Mid-stream re­vi­sion over MPF off­set un­fair to ex­ist­ing busi­nesses

China Daily (Hong Kong) - - COMMENT - H O L O K- S A N G

When I wrote on the Manda­tory Prov­i­dent Fund long-ser­vice and sev­er­ance pay off­set is­sue ear­lier (Dec 28, 2016), how the spe­cial ad­min­is­tra­tive re­gion gov­ern­ment was go­ing to tackle the sub­ject was still un­clear. To­day the an­nounce­ment has been made and it turns out that the ver­sion be­ing cir­cu­lated at the time was in­deed the pol­icy pack­age adopted by the gov­ern­ment. The gov­ern­ment pro­poses to dis­al­low the off­set as of the first day of this year but within the 10 years from that date it will help al­le­vi­ate em­ploy­ers’ bur­den through a sub­sidy, which amounts to HK$7.9 bil­lion.

Af­ter the tran­si­tion pe­riod, em­ploy­ers will shoul­der their new bur­dens com­pletely, although these are to be re­duced by re­vis­ing the sev­er­ance and longser­vice pay­ment for­mula, which will use half of the last month’s salary in­stead of two-thirds as be­fore, to be mul­ti­plied by the num­ber of years of ser­vice.

The pro­posed pol­icy pack­age, al­ready passed by the Ex­ec­u­tive Coun­cil, as ex­pected met with anger on the part of both em­ploy­ers and em­ploy­ees, be­cause em­ploy­ers hold the gov­ern­ment to task for break­ing the prom­ise to al­low off­set, on the ba­sis of which they agreed to the new con­tri­bu­tions as re­quired by the MPF Schemes Or­di­nance, while em­ploy­ees hold the gov­ern­ment to task for un­der­min­ing their es­tab­lished ben­e­fits and terms of em­ploy­ment. In my ar­ti­cle last year, my sim­ple pro­posal was just for the gov­ern­ment to take over the bur­den re­sult­ing from abol­ish­ing the off­set. The fact is that within the 15 years since 2001, the cu­mu­la­tive off­set amount was a mere HK$3.18 bil­lion. This fig­ure is of­ten less than the value of “sweet­en­ers” given to Hong Kong cit­i­zens in a sin­gle year when the fi­nan­cial sec­re­tary dis­cov­ered the bud­get sur­plus was big­ger than ex­pected. For this rea­son, I ar­gued that since the gov­ern­ment had promised the busi­ness sec­tor it would al­low the MPF off­set in or­der to win its sup­port to pass the MPF bill, it should not re­nege on that prom­ise. At the same time, we re­ally should not ex­pect la­bor would ac­cept that con­di­tions of work should worsen over time. In any case, em­ploy­ees do ex­pect that they should ben­e­fit from eco­nomic devel­op­ment. Dash­ing this ex­pec­ta­tion will harm em­ploy­ees’ sense of en­gage­ment and mo­ti­va­tion.

An ob­jec­tion to this “gen­er­ous” use of tax­pay­ers’ money to pay for the tran­si­tion to a world with­out MPF sev­er­ance pay off­set is that the cost to the gov­ern­ment down the road could be un­bear­able. Although the to­tal amount of money in­volved over the first 15 years of the MPF’s his­tory was a mere HK$3.16 bil­lion, the amount could be­come un­bear­able into the in­def­i­nite fu­ture. Against this worry I sug­gest we can fol­low the gov­ern­ment’s sug­ges­tion to set a date to con­tain the cost. But this date is not a date to af­fect busi­nesses al­ready in ex­is­tence. The date to set is to re­quire busi­nesses set up af­ter that date to be en­tirely on their own in foot­ing the bill both for MPF con­tri­bu­tions and sev­er­ance pay. This means only new busi­nesses will be af­fected. En­trepreneurs will take the cost of the MPF and pos­si­ble sev­er­ance pay as part of their nor­mal busi­ness cost. If they fig­ure their in­comes can­not cover these costs The au­thor is dean of busi­ness at Chu Hai Col­lege of Higher Ed­u­ca­tion.

We need good cap­i­tal-la­bor re­la­tions in or­der to pro­mote our com­pet­i­tive­ness. The gov­ern­ment’s in­vest­ment in smooth­ing the tran­si­tion to a world with­out the off­set is an in­vest­ment in cap­i­tal-la­bor re­la­tions and de­serves se­ri­ous con­sid­er­a­tion.

they have the op­tion not to go into busi­ness. But for ex­ist­ing busi­nesses, if the gov­ern­ment had ap­proved the off­set, that is what they came to ex­pect. Chang­ing rules in the mid­dle of the game is just not right.

Thus the cost borne by tax­pay­ers to de­fray the un­ex­pected cost of disal­low­ing the off­set is con­tained. But some may still ar­gue that the cost is still big, and busi­nesses should ex­pect that poli­cies can change. My an­swer to that is that most of the ex­ist­ing busi­nesses face a more dif­fi­cult busi­ness en­vi­ron­ment now than when the off­set was first al­lowed. If they had needed the off­set then, they would need the off­set even more now. Be­cause of this they are go­ing to fight to the end. An eter­nal strug­gle be­tween em­ploy­ers and em­ploy­ees will hurt pro­duc­tiv­ity and so­cial har­mony. We must not for­get that these costs are real costs to so­ci­ety. The long­stand­ing griev­ances of la­bor groups and the dis­con­tent of strug­gling busi­nesses may end up hurt­ing Hong Kong in a myr­iad of ways, not least the trust­wor­thi­ness of the gov­ern­ment. The ex­change of words be­tween em­ployee and em­ployer groups also sug­gests cap­i­tal-la­bor re­la­tions are likely to sour. Hon­orary Pres­i­dent of the Chi­nese Gen­eral Cham­ber of Com­merce Ho Saichu in­sisted that the off­set was noth­ing like wash­ing away the MPF funds, and that un­der the off­set the MPF funds were still there, but part of that was taken out as sev­er­ance pay. “Em­ploy­ees could put them back in if they want.” This kind of lan­guage is un­likely to help im­prove cap­i­tal-la­bor re­la­tions.

We need good cap­i­tal-la­bor re­la­tions in or­der to pro­mote our com­pet­i­tive­ness. The gov­ern­ment’s in­vest­ment in smooth­ing the tran­si­tion to a world with­out the off­set is an in­vest­ment in cap­i­tal-la­bor re­la­tions and de­serves se­ri­ous con­sid­er­a­tion.

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