector, there is already evidence from fast-food chains introducing self-ordering kiosks, robotic kitchens, and online delivery-order integration. These businesses will prove most resilient to the new rule, relying less on variable manpower.

This regulatory change from the Labour and Welfare Bureau is a meaningful step toward strengthening fairness for Hong Kong’s part-time workers. However, while its focus on labor protection is important, the government must also consider its broader impact on employers.

As discussed, simply hiring more part-timers is not a sustainable solution, given the finite labor supply and rising wage pressures. The more viable alternatives for businesses are to differentiate their offerings to justify higher prices or to invest aggressively in automation to reduce reliance on flexible labor. Both paths require capital, expertise, and strategic vision — resources that many smaller operators lack.

In the upcoming Budget speech, the financial secretary should consider allocating targeted support to help small and medium-sized enterprises in sectors most disrupted by this change in manpower structure.

The author is a senior lecturer in the Department of Marketing, the Hang Seng University of Hong Kong.

The views do not necessarily reflect those of China Daily.