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The government launched a 25-year subsidy scheme to help employers adapt to the abolition of MPF "offsetting"

2022-12-08T22:10:04.811Z

The abolition of the Mandatory Provident Fund (MPF) “offsetting” arrangement will be implemented no later than 2025 when the Mandatory Provident Fund Schemes Authority’s “eMPF” platform is fully operational. Effective when the MPF "offset" is canceled



The abolition of the Mandatory Provident Fund (MPF) “offset” arrangement will be implemented no later than 2025 when the Mandatory Provident Fund Schemes Authority’s “eMPF” platform is fully operational.

After the cancellation of MPF "offset" becomes effective (i.e. the conversion date), employers cannot use their accrued benefits of MPF mandatory contributions to "offset" their employees' severance payment or long service payment (long service payment).

Employers may pay special attention to two arrangements.


The first is that the amount of the "pre-conversion part" of severance pay or long-term service payment has been "locked" on the conversion date.

Since the cancellation of the MPF "offset" arrangement is not retroactive, employers can continue to use their accrued benefits of mandatory contributions (whether made before or after the conversion date) to "offset" the employee's severance payment or long-term service payment "before conversion" part".

Moreover, the "pre-conversion part" of severance pay or long-term service payment is calculated based on the monthly salary of the last month before the conversion date, regardless of whether the employee's salary has increased or the length of seniority after the conversion date, the amount of the "before conversion part" of severance payment or long-term service payment Neither will increase.

These two arrangements allow employers to clearly determine the amount of the "pre-conversion part" of severance pay or long-term service payment.

As for the severance payment or the "post-transformation part" of the long-term service payment, the government will launch a 25-year subsidy plan with a total amount of 33.2 billion yuan (calculated at 2021 prices).

In order to assist small, medium and micro enterprises in a more targeted manner, employers will receive a higher subsidy amount at the initial stage of canceling the "offset", and the subsidy amount will be gradually reduced within 25 years, so that employers can gradually adapt to the policy change.

500,000 yuan for the community to focus on assisting small, medium and micro enterprises

The government subsidy rate will be set at 500,000 yuan.

If the employer dismisses an employee (employee A), he must first calculate whether the total amount of severance payment or long-term service payment (referred to as the "post-conversion part") he paid to all employees in that year has exceeded $500,000.

If the total amount is less than 500,000 yuan (assumed to be 200,000 yuan), he can enjoy a comparative High funding ratio.

If the total amount exceeds $500,000, the subsidy ratio will be lower.

Since nearly 90% of small, medium and micro enterprises spend no more than 500,000 yuan on severance pay or long-term service allowance each year, small, medium and micro enterprises will benefit from the higher subsidy ratio of 500,000 yuan.

In addition, for cases of less than 500,000 yuan, the employer will "cap" the amount borne by each employee in the first 9 years.

If the amount calculated by the employer based on the subsidy rate exceeds the "capped" amount, the employer only needs to pay the "capped" amount, and the remaining amount will be subsidized by the Government.

The "capped" amount for the first 3 years is as low as $3,000.

The government will launch a dedicated webpage and online calculation tools later to help both employers and employees understand and be familiar with the relevant policies, so as to prepare for the abolition of MPF "hedging".

For more information and reference examples: https://www.labour.gov.hk/en/news/aoa.htm

(Information and photos provided by the customer)

Source: hk1

All news articles on 2022-12-08

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