Govt Hopes To Scrap MPF Offsetting By 2022

Government sources said on Thursday that the administration now hopes the Executive Council will approve a plan to scrap the controversial MPF offsetting mechanism by the end of this year.

If that happens, officials want firms to be stopped from using their workers' MPF money to fund long-service and severance payments by 2022.

The sources said at least HK$17.2 billion will be set aside to help businesses make such payments for a 12-year period from when the offsetting mechanism is abolished.

The current formula for calculating the payments would be retained: two-thirds of the worker's last monthly salary multiplied by his or her years of service. The payment cap would also remain the same at HK$390,000.

Employers would have to inject the equivalent of one percent of each employee's pay into a "designated savings account" until the pot reaches 15 percent of the worker's annual salary. This money is to be used to help make the severance and long-service payments.

For the first three years, the government would shoulder 50 percent of the payment costs. But the amount of the subsidy would be reduced by 5 percentage points each year from the fourth year onwards, until it grinds to a halt completely in the 13th year.

Additional money would be given to employers if their savings for the worker and the subsidy don't make up the full payment cost between them.

Sources said the government will continue to consult employer and workers' representatives over the next few months. But the administration is against the idea of prolonging the subsidy period, as some business leaders have demanded, because of the huge costs involved.