Hong Kong Pensions Update: Removal Of MPF Offsetting Arrangements On The Way – Employee Benefits & Compensation – Hong Kong

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The lengthy-awaited modifications, which is able to abolish the present MPF
offsetting preparations towards severance or lengthy service fee,
have been revealed, launched and handed as one of many first
payments for the 2022 legislative session. This article provides an
overview of the modifications and transitional preparations.

Abolishing the offsetting association

Currently, employers are permitted to offset severance funds
or lengthy service funds (SP/LSP) towards their
contributions below the Mandatory Provident Fund system (the
MPF) or different occupational retirement schemes.
This implies that staff could not obtain substantial compensation
following redundancy or for lengthy service.

After years of session, in February 2022 the Government
revealed the Employment and Retirement Schemes Legislation
(Offsetting Arrangement) (Amendment) Bill 2022
Bill), which has been handed by the Legislative Council on 9 June
2022. The Bill seeks to abolish the association that permits
employers to offset SP/LSP towards the employer’s obligatory MPF
contributions. Employers will nonetheless be capable to offset SP/LSP
towards employer’s voluntary MPF contributions and

These amendments will take impact from a date to be set from
round 2025 onwards (the Effective Date) as

  • SP/LSP accrued earlier than the Effective Date shouldn’t be affected by the
    amendments, i.e. SP/LSP funds might be offset towards the entire
    employer’s MPF contributions and gratuities. The SP/LSP
    calculation can be based mostly on the worker’s month-to-month wages
    instantly previous the Effective Date; and

  • SP/LSP accrued after the Effective Date can solely be offset
    towards the employer’s voluntary MPF contributions and
    gratuities. The SP/LSP calculation can be based mostly on the
    worker’s month-to-month wages instantly previous the date of
    termination of employment.

The preparations below the Bill may even apply to different
occupational retirement schemes.

Other amendments launched by the Bill

Other notable proposed amendments embrace:

  • amending the Inland Revenue Ordinance to clarify
    that SP/LSP won’t be topic to salaries tax; and

  • amending the Employment Ordinance to require that
    employers maintain data of wages and employment for the 12 months
    previous the Effective Date, or, if the worker has been employed
    for lower than 12 months previous the Effective Date, for the entire
    employment interval.

Designated Savings Accounts scheme and a 25-12 months subsidy

In reference to the Bill, the Hong Kong Government additionally
intends to:

  • allow employers to arrange a Designated Saving Account
    (DSA) to avoid wasting up for potential future SP/LSP
    liabilities. Employers can be required to contribute 1% of their
    worker’s month-to-month earnings (topic to a cap) to the DSA;

  • implement a two-tier subsidy scheme to share the employers’
    SP/LSP bills, specifically to alleviate the monetary burden on
    micro, small and medium-sized enterprises (MSMEs),
    for 25 years after the Effective Date.

The Government indicated that the Effective Date will comply with the
full implementation of the eMPF Platform, which is being developed
by the Mandatory Provident Fund Schemes Authority.

The amendments below the Bill will influence the employers’
float and SP/LSP liabilities. Employers might want to keep on high of
the modifications and put in place measures compliant with the

The content material of this text is meant to supply a common
information to the subject material. Specialist recommendation must be sought
about your particular circumstances.

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