How does MPF offset severance pay? Only the employer’s contributions can be used

Under the Employment Ordinance, employees with at least 2 or 5 years of continuous service who are dismissed in certain circumstances receive severance pay or long service payment respectively. Under the law as it then stood, employers could draw on the employer-contribution portion of the employee’s MPF accrued benefits to offset these payments — but never the employee’s own contributions.

How does the offsetting mechanism work?

The employer must first pay the severance or long service payment in full, and only then apply to the trustee for reimbursement. If the employer-contribution benefits fall short, the employer must top up the difference; any surplus stays in the employee’s MPF account.

A worked example?

Say the employer owes $50,000 in severance pay but the employer-contribution benefits total only $40,000 — the employer pays the extra $10,000. If the benefits total $60,000, the remaining $10,000 stays in the employee’s account. Only employer money is ever touched; employee contributions are ring-fenced.

What if the employer won’t pay?

If the employer fails to pay in full under the Ordinance, the employee may apply in writing to the trustee — with supporting documents — for release of the relevant employer-contribution amount. In other words, employees have a direct route to the trustee.

For MPF benefit rules, visit the MPF education hub; to compare trustee schemes, see MPF fund comparison.