Long way to go yet as workers finally claim victory in MPF battle
- After a decade-long struggle, the mechanism that allows bosses to dip into staff pension funds to cover those leaving is to be phased out
At long last, the crusade to abolish a much-criticised arrangement that allows Hong Kong bosses to claw back their contributions to workers’ pension funds to cover severance and long-service payments has triumphed. The bill to phase out the so-called offsetting mechanism under the Mandatory Provident Fund (MPF) was passed on Thursday, ending a decade-long struggle amid economic uncertainties fuelled by the Covid-19 pandemic. As the labour chief rightly said, this is a historic moment. But the journey does not stop here. Officials must ensure a smooth transition and continue to strengthen retirement protection and labour benefits.
The long-overdue approval came after a relatively short, but heated, debate in the legislature. It is a hard-earned achievement after years of bitter tussles among officials, businesses and unionists straddling two administrations with no fewer than three different proposals tabled. Recently, there were even calls to suspend legislative scrutiny pending a fresh look by the new government.
Despite the legislature now being dominated by government allies, 17 lawmakers with business ties still abstained or voted against the bill. The long and painful process speaks volumes for the difficulties in enhancing labour protection in the city. Meanwhile, more than HK$56.7 billion (US$7.22 billion) in pension funds has been offset over the past 20 years.
The changes will not take effect until 2025, with the government offering HK$33.2 billion in subsidies over 25 years to help employers cover the payment. If a worker’s employment commences before the transition and they are laid off afterwards, their boss can still dip into pension funds for the severance payment. The government subsidies and the long time frame to phase out the old mechanism are not ideal. But it is a compromise in light of the long-standing divide between the labour and business sectors.
Why the Hong Kong government is due to scrap the MPF offsetting mechanism
There is still much work ahead. The authorities must closely supervise the transition, especially when it involves the use of tens of billions of taxpayers’ money. More legislative steps will be taken to implement the logistics of the new arrangement, and the responsibility rests with the new administration and those to come.
Unlike previously when the incoming chief executive was usually committed to a wide range of concrete initiatives in return for votes from different sectors in the Election Committee, there is seemingly less pressure on John Lee Ka-chiu to do so. So far, he has only pledged to review the government’s outsourcing practices, improve workers’ wages and strengthen occupational safety, but stopped short of promising specifics. A lot more can and needs to be done. This includes further improving labour benefits, enhancing work-life balance and strengthening the retirement protection system.
