Employers to be granted subsidies to assist with transition
Starting May 2025, employers in Hong Kong will no longer be allowed to use their employees' pension funds to cover severance (SP) and long-service payments (LSP), according to Chief Executive John Lee Ka-chiu.
Lee confirmed at a Labour Day reception event last week that the government's Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 will take effect on May 1, 2025.
The bill, which was passed last year, abolishes the "offsetting scheme" that allows employers to use the benefits of the Mandatory Provident Fund (MPF) to offset, under specific circumstances, the expenses for SP and LSP that they shouldered.
The government previously said it expected the "offset arrangement" to be formally abolished in 2025, and Lee's declaration last week confirmed this timeframe.
"I hereby declare that I have made a decision that the scrapping of the 'offsetting mechanism' will take effect on May 1, 2025," Lee said as quoted by the South China Morning Post.
During the bill's passing, the government said it will provide subsidy to employers for 25 years and carry out an in-depth promotion to ease employers into the abolition arrangements.
This subsidy plan will cost up to HK$33 billion, according to Lee.
"The government will formulate and implement subsidy plans, which costs up to HK$33 billion for employers in the next 25 years to share their costs on severance and long-service payments and assist them to adapt to the changes," Lee said as quoted by the SCMP.
An information technology system will also be set up for its operations, the government previously said.
Given the time needed to set up the platform and request funding from the Legislative Council, Labour Minister Chris Sun said May 2025 is a "feasible deadline."
According to Lee, they will be coordinating with both employers and employees on labour issues and let employees "share the fruits of economic development."
