In race against time, Hong Kong’s acting leader calls for consensus on scrapping pension fund offset mechanism
Acting Chief Executive Matthew Cheung describes government intervention in the issue as ‘unprecedented’
With time running out for the current administration, Hong Kong’s acting leader issued a call on Tuesday to both the business and labour sectors urging them to accept a government proposal to scrap a controversial pension fund offsetting mechanism.
Speaking before the weekly Executive Council meeting, Acting Chief Executive Matthew Cheung Kin-chung said it was “unprecedented” for the government to be intervening in the labour relations issue and offering a HK$7.9 billion subsidy to affected employers.
“I hope that the labour and business sectors will be able to reach a consensus on this feasible and concrete proposal. Let’s take a step forward and provide protection to some three million workers,” Cheung said.
The controversy centres on the Mandatory Provident Fund offsetting mechanism, which allows employers to offset long service and severance payments with their contributions to their employees’ pension accounts.
Last year, HK$3.85 billion was offset by employers – up a staggering 70 per cent from HK$2.27 billion in 2012.
Chief Executive Leung Chun-ying, who is on holiday and will return to work on Wednesday, is in a race against time to fulfil his election promise to “progressively reduce” the proportion of MPF contributions that employers can use to offset long service and severance payments.
The last day of his term is June 30.
That is why the government proposed earlier this year to scrap the mechanism and promised to subsidise employers for 10 years to the tune of HK$7.9 billion.
“As we have always stressed, this is a balanced proposal. We have taken into consideration the interests of employers and employees. This time, the government has taken the unprecedented step to intervene in this labour rights issue,” Cheung said.
“The government has the political determination to solve this problem … We have thought this through. We have spent a long time analysing the statistics.”
He said that on top of the HK$7.9 billion subsidy, the government would also collect HK$18 billion less in tax over a 10-year period. That would mean the total price tag for the government would be HK$25.9 billion if the offset mechanism were scrapped.
Details of the confidential Exco meeting on Tuesday remained unclear. But sources with knowledge of the matter had said they did not expect a conclusion to emerge from the meeting.
Labour Advisory Board member Tang Ka-piu said he did not support the government’s proposal, claiming it had diluted how long service and severance payments were calculated.
At present, long service and severance payments are calculated by taking two-thirds of a person’s last monthly salary and multiplying it by his or her years of service. Under the government’s plan, the two-thirds base would be lowered to just half, but the employee would also get to keep his or her entire MPF.
“If this formula is passed, the impact could be significant,” he said. “I hope the government will reconsider.”