“The abolition of the offsetting arrangement would not only violate the original intention of introducing MPF, but calls into question the spirit of cooperation, as well as the government’s commitment to the business sector,” the statement read. “It will also impose heavy financial burden on businesses, especially SMEs, undermine international confidence, and cripple entrepreneurism. As such, the proposed arrangement is at odds with Hong Kong’s economic prosperity and stability.”

The statement was issued by the Federation of Hong Kong Industries, the Chinese Manufacturers’ Association of Hong Kong, the Hong Kong General Chamber of Commerce, the Hong Kong Chinese General Chamber of Commerce and the Hong Kong Employers Federation.

Sources have said the government is considering setting a cut-off date, after which offsetting will no longer be allowed.

The move has popular public support, but to pacify an angry business sector, the government is planning to subsidise employers for 10 years with taxpayers’ money. In the first year, the subsidy will be less than half the amount used for the offsetting. The rate will be progressively reduced over a decade.

“Based on the existing offsetting arrangement, most companies have not made any corresponding financial provision for the additional outlay ... The profit margin for SMEs in Hong Kong is very modest, generally only around 2 to 3 per cent, and many of them are barely profitable,” the statement said.

The groups warned that companies might be “forced to dismiss long-serving employees” prior to the cut-off date to pre-empt future long-service payments.

Federation of Trade Unions lawmaker Kwok Wai-keung said the best proposal would be not to subsidise employers at all.

“For so long, the business sector has been opposing any proposals that would improve the lives of the workers,” he said.

In 2015, the total amount of employers’ contributions used to offset employees’ long-service and severance payments was HK$3.35 billion, up 11.5 per cent from 2014.