Hong Kong business leaders wary of giving full backing to improved HK$29 billion MPF subsidy plan to stop bosses raiding workers’ pension funds

Hong Kong’s business leaders on Wednesday held back from endorsing the government’s revised subsidy package of HK$29 billion (US$3.7 billion) over 25 years to help them cope with changes to the Mandatory Provident Fund (MPF) scheme, saying they were still concerned about their financial outlay.

Jimmy Kwok Chun-wah, chairman of the Federation of Hong Kong Industries, which represents more than 2,000 companies, said smaller firms welcomed the increase but it was too early to say if they would now throw their full weight behind the government’s move to stop bosses from using their MPF contributions to staff pension funds to offset severance and long service awards due to them.

The subsidy was revised after disgruntled employers insisted the previous amount of HK$17.2 billion over 12 years was not enough.

Kwok said: “We can see that the government is committed, but we don’t know much about the second layer of protection for companies.”

He was referring to the government’s pledge to provide companies with extra help when it announced plans to scrap the MPF offsetting mechanism in March.

As part of the plan, bosses would need to set up savings accounts and contribute 1 per cent of employees’ wages which they could eventually use for long service or severance payments. The contribution amount would be capped at 15 per cent of a worker’s annual wage.

Why is the Hong Kong government’s MPF offsetting plan so controversial?

If the amount in savings accounts ended up being insufficient, there would be a second layer subsidy, it said.

A government source on Wednesday said this pledge remained, even with the revised subsidy amount.

Small and Medium Enterprises Association president Stephen Kwok Chun-pong said his sector still wanted more information to “fully respond” to the improved subsidy. Small firms that employed mostly contract workers remained worried about bearing the full cost of severance payments, he said.

The revised amount was revealed on Tuesday by a source, who said Hong Kong leader Carrie Lam Cheng Yuet-ngor’s cabinet had approved the generous increase.

Chinese University economist Terence Chong Tai-leung said the government could well afford to devote HK$29 billion to the cause, given its current strong fiscal reserves.

“The government can pay it off in one go,” Chong said.

But there might be a public backlash for using taxpayers’ money to help the business sector, he said.

“The government made the [offsetting] compromise in the first place, and now citizens have to foot the bill,” Chong said.

Half a million workers to pay more into MPF fund, under planned changes

Before the MPF scheme was introduced 18 years ago, the government said the offset mechanism existed so employers would not need to “pay twice” to help workers’ build up their nest eggs for retirement.

Hong Kong employers last year offset HK$4.2 billion from the MPF. The year before, it was HK$3.85 billion.

Labour unions have for years railed against how bosses have been able to deprive workers of long service or severance payments. The former applies to those under a continuous contract of five years or more, and the latter to those who have worked in the company for more than 24 months.

Veteran unionist Bill Tang Ka-piu said if business leaders still opposed the revised proposal, they would come across as “stalling or being too greedy”.

“What more do you want from the government?” Tang, of the Federation of Trade Unions, asked.

He said union leaders welcomed any solution to speed up doing away with the offsetting mechanism but they still wanted the government to provide more assistance to workers, especially those who would leave the workforce before the change to the scheme.

Labour minister Law Chi-kwong said in July the process of scrapping the offset mechanism could take four years, providing the business and labour sectors accepted the government’s proposal within this year.