HR practitioners support the abolition of MPF offsetting

We came across an interesting report on the Hong Kong Institute of Human Resource Management (HKIHRM) that states that 65% of members of the Institute are in favour of abolishing the MPF offsetting mechanism for making severance and long-service payments to employees. This data was gathered through an online survey that the HKIHRM sent out to its members who are HR practitioners.

Whilst almost all respondents reported that their companies do provide MPF schemes for their employees, the percentage of contribution varies from the mandatory 5% to more than 5% for larger companies and more senior employees. 41% of respondents said that their companies offer their employees both MPF schemes and additional employer-sponsored retirement schemes such as Pension Plans.

As it currently stands, an employer who is liable to pay an employee severance or long-service payments can offset these payments with the accrued benefits derived from the employer’s contributions made to an MPF scheme for the employee.

When questioned regarding the abolition of MPF offsetting for severance and long-service payments, 65% of the respondent HR practitioners supported eventually abolishing it.

The main reasons for this are:

  1. Having better retirement protection for employees
  2. Companies would be perceived as caring and considerate towards employees
  3. It would offer more protection for redundant staff during unemployment

Meanwhile, 23% of respondents to the poll were against the abolition, claiming that employers should not be obliged to make double payments, that it would bring increased costs for staff dismissals or redundancies, and that employers would be forced to hire staff on short-term contracts.

As far as the HKIHRM itself is concerned, it supports eventually abolishing MPF offsetting, yet it believes this should be implemented in phases and alternative arrangements should be explored, such as tax credits to employers, as well as partial MPF offsetting using the employer’s voluntary contribution. 45% and 42% of the polled HR practitioners respectively agreed with these two suggestions.

What are your thoughts on this matter? Should MPF offsetting be abolished?

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