Hong Kong business slams decision to scrap pension fund offset mechanism
Chambers say plan will discourage start-ups and add pressure to small and medium-sized firms
Hong Kong business groups have labelled as reckless the government plan to stop them using pension fund contributions to offset severance and long-service payments.
They warned the plan would discourage entrepreneurs from starting businesses in Hong Kong and add pressure to small and medium-sized firms.
Five major business associations issued a joint statement on Friday after theExecutive Council gave the green light for the scrapping of the so-called offset mechanism for the city’s Mandatory Provident Fund (MPF) scheme.
The government will offer a subsidy of HK$7.9 billion to be spent over 10 years to ease employers’ financial burden.
Shirley Yuen, chief executive of the largest business body, the Hong Kong General Chamber of Commerce, said the government would face big hurdles in carrying out its decision as both the labour and business communities had opposed it “repeatedly”.
“We regret that the government forced the proposal through when there was no consensus,” Yuen said. “And we are really disappointed that our suggestions were not properly considered.”
The business sector argues that the function of pension fund contributions overlaps with those of severance and long-service payments, and companies should not be required to cover both.
Former legislator Ho Sai-chu said the MPF scheme was designed to ease the burden on small firms so they would not have to make big, one-off payments when staff leave.
He said the government had broken its promise in abolishing the offset machanism.
“It will not affect big companies as they have their own pension system,” he said. “But it is hard for medium, small and micro firms to save up.”
The business groups have been calling for an alternative proposal that increases employers’ MPF contributions from the current 5 per cent of salaries to 6 per cent. They asked the government to make up the additional 1 per cent on the employee’s side.
However, the government said the business proposal would cost taxpayers more.
“The government’s proposal has a clear target,” said Doris Ho, head of the policy and project co-ordination unit of the Chief Secretary’s Private Office. “Employers pay more for firing more people, and pay less for firing less.”
Yuen said the business groups had been in touch with the new administration, and they hoped the Executive Council decision would be revised soon.
“We look forward to having a healthy, constructive discussion with both the government and the labour side,” she said.