Move on now MPF offset scrapped

The abolition of a decades-old statutory provision for employers to pay redundancy or long-service payments with their mandatory provident fund contributions is long overdue.

The provision - commonly known as the offsetting mechanism - has been controversial since the MPF legislation was passed in 2000 to require employers and employees to contribute a designated percentage of workers' wages to their selected MPF providers.

Passage of a government amendment to abolish the offsetting provision by an overwhelming majority at yesterday's Legislative Council meeting should end a controversy that has poisoned labor relations for so many years.

There has never an absolute answer as to whether redundancy or long-service payments should be viewed as part of a worker's retirement protection or merely a payment meant to protect laid-off employees for the transition before they land a new job.

The question could only be answered through compromise facilitated by political decision, without which the debate could have lasted forever.

Lawmakers voted almost unanimously in support of a government bill to remove the offsetting mechanism, even though it has been the employers' view that they would not have voted for the MPF legislation 22 years ago without the offsetting arrangement.

Hong Kong has moved from one stage to another politically, as marked by the nearly unanimous vote.

Now that a vote has been taken, it's also time for all - including employers - to focus on matters that are more important.

How to limit operating costs in order to remain competitive? Obviously, all employers will have to look at ways in light of the characteristics of their respective industries.

Some may assert that employers may readily dismiss long-serving workers before the amended law takes effect in 2025 with a view to making use of the offsetting mechanism while they still can.

I could not disagree more.

Although nobody can rule out that some employers may try to outwit the law, I doubt this will be widespread enough to become a genuine concern.

Their reaction will have more to do with how the labor market fares.

In a robust economy, companies would come under pressure to expand to cope with increased demand.

Conversely, during challenging times they would have no alternative but to cut staff in order to survive - even if the legislature had not voted to delete the offsetting provision.

As long as the incoming administration is able to create a robust environment for the economy, I cannot imagine why employers would get rid of those who have the experience and knowledge to help them get the most out of an economic boom.

The key is to enlarge the size of the cake so that everyone - employers, employees and even the public sector - can share a bigger slice of it.

The debate over the MPF offsetting controversy should now fizzle out - it is time to focus on expanding the cake.

Meanwhile, thoughts should be given to lowering MPF management fees and enhancing returns in light of recent losses.

Should fees be tied to fund performance?