{"id":127257,"date":"2025-06-24T14:44:40","date_gmt":"2025-06-24T06:44:40","guid":{"rendered":"https:\/\/linksinternational.com\/?p=127257"},"modified":"2025-10-13T18:06:30","modified_gmt":"2025-10-13T10:06:30","slug":"mpf-reform-2025-key-changes-and-what-employers-in-hong-kong-should-prepare-for","status":"publish","type":"post","link":"https:\/\/linksinternational.com\/en-sg\/blog\/mpf-reform-2025-key-changes-and-what-employers-in-hong-kong-should-prepare-for\/","title":{"rendered":"MPF Reform 2025: Key Changes and What Employers in Hong Kong Should Prepare For"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><strong>Understanding\nthe Mandatory Provident Fund (MPF)<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In Hong Kong, the Mandatory Provident Fund (MPF) system is a\ncompulsory retirement savings scheme. Under current regulations, employers must\ncontribute an amount equivalent to 5% of each employee\u2019s relevant monthly\nincome, up to a maximum of HKD 1,500. These are known as Employer\u2019s Mandatory\nContributions (ERMC).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Two major changes are reshaping the MPF landscape: the\nabolition of the MPF offsetting mechanism and the rollout of the new eMPF\nPlatform. These reforms signal a move towards a more equitable and efficient\nretirement system in Hong Kong.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The\nAbolition of the MPF Offsetting Mechanism<\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>What Is MPF Offsetting and Why Is It Ending?<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Since the MPF system was launched in 2000, employers have\nbeen able to use their mandatory MPF contributions to reduce the amount payable\nto employees as severance payment (SP) or long service payment (LSP). This has\nlong been viewed as unfair, effectively allowing employers to dip into\nemployees\u2019 retirement savings to fulfil statutory obligations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">After years of public concern and policy debate, the\nLegislative Council passed the Employment and Retirement Schemes Legislation\n(Offsetting Arrangement) (Amendment) Bill 2022 on 9 June 2022. As a result, the\noffsetting mechanism will officially be abolished starting 1 May 2025.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Why Is This Reform Happening Now?<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Critics of the mechanism have likened it to withholding\nemployees&#8217; rightful pension entitlements. Although previous governments\nattempted to remove the practice, strong opposition from the business sector\ndelayed reform. It wasn&#8217;t until 2021 that momentum resumed, and the current\nadministration succeeded in pushing through the legislation.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>What Changes Will Occur After 1 May 2025?<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Once the new regulation is in effect, employers will no\nlonger be able to use mandatory contributions to offset SP or LSP. However,\nbenefits arising from voluntary employer contributions and contractual\ngratuities based on length of service may still be applied for this purpose.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To ease this shift and reduce the risk of pre-transition\nterminations, a &#8220;grandfathering&#8221; arrangement has been introduced.\nThis ensures a fair transition for employers and employees who are already in\nan employment relationship before the effective date.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Grandfathering Arrangement: How Will It Work?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The new rule divides severance or long service payments into\ntwo segments: before and after the transition date of 1 May 2025.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>For the employment period before the transition:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Employers may still offset SP\/LSP using both mandatory and voluntary contributions.<\/li><li>SP\/LSP is calculated based on the employee&#8217;s last full month\u2019s wages before the transition date (capped at HKD 22,500), using the formula: Monthly Wage x 2\/3 x Years of Service before 1 May 2025.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/linksinternational.com\/wp-content\/uploads\/2025\/06\/Hong-Kong-Labour-Law-Workshop-2023-V3-1024x576-1024x576.png\" alt=\"\" class=\"wp-image-127258 lazyload\"\/><noscript><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/linksinternational.com\/wp-content\/uploads\/2025\/06\/Hong-Kong-Labour-Law-Workshop-2023-V3-1024x576-1024x576.png\" alt=\"\" class=\"wp-image-127258 lazyload\" srcset=\"https:\/\/linksinternational.com\/wp-content\/uploads\/2025\/06\/Hong-Kong-Labour-Law-Workshop-2023-V3-1024x576.png 1024w, https:\/\/linksinternational.com\/wp-content\/uploads\/2025\/06\/Hong-Kong-Labour-Law-Workshop-2023-V3-1024x576-300x169.png 300w, https:\/\/linksinternational.com\/wp-content\/uploads\/2025\/06\/Hong-Kong-Labour-Law-Workshop-2023-V3-1024x576-768x432.png 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/noscript><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>For the period after the transition:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Only voluntary contributions can be used to offset SP\/LSP.<\/li><li>Calculations are based on the last month\u2019s wages before termination (capped at HKD 22,500), using: Monthly Wage x 2\/3 x Years of Service after 1 May 2025.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Note: <\/strong>The total combined cap for SP\/LSP payments\nremains at HKD 390,000.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Example: An employee has worked 4 years before the\ntransition and 3 years after. Their monthly wage was HKD 15,000 before the\ntransition and HKD 18,000 at dismissal.