Hong Kong Key Workforce Reforms in Year 2025

2025 marks a transformative year for employment practices in Hong Kong. From retirement fund reforms to wage adjustments, these changes carry significant implications for employers across all sectors. Here’s a comprehensive breakdown of the five most impactful updates and what they mean for your business.

1.  Abolition of MPF Offsetting Arrangement

Effective Date: 1 May 2025

The long-standing practice of using employer contributions to the Mandatory Provident Fund (MPF) to offset severance payments (SP) and long service payments (LSP) has officially ended. This reform ensures that employees retain their full MPF savings upon termination.

Implications for Employers:

• Starting from 1 May 2025 (“transition date”), the accrued benefits derived from employer’s MPF mandatory contributions (ERMC) cannot offset employee’s severance payment (SP) and long service payment (LSP) in respect of the years of service starting from the “transition date”, but can continue to offset the employees’ SP/LSP in respect of the years of service before the “transition date”.
• The accrued benefits derived from employer’s MPF voluntary contributions (ERVC) and gratuities based on employees’ years of service can continue to offset employees’ SP/LSP irrespective of the years.
• Employees not covered by MPF or other retirement schemes (e.g. domestic helpers, under age 18 or above 65) aren’t affected by the offsetting abolition. Their SP/LSP remains calculated per the Employment Ordinance.

2.  Government Subsidy Scheme

Effective Date: 1 May 2025 (aligned with MPF offsetting abolition)
Duration: 25 years

To ease the transition from the MPF offsetting arrangement, the government has rolled out a 25 years’ subsidy scheme.

Implications for Employers:

• The subsidy only covers the post-transition (i.e. after 1 May 2025) portion of SP/LSP paid to the employees.
• A specified subsidy/share ratio in respect of the net amount of post-transition portion of SP/LSP payable to an employee by an employer in each subsidy year.
• A threshold of HK$500,000 is set with specified employer subsidy ratios for each subsidy year. The HK$500,000 threshold refers to whether the accumulated amount of post-transition portion of SP/LSP payable by an employer during the same subsidy year.
• For subsidy applications fall within HK$500,000 threshold in a subsidy year, a “capped amount” applies for the first nine years on the employer’s share of an employee’s post transition portion of SP/LSP. The subsidy amount is the greater amount of: –
  a) an amount in excess of the cap on employer’s share of an employee’s net amount of post transition portion of SP/LSP eligible for subsidy; OR
  b) the subsidy amount calculated by applying the subsidy ratio of the applicable subsidy year to the net amount of post transition portion of SP/LSP eligible for subsidy.
• A lower “capped amount” is set for the initial years to increase subsidies—starting as low as $3,000 for the first three years. The subsidy ratio will be gradually reduced over the subsidy period with a view to helping employers adapt to the policy change.
• For subsidy applications over HK$500,000 threshold in a subsidy year, the subsidy amount is calculated by applying the subsidy ratio of the applicable subsidy year to the amount of net post transition portion of SP/LSP eligible for subsidy of an employee.

3.  eMPF Platform Introduced

Effective Date: Phased rollout throughout 2025; full transition expected by Q4 2025

The eMPF platform is a centralized digital system introduced to streamline MPF administration. It consolidates fund management under a single interface, improving transparency and reducing administrative complexity.

Implications for Employers:

• Employers must register to the eMPF platform, please refer to MPF trustee’s notice and register from the specific date.
• After the MPF scheme is onboarded, employers should submit the contribution data via eMPF Platform.
• The employers should continue to pay contributions to trustees but through eMPF Platform after the participating MPF scheme is onboarded to the eMPF Platform.
• After an MPF scheme is onboarded to the eMPF Platform, employers and members should use the designated MPF administration forms to manage their MPF if they still wish to use paper submissions. There will be a two-month grace period following the onboarding date of an MPF scheme, the eMPF Platform will still accept existing trustee’ administration forms.

4.  Minimum Wage Increased

Effective Date: 1 May 2025
New Rate: HK$42.10/hour (up from HK$40.00/hour)

To reflect inflation and rising living costs, the Hong Kong government has raised the statutory minimum wage (SMW). This adjustment is part of a broader effort to ensure fair compensation for low-income workers.

Implications for Employers:

• To comply with the laws and ensure fair treatment for employees, employers must stay informed and maintain accurate record.
• SMW applies to all employees, including monthly-rated, daily-rated, hourly-rated, piece-rated, permanent, casual, full-time, part-time.
• Coverage is regardless of contract type under the Employment Ordinance (EO).
• SMW does not apply to student interns and work experience students.
• Employees with disabilities are also protected under SMW with a special productivity assessment option. If opted in, wages must be not less than SMW rate or adjusted according to assessed productivity level.
• For record keeping requirement: monthly wage threshold for recording work hours raised from HK$16,300 to HK$17,200. The employers must record total hours worked if employee earns less than HK$17,200/month.

5.  Redefinition of “Continuous Employment” – The 468 Rule

Effective Date: 18 January 2026
New Threshold: 68 hours over 4 consecutive weeks

The Employment (Amendment) Ordinance 2025 has redefined the criteria for “continuous contract” status. Previously, employees needed to work 18 hours per week for 4 consecutive weeks (the “418 rule”) to qualify for statutory benefits. The new rule allows employees to qualify by working a total of 68 hours over any 4-week period, even if some weeks fall below the 18-hour mark.

Implications for Employers:

• More part-time and gig workers will now qualify for statutory benefits such as paid holidays, sick leave, and maternity/paternity leave.
• Employers must reassess workforce classifications and update HR policies to reflect the new eligibility criteria.
• Payroll and attendance systems should be configured to track cumulative hours over rolling 4-week periods.
• This change promotes fairer treatment of flexible workers.