Mandatory Provident Fund (MPF)

Can plan to scrap MPF offset mechanism move by Lunar New Year? Unlikely, Hong Kong’s business sector says

Long-awaited proposal, introduced in the last administration, still requires more data and consideration of economic impacts

PUBLISHED : Tuesday, 19 December, 2017, 6:39pm
UPDATED : Tuesday, 19 December, 2017, 10:59pm

Hong Kong’s business sector on Monday expressed scepticism over a Lunar New Year time frame being observed for progress on a long-awaited government proposal to stop employers from dipping into workers’ pension funds for severance and long-service payments.

Jimmy Kwok Chun-wah, chairman of the Federation of Hong Kong Industries, poured cold water on the government’s plan to move on scrapping the much-criticised Mandatory Provident Fund (MPF) offsetting mechanism by February next year.

Chief Secretary Matthew Cheung Kin-chung earlier said the government expected to achieve progress on the plan. Last year, HK$3.85 billion was offset by employers – up a staggering 70 per cent from HK$2.27 billion in 2012.

‘Scrap MPF offset mechanism now or expect no change in Hong Kong status quo’

“We are still working hard on it. When we get hold of enough relevant data we’ll contact the labour and business sectors for discussion ... I believe that there must be some kind of progress around the Lunar New Year,” Cheung said.

He stressed that the government had to take into account the impact on small and medium-sized enterprises and how the move would affect the city’s business environment.

Cheung said one way was to set out a savings scheme to assist small businesses to cope with additional expenditure.

He also pledged that the government subsidy for employers to tide over a 10-year period once the plan was in place must be more than HK$7.9 billion as proposed by former chief executive Leung Chun-ying.

However, Kwok said that with the Lunar New Year just round the corner, he did not think a consensus could be reached.

“Personally I am not optimistic as so far we haven’t been informed of any inclinations from the government. For us to seriously consider the proposal, we need ample supporting data to help us make an assessment, which certainly takes time,” he said.

Personally I am not optimistic as so far we haven’t been informed of any inclinations from the government
Jimmy Kwok, Federation of Hong Kong Industries chairman

He said he hoped the government would adopt the business sector’s proposal of setting up a savings mechanism with 1 per cent of employees’ wages contributed to this account to handle the financial burden on employers.

Kwok also welcomed Cheung’s pledge of more than HK$7.9 billion for the government subsidy, saying that as long as affordability for the business sector and the economic impact were factored in, employers would seriously consider the plan.

Chau Siu-chung, a representative of the Labour Advisory Board, also said that as long as the government proposal did not affect employees’ welfare, there was room for negotiation.

“Our bottom line is that the calculation method cannot be changed but we are willing to consider a ceiling of severance and long-service payments lower than the current HK$390,000.

“The government once said that over 90 per cent of affected employees made claims lower than HK$200,000. But our negotiation with officials hinges on available data and the details of the proposal,” he said.