My Take | CY Leung failed to get his MPF reform off the ground: it’s time to let someone else have a go
The outgoing chief executive has had five years to end a practice that allowed employers to take severance and long service pay out of employees’ pension, but has made no progress
Leung Chun-ying is a man in a hurry. With barely two more weeks in office, the outgoing chief executive is desperate to fulfil an election promise he made five years ago to overhaul a key compensation mechanism under the Mandatory Provident Fund pension scheme.
While it’s usually a good thing for political leaders to try to keep their promises, this is not the case here. Leung has come up with a half-baked proposal that even members of his own Executive Council can’t agree on, let alone opposing representatives from labour and the business sector.
His successor, Carrie Lam Cheng Yuet-ngor, is fully acquainted with the issues. It would make more sense for her administration to work out the reform plan than trying to force through a compromised solution that will not satisfy anyone.
The so-called offsetting mechanism has long enabled bosses to make payments for long service and severance using contributions they have already paid into the pension funds of departing employees.
Under this mechanism, bosses offset HK$3.85 billion last year from the cost of pensions– up 70 per cent from HK$2.27 billion in 2012.
Leung has promised to phase out this practice, which many consider exploitative, over 10 years with a government subsidy of HK$7.9 billion to help employers meet such obligations.