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Pre-transition SP\/LSP: HKD 15,000 x 2\/3 x 4 = HKD 40,000<\/li><li>Post-transition SP\/LSP: HKD 18,000 x 2\/3 x 3 = HKD 36,000<\/li><li>Total SP\/LSP: HKD 76,000<\/li><li>If total ERMC over 7 years is HKD 69,150, only HKD 40,000 may be offset<\/li><li>ERMC retained in MPF account = HKD 29,150<\/li><li>Total benefit for employee = HKD 76,000 (SP\/LSP) + HKD 29,150 (MPF) = HKD 105,150<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">These reforms also extend to other statutory retirement\nschemes like occupational retirement schemes under MPF Ordinance (Cap. 485),\nschool provident funds, and exempt overseas retirement schemes. The changes,\nhowever, do not apply to domestic helpers or those outside the MPF system\n(under 18 or over 65).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\" style=\"text-align:left\"><em>Reference:&nbsp;<\/em><a href=\"https:\/\/www.labour.gov.hk\/common\/public\/pdf\/opd\/FAQs_aoa_en.pdf\" target=\"_blank\" rel=\"noopener\"><em>https:\/\/www.labour.gov.hk\/common\/public\/pdf\/opd\/FAQs_aoa_en.pdf<\/em><\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Employer\nAction Plan: Preparing for the End of MPF Offsetting<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">To ensure smooth compliance and avoid any penalties,\nemployers should:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Update employment contracts: Remove or revise clauses relating to MPF offsetting.<\/li><li>Review payroll systems: Confirm correct calculations for LSP\/SP and final salary.<\/li><li>Set financial plans: Start budgeting for full LSP\/SP payouts.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/li><li>Communicate proactively: Inform staff early about how the changes may affect them.<\/li><li>Provide training: Ensure HR teams understand the new calculation methods and obligations.<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Additionally, the government is providing a HKD 33.2 billion\nsubsidy over 25 years to help especially small and medium enterprises cope with\nthe new requirements. Employers may also consider setting up Designated Savings\nAccounts to prepare for future LSP\/SP liabilities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The eMPF\nPlatform: A Digital Transformation of MPF Administration<\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>What Is the eMPF Platform?<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Launched in June 2024, the eMPF Platform is a\ngovernment-backed initiative aimed at simplifying and modernising the\nadministration of MPF schemes. It standardises procedures across all MPF\ntrustees and introduces automation to reduce errors and processing times.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The platform will eventually connect all 12 MPF trustees,\nmore than 350,000 employers, and over 4.7 million scheme members.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Current Progress<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">YF Life Trustees and China Life Trustees were the first to\nonboard in June and July 2024, respectively. Remaining trustees will be\nintegrated according to the size of assets they manage.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Benefits for Users<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Centralised access to manage MPF accounts across all schemes<\/li><li>Real-time contributions tracking<\/li><li>Enhanced accuracy through automation<\/li><li>Reduced administrative burden for employers<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">By consolidating multiple accounts into a single dashboard,\nthe platform enhances transparency, minimises paperwork, and empowers users to\nmanage their retirement planning more effectively.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The removal of MPF offsetting and the implementation of the\neMPF Platform mark a significant evolution in Hong Kong\u2019s retirement landscape.\nThese initiatives are designed to protect employee benefits, improve\nadministrative efficiency, and promote a fairer system.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For employers, the message is clear: preparation is key. By\nunderstanding the changes, updating internal systems, and training staff,\nbusinesses can ensure compliance and continue supporting their workforce\nthrough this transition.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Need help navigating these reforms? <a href=\"https:\/\/linksinternational.com\/en-sg\/about-us\/contact-us\/\">Contact us<\/a>\ntoday to ensure you&#8217;re ready for the transition and your business stays\ncompliant.<\/p>\n","protected":false},"excerpt":{"rendered":"<p class=\"text-justify\">Understanding the Mandatory Provident Fund (MPF) In Hong Kong, the Mandatory Provident Fund (MPF) system is a compulsory retirement savings scheme. Under current regulations, employers must contribute an amount equivalent to 5% of each employee\u2019s relevant monthly income, up to a maximum of HKD 1,500. These are known as Employer\u2019s Mandatory Contributions (ERMC). Two major [&#8230;]<\/p>\n<p class=\"text-justify\"><a class=\"btn btn-secondary links-read-more-link\" href=\"https:\/\/linksinternational.com\/en-sg\/blog\/mpf-reform-2025-key-changes-and-what-employers-in-hong-kong-should-prepare-for\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","inline_featured_image":false,"footnotes":""},"categories":[254,313],"tags":[],"class_list":["post-127257","post","type-post","status-publish","format-standard","hentry","category-hro"],"acf":[],"_links":{"self":[{"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/posts\/127257","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/comments?post=127257"}],"version-history":[{"count":4,"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/posts\/127257\/revisions"}],"predecessor-version":[{"id":132151,"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/posts\/127257\/revisions\/132151"}],"wp:attachment":[{"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/media?parent=127257"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/categories?post=127257"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/linksinternational.com\/en-sg\/wp-json\/wp\/v2\/tags?post=127257"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}