Chief Executive Carrie Lam today welcomed the passage of the Employment & Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 by the Legislative Council.

Abolishing the Mandatory Provident Fund (MPF)’s offsetting arrangement which has been a thorny issue over the years, the Chief Executive referred to the passage as a significant milestone in enhancing employees’ retirement protection.

The Government expects that the offsetting arrangement could be formally dismissed in 2025.

Under the Mandatory Provident Fund Schemes Ordinance passed in 1995, employers could use the accrued benefits of their mandatory contributions under the MPF system to offset, under specific circumstances, the expenses for severance payment and long-service payment shouldered by them. This would, however, hamper the retirement protection accorded by the MPF to employees, especially the grassroots.

During the implementation of the MPF schemes over the years, the amount of contributions depleted as a result of the offsetting arrangement has been rising. The labour sector has requested that such arrangement be abolished as soon as possible, whereas the business sector has been concerned that cancelling the arrangement would increase employers’ burden and affect the business environment.

Mrs Lam said: “As early as when I served as the Chief Secretary and Commission on Poverty Chairperson, I championed the need to strengthen the MPF as one of the key pillars of Hong Kong’s retirement protection system, under which the community must duly address the offsetting arrangement.

“After assuming office (as Chief Executive), I proposed in March 2018 a preliminary idea of key points on abolishing the offsetting arrangement, and formally announced in the 2018 Policy Address an enhanced package to significantly increase the subsidy for employers, with the subsidy period extended from 10 years as proposed by the previous-term Government to 25 years, and the financial commitment of the entire government subsidy scheme thus increased from $7.9 billion as proposed by the previous-term Government to $29.3 billion.”

Having discussed with stakeholders and taken the business sector’s views into account, the 2021 Policy Address Supplement set out the refinement of the government subsidy scheme. This renewed scheme maintains generally the same amount of the Government’s financial commitment and the 25-year subsidy period in order to focus more on supporting micro, small and medium-sized enterprises and provide more targeted assistance to help employers adapt to the policy change.

These measures have addressed the concerns of the business sector while duly resolving the problem of the offsetting arrangement that has plagued the labour sector for years, and also create the necessary conditions for the full portability of the MPF, the Government commented.

Mrs Lam expressed her heartfelt gratitude to all sectors of the community, especially the Labour Advisory Board and relevant employers’ and employees’ organisations, for their understanding coupled with rational deliberation over the years and offering valuable views on the proposed abolishment of the offsetting arrangement. Their efforts have facilitated LegCo’s smooth passage of the bill, which is hailed as a major achievement of the current-term Government in enhancing Hong Kong’s retirement protection system, the Chief Executive noted.

She also thanked the Labour & Welfare Bureau and the Labour Department for their perseverance in resolving this thorny issue.

The Government will press ahead with the ancillary arrangements for abolishing the offsetting arrangement, including setting up the government funding programme, following up on a designated savings accounts scheme for employers to cope with future financial needs, and conducting publicity activities to help employers understand the offsetting arrangement.