• Thu
  • Dec 18, 2014
  • Updated: 10:56am
NewsHong Kong

Business sector gives resounding 'no' to MPF offsetting clause

Businesses dig in heels on 'offsetting' clause in pension plan, which unionists want scrapped as per the chief executive's election promise

PUBLISHED : Monday, 10 February, 2014, 10:06am
UPDATED : Tuesday, 11 February, 2014, 4:44am

Despite unionists’ possible concessions on the timing of their demand to see the Mandatory Provident Fund’s “offsetting” mechanism ditched, the message from the business sector seems clear: no deal is possible.

Seething criticisms have poured in from the labour side over chief executive Leung Chun-ying’s omission of the clause – which allows employers to offset severance payouts and long-service pay with their contributions to the employees’ MPF accounts – from the policy address last month.

But the employers remained determined not to concede.

“We are worried of a slippery slope. Once we agree to some sort of changes to the offsetting mechanism, the unionists will demand more,” said Jimmy Ng Wing-ka of the Chinese Manufacturers’ Association.

The inclusion of the offsetting mechanism was a pre-condition for business leaders to agree to the establishment of the MPF in 2000.

The Federation of Trade Unions (FTU) – a Beijing-loyalist party and a supporter of Leung in the top job election – vowed to “reclaim the debt” from the chief executive, as the abolition of the mechanism was among Leung’s election promises.

We are worried of a slippery slope. Once we agree to some sort of changes to the offsetting mechanism, the unionists will demand more
Jimmy Ng, Chinese manufacturers association

FTU chairman Stanley Ng Chau-pei said there was room for negotiation about “gradually lowering” the offsetting ratio, but added that discussions with the business side and the government were urgently needed.

“We are willing to consider different approaches – let it be lowering the ratio in phases, separating the offsetting of severance and long service pay, or something else,” said Ng, who sits on the Labour Advisory Board.

“Regardless, we need to sit down and talk with the government and businesses first.”

A majority vote is needed on the board – consisting of six representatives from the employee and employer sides – to kick-start legal amendments that would abolish the offsetting mechanism in the retirement scheme.

The mechanism means that if an employee pays a total of HK$1,000 to the MPF, an amount matched by the employer during the staff's tenure, and the severance pay amounts to HK$900, then the employer can consider the amount already covered by its share of MPF contributions. If the severance pay is more than HK$1,000 in this case, however, the employer can simply make up the difference.

One of the board’s employer representatives, Stanley Lau Chin-ho, who heads the Federation of Hong Kong Industries, said any change would have far-reaching effects.

“Not now,” said Lau when asked about the unionists’ demand. “We need an overall review of the MPF, perhaps. But these offsetting abolition proposals alone cannot resolve the differences [between the business and the labour side].”

He added: “Much more in-depth study is required before making any move. This affects the interest of the whole society – not only of businesses.”


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This article is now closed to comments

In all honesty...which idiot thought this up when they established the MPF regime?
To be able to off-set redundancy payment with the employee's retirement fund (which in reality is barely anything to begin with) is sounding more and more a way to reduce total compensation by employers to me.
If you want to protect the employer from jumpy staff, set that they don't get MPF until 1 or 2 years of service, but after that, any contribution should belong to the employee.
You've got a situation where there's an aging population who don't have a superannuation or pension fund to live off, and the only scheme available now is MPF requiring people to contribute barely anything each month.
If anything, they should require employers to up the portion of pay required to be saved, and then actually educate the employees that they're not getting docked pay, it's savings for their retirement.
There's a bunch of labourers that are sadly being manipulated by politicians to say things because they don't know how the system works. And on the other side, you've got employers putting pressure on politicians to rip the employees off.
I am a business owner and I strongly support cancelling the offsetting clause. It should have never been put there in the first place. This is the employees money which they have earned already.
Not every business owner wants to rob its own employees. These guys should be ashamed of themselves.
There should never have been an MPF offsetting clause in the first place. The entire idea of a severance/long service payment is to recognize the loyalty of an employee for a given employer. This is separate and independent of an employer's responsibility to contribute to the retirement scheme of an employee as represented by MPF.

In other words, a long service payment is recognition and a token of gratitude for the continued long service of an employee. MPF contributions, on the other hand, are mandatory and required for any employee, regardless of whether the employee has worked 1 or 35 years for a given employer.

Therefore, the MPF offsetting clause has, in essence, eliminated and defeated the entire purpose of the long service payment.
Of course the employers will never agree, they won't be able to fire workers effectively for free.
Same here. I would go further and make MPF accounts truly owned and controlled by the employee so one account follows the person thru their working career. Allow employees to find the best deal with the lowest cost. It would cost me as an employer absolutely nothing. The MPF is for my employees, not for me.
Yes, it's great that there are business owners like yourself that believe that treating their employees fairly is a good thing.
However, sadly, you're probably in the minority, only in Hong Kong will you find college/university educated people who are still paid around 10k a month and are forced to work crazy hours.
It is so ingrained in our culture that bosses who has gone through the tough feel that they are now previledge to treat their employees unfairly.
Honestly, I don't know in what mental state the people who came up with the off-setting clause were in when they introduced this.
How about a claw-back clause that allows the employers to claw back all the wage they've ever given if the employee leaves the firm?
Or a clause that forces the employee's children to work for the firm for minimum wage if the employee dies because the company has spent money training them?
Heard an interview the other day that an employer say they will "die" if they remove the off-set, what they fail to understand is that, it is not your money!!!
MPF is drawing angry critcicims from both employers and employees and benefits only the fund managers. It also goes against the principle of allowing one to control their own money. I cannot get a cent from the fund and is watching them being slowly eaten away by the fund managers! It should be scapped immediately!
The MPF scheme was rushed thru in about 6 weeks by a little known consultancy firm with the intent of attracting the mutual fund industry to HK and not Singapore. Another factor was the stock market was red hot at the handover and the controlling families wanted a means to pump liquidity in so they can continue to enjoy tax free capital gains and dividends; the MPF scheme came to the rescue. The scheme is seriously flawed but retirement savings was not the main reasons it was put in place. In order to get employers to agree, the offset was thrown in. The absolutely last person's interests to be considered was the worker.


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