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Tuesday, April 18, 2017, 23:43

Employers, employees remain at odds on MPF offsets

By Willa Wu

HONG KONG - The city’s employers and workers continued to differ significantly over abolishing the current Mandatory Provident Fund offset mechanism on Tuesday – the last day of the three-month public consultation on the government’s proposal.

While the labor sector hoped workers could retain their money, the business sector still opposed plans to remove the arrangement and sought alternatives to solve the problem.

The government hoped to present a final plan to the public before ending its term on June 30.

The labor representatives said they are in favor of the government’s decision to abolish the offset mechanism but held that the extra conditions in that proposal should be modified to better guard employees’ interests.

The three conditions are that the abolition will have no retroactive effect, the amount of severance payments or long-service payments would be reduced from two-thirds of an employee’s monthly pay to half, and the government would also invest HK$6 billion to share part of the expenditure on severance or long-service payments.

The outgoing Chief Executive Leung Chun-ying announced in his last Policy Address in January that the government would progressively abolish the offsetting of severance or long-service payments with MPF contributions, with those additional conditions.

Lawmaker Bill Tang Ka-piu from the Hong Kong Federation of Trade Unions said his fellow workers would not accept the scaling down of severance or long-service payments. He noted that the formula should remain unchanged.

The workers’ representative suggested a government fund pool that helped employers relieve financial burdens in paying compensation. According to Tang, the plan requires the government to invest HK$20 billion while employers pay an additional monthly HK$200 to an employee’s account.

However, the business sector has expressed reservation on such a plan, fearing “possible abuse” of the pool after a meeting on Tuesday morning joined by members from the city’s five major commerce chambers.

Eddy Li Sau-hung, president of the Chinese Manufacturers’ Association of Hong Kong, added that setting up a pool may also introduce “unnecessary administrative fees”.

Meanwhile, the business sector still opposes the basic idea of abolishing the mechanism. But Li agreed that employers should do more to guard employees’ retirement protection.

Therefore, the business sector suggested that, on condition of not abolishing the current mechanism, employers will be able to raise their MPF contribution from the current 5 percent to 6 percent while the government shoulders a further 1 percent of MPF contributions.

In this way, Li said, the employers would pay an extra of HK$5 billion annually, enough to cover the HK$3 billion offset under the current scheme.

The MPF serves as the pension fund for Hong Kong residents. Currently, employers and employees are required to each contribute a sum equal to 5 percent of the employee’s wages to MPFs run by banks, insurers or fund houses, with a maximum monthly contribution of HK$1,500.

According to the law, laid-off employees are entitled to long-service or severance payments. But the current mechanism allows employers to use their MPF contributions to offset this amount.

The mechanism has long been controversial but the discussions between the labor and business sectors remain in deadlock.

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