BPA Strongly Opposes Abolition of MPF Offset Mechanism

According to certain sources quoted in the media, Chief Executive Leung Chun-ying plans to include in his next policy address the recommendation to scrap the offset mechanism under the Mandatory Provident Fund (MPF). Although such reports have not been verified by government, the Business and Professionals Alliance for Hong Kong (BPA) is nevertheless very concerned about the impact this would have on the business and professional sectors, which it represents. The BPA is strongly and unequivocally against the abolition of the offsetting mechanism as this will surely add to the financial burden of small and medium enterprises (SMEs) and increase operational costs.

The BPA points out that the offset mechanism was a key condition for business sector’s support to MPF when this was initially put forward by government. The abolition of the offset mechanism would result in the incurrence of massive financial liabilities by SMEs in such situations as the termination of an ongoing concern, which could give rise to millions of dollars in severance payment obligations.

Scrapping the offset mechanism may not trigger a tidal wave of layoffs but some employers may decide to trim their workforce of senior employees while they are able to use their portion of contributions to MPF to offset severance and long-service payments before any changes to legislation take place. These employees would then be rehired but on new and less favourable contractual terms or replaced by new staff. This would inevitably give rise to a sense of low job security.

The BPA believes that SMEs are the pillars of Hong Kong’s economy as they account for the vast majority of local enterprises and employs over a million workers or half of the total workforce employed in the private sector. The Government should support SMEs by creating a better business environment instead of putting up new barriers to the disadvantage of this important segment of the business population.


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