The government is considering ending the system that allows employers to offset employees’ severance payments or long-service payments with Mandatory Provident Fund (MPF) contributions after members of the Labour Advisory Board expressed no objection to the idea in June.
Sources said the Executive Council endorsed a proposal on Tuesday to use public money to subsidize employers as a way to replace the so-called MPF offsetting mechanism, the Hong Kong Economic Journal reports.
Chief Executive Carrie Lam Cheng Yuet-ngor is expected to announce the new measure when she delivers her annual policy address on Oct. 10 before sending it to the advisory board for further discussions, according to the sources.
Employees have long argued that the offsetting mechanism undermines their interests by depriving them of retirement protection.
Some employer groups, however, have opposed the abolition of the offsetting mechanism.
The administration led by former chief executive Leung Chun-ying had proposed to progressively scrap the practice by sharing part of the employers’ expenses for severance and long-service payments for 10 years from the abolition of the offsetting mechanism.
The current administration considered extending the period to 12 years at the beginning of this year, but it now aims for 25 years.
If the new proposal is implemented, the government subsidy for employers would jump to as much as HK$29 billion, or nearly 70 percent more than the originally planned HK$17.2 billion and more than triple the HK$7.9 billion planned by the Leung administration.
Irons Sze Wing-wai, who represents the Chinese Manufacturers’ Association of Hong Kong at the Labour Advisory Board, said the new proposal to significantly extend the subsidy period is consistent with the board’s view, adding that what is most important is that implementation of the measure must really help micro businesses as well as small and medium-scale enterprises (SMEs).
Welcoming the extension, Jimmy Kwok Chun-wah, another board member representing the Federation of Hong Kong Industries, said the industrial and commercial sectors generally approve of the measure, but discussions are still needed after the government unveils the details of the plan.
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