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| From May 1, the MPF can no longer be used for long-service and severance payments |
Hong Kong’s Secretary for Labour and Welfare Chris Sun has dismissed concerns that preventing employers from using the mandatory provident fund or MPF to make severance and long service payments to employers could lead to massive layoffs.
Speaking on radio on May Day, when the offsetting
mechanism for the MPF was officially canceled, Sun said he did not believe
bosses would fire workers just to save money.
He also said it was not likely that long-service
staff would be replaced with new hires on low salaries because of the tight
labor market.
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| PINDUTIN PARA SA DETALYE |
“If an
experienced employee is already familiar with the business and contributes
effectively, does replacing them truly save costs?” Sun said when questioned.
He also warned that hiring new staff could be costly
as they would have to be trained.
Besides, he said existing workers’ length of service could still be offset, but not for the new hires.
“Therefore, by doing so, it does no good to the employers.”
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| Basahin ang detalye! |
Under the MPF system which was implemented in 2000, both employers and employees are required to make mandatory contributions equal to 5% of the employee's relevant income, subject to minimum and maximum income levels. These contributions are deposited into the employee's MPF account to help build retirement savings.
When an employee resigns or is made redundant, the employer could use the MPF to pay for severance and long service to the worker.
But that offsetting mechanism was removed under a government bill filed in 2022, and took effect this Thursday, May 1.
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| Secretary Sun says employers are not likely to hire new, less-paid workers because of the offsetting cancellation (RTHK photo) |
Writing on the issue separately on his Facebook
page, Chief Executive John Lee said doing away with the offsetting mechanism
will benefit more than three million workers in Hong Kong.
He added the government will also come up with a
subsidy scheme to help ease the burden on employers who will have to shoulder
extra costs due to the policy change.
This subsidy scheme worth over $33 billion, will be
spread over 25 years. Sun said the
amount can be increased should it become necessary.
