Monday, November 30, 2015
Many employers will have to outsource and labor costs will soar if the Mandatory Provident Fund offsetting mechanism is canceled, a leading light in the Hong Kong General Chamber of Small and Medium Business claims.
Eric Ng Ka-wing, a consultant and a honorary lifetime president for the chamber, said people who run services such as cleaning, security and elderly care, which depend on basic manpower, will turn to outsourcing and self-employed people to replace regular personnel to lower labor costs.
Worker pay, he went on, accounts for 80 percent of operating costs in those sectors.
“If the offsetting mechanism is canceled, labor costs will increase by 5 to 7 percent,” he said. That will mean “employers will have no choice but to fire senior staff first.”At present, employers can take the accrued benefits from their contributions into employees’ MPF schemes to offset severance or long- service payments.
Stephen Chow Chun- keung, chief executive accountant with Kinson CPA, said government officials ignored the fact that small and medium-sized firms “always have an insufficient cash flow.”
Stephen Kwok Chun- pong of the Hong Kong Small and Medium Enterprises Association said the government will break a promise if offsetting is scrapped.
“When the government was formulating the MPF scheme,” he said, officials had “approved the offsetting mechanism in exchange for the business sector’s support.
“They will break their promise if the mechanism is canceled, hurting our long- term and well-established relations.”
What should happen instead, Kwok said, is that the government reduces the levels of MPF management fees charged so employees get better retirement benefits.