SEVERANCE TO ESCAPE MPF GRAB

Top News | Staff reporter 10 Dec 2015

Bosses are in line to be limited on how they can use their mandatory provident fund contributions to cut back on payoffs to employees.

At present, employers can take the accrued benefits from their contributions into employees' MPF schemes to offset severance or long-service payments.

Labor unions have demanded the scrapping of the system, saying it is unfair for workers who had counted on payments at times of unemployment or retirement only to see amounts reduced.

But the business sector has resisted such an idea, saying that when the MPF was introduced in 1995 the offsetting mechanism was in it as one of the conditions that employers went along with the scheme.

Cancelling the mechanism would make employers "pay double," it's claimed.

With government officials trying to find middle ground between bosses and workers on the issue, the suggestion now being pushed is that employers will be able to apply the offsetting mechanism to severance payments but not for long service, according to Sing Tao Daily.

Chief Executive Leung Chun-ying is expected to include the topic in his next policy address in January, though it is unclear when changes could kick in.

Legislator Wong Kwok-kin of the Federation of Trade Unions said he's open to further discussions but worries that employers will seek to dodge any new rule by playing with the definitions of severance and long-service payments.

Laid-off employees are eligible for severance payments if they have worked for not less than two years. And workers who have worked for five years or more and are dismissed not by reason of redundancy or they resign due to old age or ill health are entitled to long- service payments.

So if an employer could tinker with reasons for dismissing someone an employee could be a loser, Wong said.

But it was too soon to talk about whether unions will accept reduced opportunities for offsetting as there is no word from officials yet on what could be offered.

Stanley Lau Chin-ho, chairman of the Labour Advisory Board, said he welcomed more discussions, and not least about matters such as a company needing to fire dozens or hundreds of employees yet not being able to afford a deal without the offsetting mechanism.

Former Mandatory Provident Fund Schemes Authority chairwoman Anna Wu Hung-yuk, who ended her term in March with a parting shot at the offsetting mechanism, said some employees found that 95 percent of MPF money contributed by employers was taken away from severance or long-service payments that they had counted on.

Leung pledged in his election manifesto in 2012 that he would adopt measures to "progressively reduce" the use of the offsetting mechanism.

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