Blame Hong Kong’s selfish employers for the deadlock on MPF offsetting mechanism

Albert Cheng says workers deserve a fairer deal, and employers who have benefited from the arrangement over the past 18 years should not stand in the way of the government doing the right thing now

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The Hong Kong Business Community Joint Conference, an alliance representing 114 business chambers, rejected the government proposal to stop employers dipping into pension funds to pay for severance and long-service payments. Instead, business owners want officials to offer more subsidies indefinitely. Photo: Dickson Lee

Published: 2:58pm, 17 May 2018Updated: 7:39pm, 17 May 2018

After years of debate on how to stop employers dipping into employees’ nest egg in the government-mandated provident fund, Hong Kong is no closer to a consensus. For this we can blame Hong Kong’s greedy capitalists, who have strongly opposed the abolition of the so-called offsetting mechanism in the Mandatory Provident Fund, and are pressuring the government to withdraw its proposal.

It is well known that Hong Kong does not have a comprehensive retirement protection scheme. Labour rights have been deteriorating since 1997, when Hong Kong scrapped plans to introduce a collective bargaining law. With our ageing population, a retirement protection scheme should be formulated as soon as possible.

What the Hong Kong government’s MPF offsetting plan is really about

The MPF scheme was launched in 2000. Over the years, however, the low rate of return on investment and unreasonably high administrative fees have been criticised for undermining employee interests. Among the fund’s many faults, the offsetting mechanism is particularly unfair.

Back in the day when the government was lobbying the business sector to support the MPF’s introduction, it struck a deal with business owners allowing them to use the accrued benefits derived from employee contributions to offset severance and long-service payments. A staggering HK$31.8 billion of contributions have been offset since the start of the MPF scheme.

The Society for Community Organisation calls on the government to scrap the MPF offsetting mechanism and introduce a universal pension fund, at a rally outside government offices in Tamar in February. Photo: Nora Tam

Former chief executive Leung Chun-ying did not act on this unfair system until he was about to leave office. That was when he proposed to abolish the offsetting mechanism. The work now falls to his successor, Carrie Lam Cheng Yuet-ngor.

The government has proposed changes that are considered relatively mild. Under this plan, the government will remove the offsetting mechanism, thus requiring employers to stump up the severance and long-service payments by other means, while committing HK$17.2 billion to help ease the burden on small businesses for 12 years.

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