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Mandatory Provident Fund (MPF)

Hong Kong bosses refuse to budge on proposal to halve staff payouts if employers leave pension pots alone

One business leader says HK$200,000 is better than HK$390,000 for long-service and severance payments, ‘but we would like to see it as low as possible’

PUBLISHED : Monday, 24 July, 2017, 7:48pm
UPDATED : Tuesday, 25 July, 2017, 4:30pm

Members of Hong Kong’s business chambers on Monday refused to concede much ground over a proposal to allow employers to almost halve long-service and severance payouts in return for no longer dipping into workers’ pension funds.

In their first meeting with the city’s new labour minister, bosses said lowering the maximum payout to HK$200,000 – nearly half the current level – did not go far enough in return for abolishing the Mandatory Provident Fund offsetting mechanism.

That figure had been proposed by Secretary for Labour and Welfare Dr Law Chi-kwong before he joined the government on July 1.

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The issue has been a source of dispute for both employees and employers, and is already proving to be a difficult topic for the new administration.

Employers have complained that scrapping the mechanism – a goal that former chief executive Leung Chun-ying promised workers – could force small and medium-sized firms to close under the added financial burden.

After the meeting, the honorary chairman of the Chinese General Chamber of Commerce, Ho Sai-chu, said lowering the cap marked “a step forward”.

“The HK$200,000 level is an improvement from HK$390,000, but we would like to see it as low as possible, albeit at a reasonable level,” he said. “We are not as mean as misers and are not unreasonable.”

Another representative of the Labour Advisory Board at the talks, Jimmy Kwok Chun-wah, said he welcomed the lower cap but wanted more evidence from the government to prove the figure would benefit employers.

“We do not have any figures to prove why HK$200,000 is appropriate,” he said.

Labour representatives have said recently that any reduction in the cap would hurt workers.

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Official figures show that last year only 7.3 per cent of affected employees received long-service or severance payments of HK$200,000 or above.

To help ease the financial burden on employers, Leung’s government in June pledged to subsidise them to the tune of HK$7.9 billion over 10 years. But the offer satisfied neither side and the government that took over on July 1 said it would draw up a revised version by the end of the year.

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

The labour minister’s office declined to comment on the meeting on Monday, but Law wrote on his weekly blog that the government should take the role of arbitrator when handling controversial labour issues, such as scrapping the offset scheme.

Society should also consider what price it was willing to pay to protect workers’ rights, he said.

“Like introducing the minimum wage, it is not only about the relationship between employers and employees. It inevitably brings about extra costs to society, which they have to bear,” Law said.

Irons Sze Wing-wai, honorary president of the Chinese Manufacturers’ Association and an employer representative on the board, said recently he supported a HK$70,000 cap.

Employee representative Bill Tang Ka-piu said he was not surprised by Sze’s suggestion. “Like the minimum wage, they will ask for a very low [figure].”

He cautioned the government to “make the best deal for society, not just employers”.