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Mandatory Provident Fund (MPF)

A last-ditch attempt to scrap MPF offset mechanism? CY Leung to hold ‘special meeting’ with cabinet

Plan to progressively reduce the proportion of staff pensions that employers can tap seems to be a possible middle ground

PUBLISHED : Thursday, 22 June, 2017, 7:27pm
UPDATED : Thursday, 22 June, 2017, 10:33pm

Hong Kong’s leader Leung Chun-ying will hold a special meeting with his cabinet members on Friday afternoon in a last-ditch effort to scrap a controversial mechanism that allows employers to dip into workers’ pension funds for severance and long-service payments.

A source with knowledge of the matter said it remains unclear if an agreement could be reached, as views among the Executive Council members remain poles apart.

The labour and business sectors are both against the government’s proposal for the so-called Mandatory Provident Fund offsetting mechanism.

‘Scrap MPF offset mechanism now or expect to wait years’

“We are standing firm on not accepting the government’s present proposal,” Labour Advisory Board member Tang Ka-piu said on Thursday.

The clock is ticking for Leung to fulfil his election promise to “progressively reduce” the proportion of MPF contributions that employers can use as an offset. The last day of his term is next Friday.

The offsetting mechanism has for years put bosses and employees at odds.

Last year, HK$3.85 billion was offset by employers – up a staggering 70 per cent from HK$2.27 billion in 2012.

Earlier this year, the government proposed to scrap the mechanism. To ease the financial burden on employers, officials pledged to offer a subsidy of HK$7.9 billion, to be used over 10 years.

But employers said the amount was not enough. The labour sector was also against the proposal because the government wanted to water down the formula that calculates the payments.

In an earlier Exco meeting, sources said a member suggested that the scrapping be done in phases – employers will no longer be allowed to offset severance payments but can still offset long severance payments for some time.

The government saw that as a feasible suggestion and used it to woo the business sector, sources said.

“We won’t say no to this suggestion outright at the moment. But the government needs to promise us that employers can no longer do any offsetting in two years’ time. Then we will consult the workers,” Tang said.

Setback for Leung Chun-ying over pension fund offset bid

On an RTHK program on Thursday, incoming labour and welfare minister Dr Law Chi-kwong did not comment directly on the government’s proposal. But he spoke of the need to have “continuity” in government policies.

“There has to be a level of continuity in government policies. That means you don’t start over from scratch. You take it as the basis,” he said. “There will always be better policies. It’s all about improving them when they are implemented.”

Asked what if the basis of a policy was not ideal, Law said adjustments could be done.

“If someone raises suggestions that were not considered after a policy has been approved, then the government will still have to review it and make adjustments,” he said.

He also said he would be more cautious when making comments in public after July 1, as the public may take his views as the government’s official position.

Law was a founding member of the Democratic Party and a long-time academic at the University of Hong Kong.