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Chief executive’s policy address 2017

HK$6 billion subsidy to help businesses as controversial MPF offset mechanism faces axe

Unionists slam measures to scrap controversial offset mechanism as ‘half measure’ while business sector could start using short-term contracts

PUBLISHED : Wednesday, 18 January, 2017, 11:12pm
UPDATED : Thursday, 19 January, 2017, 12:21am

A one-off subsidy of HK$6 billion will be offered to employers to alleviate financial pressure over a decade after they are no longer ­allowed to use the money they put into workers’ retirement funds to offset severance and long-service payments.

While Chief Executive Leung Chun-ying praised himself for showing determination to scrap the controversial Mandatory Provident Fund offsetting mechanism, unionists slammed it as a half measure and criticised him for watering down the formula that calculates severance and long-service payments.

At present, the payments are calculated by taking two-thirds of a person’s last monthly salary and multiplying it by the years of service. Under the new proposal, the two-thirds base will be lowered to half a month’s salary but the employee will also get to keep their entire MPF.

His plan also failed to pacify an angry business sector, as employers warned they could start hiring staff on short-term contracts to avoid making the two payments.

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“We think that it is a feasible proposal, one that employers should accept and employees should find acceptable,” Leung said yesterday. “This proposal has considered the additional expenses incurred on the employers and so the government will be subsidising them. It is balanced.”

Under the proposal, sources said, the government will take HK$6 billion from the HK$50 ­billion already earmarked for ­retirement protection purposes.

Sources said the government will in the first year subsidise the employers less than half of the amount supposed to be offset. The rate will be progressively ­reduced over 10 years.

“We believe that the amount will be enough to last a decade,” a source said. Yet the ­total amount of employers’ contributions used to offset severance and long- ­service payments in 2015 was HK$3.35 billion.

If the HK$6 billion is used up in less than 10 years, the source said the government would not inject more money into the pool.

Full speed ahead for Hong Kong on the ‘one road’ strategy

Sources also pointed out that the government would collect less tax as the amount of money reserved to pay severance and long-service payments would not qualify. The amount of lost tax is forecasted to be HK$18 ­billion over the 10-year period and could be as high as HK$2.6 billion in the 11th year.

The government has no plan to launch a public consultation but will consult the business and labour sector over the coming three months. Officials plan to ­table a proposal to the Executive Council in June, as Leung’s term will finish at the end of that month.

Liberal Party chairman Felix Chung Kwok-pan said employers could start firing their staff and recruit others on two-year contracts. As employees are only entitled to severance payment ­after working continuously for at least two years, and long-service payments for at least five years, such tactics would mean they were entitled to neither.

“Employers are walking into deeper waters and the government is just leaving them there,” Chung said.

Liberal Party vice-chairman Lee Cheuk-yan said Leung was treating workers as “fools” by scrapping the offsetting mechanism yet lowering the formula to calculate the two payments.

“If the government’s concern is the financial burden on small and medium-sized companies, officials can consider taxing the big companies and use that to subsidise the smaller ones,” Lee said.

Dr Billy Mak Sui-choi from the Baptist University’s business school said the long-service payments should be scrapped with employers putting more money into their employees’ MPF accounts instead. “There is an overlap between long-service payments and the MPF. Both aim to help workers upon retirement,” Mak said.

Severance pay, working hours remain sore points for security guard

The joy that security guard Yu Mei-wan felt at the government’s announcement yesterday to abolish the mechanism that allows employers to use the money they put into workers’ retirement funds to offset severance and long service payments was short-lived.

It lasted until she found out that the government is also planning to lower the formula that calculates how much severance and long-service payments employees receive.

“Has the government ever thought about how difficult lives could be when the underprivileged people are out of jobs?” the 60-year-old asked. “We are still not getting as much as we should get.”

Yu remembered that four years ago, her then employer wanted to fire her and other colleagues. But to avoid paying severance payments, her employer asked her to sign a form that stated she was leaving the job voluntarily. Her severance payment was just HK$2,000.

She makes HK$8,600 a month working at a Tai Po shopping centre from 11pm to 7am. Until about two years ago, two security guards including her worked night shift. Now it was left with she alone.

She said it was imperative that the government standardise working hours to 44 a week. Bosses should pay their staffs 1.5 times their normal wages for every extra hour they put in.

However, Chief Executive Leung Chun-ying would only say in his swansong policy address yesterday that the Standard Working Hours will submit its report to the government by the end of this month.

“I am left with myself doing the shift. And it is a big mall,” Yu said. “I have known people who worked so hard they worked to death.”