{"id":4697,"date":"2017-08-15T14:17:45","date_gmt":"2017-08-15T06:17:45","guid":{"rendered":"https:\/\/www.tannerdewitt.com\/legal-update-mpf-offset-mechanism\/"},"modified":"2018-11-29T15:08:37","modified_gmt":"2018-11-29T07:08:37","slug":"legal-update-mpf-offset-mechanism","status":"publish","type":"post","link":"https:\/\/www.tannerdewitt.com\/zh-hans\/legal-update-mpf-offset-mechanism\/","title":{"rendered":"Legal update: MPF Offset Mechanism"},"content":{"rendered":"

Under the current offset mechanism, an employer who is liable to pay an employee statutory severance pay (\u201cSP<\/strong>\u201d) or long service pay (\u201cLSP<\/strong>\u201d) is allowed to offset against the SP or LSP due to an employee,\u00a0 the accrued value of benefits derived from:<\/p>\n

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  1. the employer\u2019s contributions to an MPF scheme, or ORSO scheme and\/or<\/li>\n
  2. Contractual end of contract gratuities and benefits<\/li>\n<\/ol>\n

    In particular the employer\u2019s right to offset the value of the employer\u2019s MPF contributions has been the subject of much debate in recent years.<\/p>\n

    In the case of a monthly rated employee, the calculation of both SP and LSP is two-thirds of the employee\u2019s last full month\u2019s wages or two-thirds of HK$22,500 whichever is higher, multiplied by his reckonable years of service.\u00a0 The maximum amount of SP or LSP is currently HK$390,000. The employer has a choice to do either of the following:<\/p>\n

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    1. After actually paying to an employee SP or LSP in accordance with the Employment Ordinance, an employer can apply to the MPF trustee with supporting evidence for re-payment of the relevant amount from the employee\u2019s accrued benefits derived from the employer\u2019s contributions, or<\/li>\n
    2. The employer can set off the accrued value of benefits from the employer\u2019s contributions (as ascertained from the MPF trustee) against the calculation of SP and LSP and pay to the employee only the net balance of the SP or LSP (if any).<\/li>\n<\/ol>\n

      Proposal to Scrap the MPF Offsetting Mechanism<\/strong><\/p>\n

      Earlier this year, the Hong Kong government in its Policy Address proposed to progressively abolish the MPF offset mechanism.\u00a0 In other words, employers will need to bear the costs of paying eligible employees\u2019 SP or LSP and employees will be able to keep the employer\u2019s contribution to their MPF accounts in full.\u00a0 To ease the resistance from the business sector and to reduce the financial burden on employers after the offset mechanism is scrapped, the government proposed to:-<\/p>\n