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Alex Lo
SCMP Columnist
My Take
by Alex Lo
My Take
by Alex Lo

Chief executive has failed us on his promise to end the great pensions rip off

Leung Chun-ying said four years ago he would end the MPF mechanism that allows employers to use their contributions to offset severance payments, to the detriment of employees

Why make promises you can’t keep?

Chief Executive Leung Chun-ying has vowed to address the so-called “offsetting mechanism” in the Mandatory Provident Fund before his term ends next year. There is virtually no hope that the contentious issue can be resolved anytime soon. In this, he has no one to blame but himself. He promised to address it as part of his election platform in 2012. Labour groups have been, justifiably, holding him to the fire for failing to do so in the past four years. Of course, when he made the election promise, he wasn’t expecting to win the chief executive race.

The offset is the mechanism by which bosses can use their contributions to an employee’s MPF account to pay for his or her long service and severance. In most advanced economies, it’s called raiding your workers’ pension funds, an illegal act.

But hey, this is Hong Kong. According to official figures, HK$442 million in severance payments and HK$419 million in long-service payments were offset in the first quarter of this year alone. From the start of the MPF in 2000 to 2013, more than HK$21 billion was withdrawn by employers under the mechanism. A former colleague was over the moon when he was let go, boasting he had enough from his severance payment to buy the latest Porsche model. He was quite ignorant of local labour laws, and we didn’t want to burst his bubble.

If some recent reports are correct, the Leung administration is considering scrapping long-service payments and replacing severance payments with an unemployment insurance fund.

Now this would be a radical overhaul of labour laws that date back to the 1970s and 1980s. And it would not please employers or union leaders. Who would pay for such an insurance fund – taxpayers, bosses or both? This question alone would be highly contentious.

It would be no less controversial than scrapping the offsetting mechanism and making bosses pay for long service and severance out of their own pockets. The labour and welfare bureau would neither confirm nor deny the reports. But it sounds like something this government would consider.

Chief Secretary Carrie Lam Cheng Yuet-ngor previously admitted the offsetting issue was unlikely to be resolved during the term of this government. This was despite its being accorded priority.

In this, she has been more honest than her boss.

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