CE pledges to end MPF offsetting in current term

Hong Kong’s No 1 official on Wednesday pledged to resolve the contentious issue of the Mandatory Provident Fund offsetting mechanism within her current term — despite deep divisions in society over the issue.

Making these remarks at a Legislative Council meeting in answer to lawmakers’ questions, Chief Executive Carrie Lam Cheng Yuet-ngor said the government would meet representatives from the business sector on Thursday to pursue a solution.

Under the current offsetting mechanism, employers are allowed to pay their workers’ severance and long-service payments using the employers’ contributions to employees’ MPF accounts.

News reports emerged on Monday, claiming the government will allocate HK$17.5 billion to subsidize employers for scrapping the offsetting mechanism for a transitional period up to 12 years.

Felix Chung Kwok-pan, lawmaker representing the textiles and garment industry and a champion of the business sector, raised concerns at Wednesday’s meeting. He said a one-off government fund to subsidize employers could not solve the problem in the long run.

The plan favors the labor side and it was unacceptable to burden employers for all the severance and long-service payments after the transitional period, Chung said.

Lam did not confirm the news reports. But she stressed that the subsidy period is only one consideration in future proposals to end the mechanism.

“The incumbent administration is capable and committed to resolve the problem by finding a solution acceptable to both employers and employees,” said Lam.

The government’s plan is sustainable to stop employers from using employees’ pension funds to cover severance and long-service payments in the long run, Lam said.

She also noted that even under the existing offsetting mechanism, employers are not allowed to pay off all the severance and long-service payments with workers’ MPF — they also have to take money from their own pockets to meet legal requirements.

She believed that if a plan allows employers to pay off all the severance and long-service payments with a certain fund or a third party, it will deviate from today’s practice.

The fund Lam referred to was a plan proposed by the Labor Advisory Board in April last year to set up a central “fund pool” to pay severance and long-service payments. It involved a one-off government fund and a monthly investment from employers.

The fund is preferred by the business sector as it would last as long as the fund goes.

Representing the labor sector, lawmaker Michael Luk Chung-hung, member of the Hong Kong Federation of Trade Unions, was concerned that such a fund would be abused; it might encourage employers to lay off workers. The employers may think a pool of funds will be there to cover their own expenses when they have to pay the two payments, Luk suggested.

He told China Daily that the labor sector welcomed the government’s plan to end the mechanism as it would provide better protection for retirees.