Hong Kong sets May 1, 2025 as the day MPF offsetting dies: HK$33 billion buys a 25-year transition

On April 29, 2023, Chief Executive John Lee Ka-chiu used the Labour Day reception to put a date on the end of one of Hong Kong’s most resented labour arrangements: the MPF offsetting mechanism will be abolished on May 1, 2025. From that day, employers can no longer use their MPF contributions to offset severance and long-service payments.

What offsetting is, and why it had to go

Under the offsetting arrangement, an employer could dip into the MPF contributions it had made for an employee to cover statutory severance or long-service payments on termination. In practice, part of a worker’s retirement savings was never truly theirs — it could be clawed back to settle the employer’s redundancy bill.

Labour groups had attacked the mechanism for years as eating into retirement protection. Legislation to scrap it passed in 2022, but no commencement date was set — until Lee’s announcement.

HK$33 billion over 25 years: the transition deal

The abolition is not a clean cut. The government designed a 25-year subsidy scheme, funded by taxpayers, to ease employers through the change:

Secretary for Labour and Welfare Chris Sun Yuk-han said the two-year lead time was needed for preparatory work, including building an information portal and processing the funding application. He expressed confidence the funding would pass, describing the HK$33 billion as a cushion for business — especially small and medium enterprises.

Three things employees should know

1. May 1, 2025 is the dividing line. Severance and long-service payments for employment periods before that date can still be offset; afterwards, MPF contributions and termination payments are fully separated.
2. Your MPF is no longer the employer’s cash machine. After commencement, the accrued benefits from employer contributions belong entirely to the employee and cannot be offset on departure.
3. SMEs get 25 years to adjust. Taxpayer money shares employers’ severance costs, with subsidies concentrated in the first nine years — the compromise that made the deal possible.

Looking back: on May 1, 2025, the abolition took effect as scheduled, opening a new chapter for Hong Kong’s MPF system. The announcement at that 2023 reception was where it started.