Plan boosts MPF offset coffers of employersTop News | Jane Cheung 11 Oct 2018
Only some companies will be subsidized by the government for 25 years in its latest proposal to abolish the Mandatory Provident Fund offsetting mechanism.
Others will be subsidized for only 12 years, said Carrie Lam, who spelled out the revised plan in greater detail.
After the changes, employers will no longer be allowed to use their contributions to the MPF to offset severance or long-service payments to workers. Instead, a subsidy will be distributed under a two-tier mechanism.
But only the second tier, targeting companies in need, will be subsidized for 25 years.
Compared to a proposal in March, the latest plan boosts subsidies to employers from HK$17.2 billion to more than HK$29 billion.
Instead of aiming to pass the bill amendments before the Legco term ends in 2020 and scrap the offsetting mechanism in 2022, the latest proposal targets getting it through the legislative process during Lam's tenure, which ends in 2022, according to a government source.
"After the bill has been passed, we'll need two more years to draft more details and let everyone get familiar with the cancellation of the mechanism. So we target to introduce the change by 2024," she said.
After cancellation of the mechanism, an employer will be required to set up a savings account and pay the equivalent of 1 percent of an employee's wage to cover future severance and long-service payments.
The employer will have to contribute to the account until the accumulated sum reaches 15 percent of the total staff salary.
In the first three years after the change, the government will subsidize all companies with 50 percent of severance and long-service payments and then gradually decrease them, starting from the fourth year.
After 12 years, it will only provide second-tier support for employers whose savings accounts are not sufficient to cover the payments.
Between the 13th and 15th years after the cancellation, the government will subsidize 30 percent of the employers' insufficient balance and the percentage would gradually decrease.
Both employer and employee representatives from the Labour Advisory Board welcomed the move.
Employer representative Jimmy Kwok Chun-wah said the new proposal shows the government is determined to address the concerns of smaller firms.
"The second-tier subsidy is extended to a 25-year period, which is a long-term commitment to the business sector," he said.
Labor representative Bill Tang Ka-piu said the government is generous and "there is no reason for the business sector to reject the proposal."