Union Proposes HK$15 Billion Employer Subsidy to Speed Up Scrapping MPF Offsetting

With the 2018 Budget due in February, the Federation of Trade Unions met Financial Secretary Paul Chan on 13 December to submit its proposals, urging the government to earmark HK$15 billion to subsidise employers’ additional costs when the MPF offsetting arrangement is scrapped. A Federation lawmaker who chairs the manpower panel said the government will submit its offsetting-abolition proposal to the manpower panel in January 2018, and is expected to table a paper to the Labour Advisory Board before the end of this month for discussion at the panel next month. The HK$15 billion subsidy proposal puts a concrete fiscal figure on an issue debated for years.

Background: what offsetting is and why it should go

“Offsetting” allows employers to use their MPF contributions for an employee to offset severance payments or long-service payments owed. In other words, when an employee is dismissed or retires, the accrued benefits from employer contributions can be clawed back through offsetting, sharply reducing the retirement protection the employee actually keeps. The case for abolition: employer MPF contributions should genuinely belong to the employee’s retirement savings, not serve as the employer’s cash machine for statutory compensation.

The logic of HK$15 billion: who bears the cost of abolition

The biggest resistance to abolition has always been cost: employers would keep contributing to the MPF while losing the ability to offset severance or long-service payments against those contributions — a new long-term expense. The union’s HK$15 billion subsidy proposal asks public money to share that transition cost in exchange for business support for abolition. Whether the figure is enough, how long subsidies would last, and how to stop employers from pocketing subsidies then cutting staff were details still awaiting the government’s proposal at the time.

What it means for you

For employees, abolition means employer contributions genuinely stay in their MPF accounts, no longer eroded by severance arrangements. For employers, higher near-term costs are unavoidable; the question is whether the government’s subsidy package covers the transition. Offsetting has existed since the MPF began in 2000 — scrapping it would be one of the most significant structural changes in the system’s 17-year history.

Action list

• Employees: understand the accrued benefits from employer contributions in your account — once offsetting ends, that portion stays yours in full
• Employers: watch the proposal the government submits to the manpower panel in January 2018 and reassess staffing-cost models
• Everyone: watch whether the February 2018 Budget adopts the HK$15 billion subsidy proposal