MPF off­set abo­li­tion ‘to be de­cided this year’

China Daily (Hong Kong) - - TOP NEWS - By LIN WENJIE in Hong Kong cher­rylin@chi­nadai­lyhk.com

Chief Sec­re­tary for Ad­min­is­tra­tion Matthew Che­ung Kin-chung said he is con­fi­dent a so­lu­tion to the con­tro­ver­sial is­sue of abol­ish­ing the off­set­ting of sev­er­ance and long-ser­vice pay­ments with Manda­tory Prov­i­dent Fund con­tri­bu­tions will be found by the end of the year.

Che­ung, who spoke at a me­dia brief­ing on Wed­nes­day, said the pro­posal to abol­ish the MPF off­set­ting mech­a­nism, put for­ward by former chief ex­ec­u­tive Leung Chun­y­ing late last month would be fine-tuned.

“The mod­i­fi­ca­tion is to in­crease the gov­ern­ment’s sub­si­dies on firms dur­ing the 10-year tran­si­tion pe­riod. This is be­cause it is vi­tal to help small and medium en­ter­prises to have enough sav­ings to pay for sev­er­ance and long-ser­vice pay­ments once the MPF off­set­ting mech­a­nism is scrapped,” Che­ung ex­plained.

“Be­sides the HK$7.9 bil­lion sub­sidy, the gov­ern­ment is bound to al­lo­cate more pub­lic funds to share em­ploy­ers’ bur­den in the tran­si­tion pe­riod. The gov­ern­ment will get opin­ions from re­lated par­ties re­gard­ing the ex­act amount of pub­lic funds that should be al­lo­cated,” he added.

Un­der Leung’s pro­posal, abo­li­tion of the MPF off­set mech­a­nism should not be retroac­tive. A “cut-off ” date to abol­ish the mech­a­nism will be de­ter­mined in due course. Em­ploy­ers will be able to off­set be­fore the “cut- off ” date takes ef­fect.

The amount used to cal­cu­late em­ploy­ees’ com­pen­sa­tion will be re­duced from twothirds of an em­ployee’s monthly salary to half. At present, sev­er­ance and longser­vice pay­ments are both cal­cu­lated by tak­ing two-thirds of an em­ployee’s last monthly salary and mul­ti­ply­ing it by years of ser­vice.

In a 10-year tran­si­tion pe­riod, the gov­ern­ment will al­lo­cate HK$7.9 bil­lion to share em­ploy­ers’ bur­den when mak­ing sev­er­ance or long-ser­vice pay­ments after abol­ish­ing the MPF off­set mech­a­nism.

The gov­ern­ment es­ti­mates HK$18 bil­lion less tax will be col­lected over the 10-year tran­si­tion pe­riod after the MPF off­set­ting mech­a­nism is abol­ished. Taken to­gether with the HK$7.9 bil­lion subsi- dy, the orig­i­nal price tag for the gov­ern­ment will be HK$25.9 bil­lion.

Em­ploy­ers and em­ploy­ees in Hong Kong are both re­quired to con­trib­ute an amount equal to 5 per­cent of work­ers’ monthly wages — capped at HK$1,500 — to MPF ac­counts.

Last year HK$3.85 bil­lion was off­set by em­ploy­ers — up a stag­ger­ing 70 per­cent from HK$2.27 bil­lion in 2012, ac­cord­ing to MPF Schemes Author­ity data.

The off­set mech­a­nism came into ef­fect when the MPF scheme was launched in 2000 as a pri­vate-run re­tire­ment sav­ings pil­lar for Hong Kong. The off­set mech­a­nism had been agreed in or­der to win busi­ness-sec­tor back­ing for the re­tire­ment sav­ings scheme.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.