Three years after Hong Kong’s legislature passed a long-awaited labour bill to stop bosses from raiding staff pensions to cover severance and long-service payments, the cancellation of the so-called offsetting mechanism finally took effect on Labour Day on Thursday.
The abolition marked a milestone for the Mandatory Provident Fund (MPF), which came into operation in 2000, after enduring criticism from the labour sector for half its existence.
The Post examines what the changes mean to Hong Kong workers and bosses.
What prompted authorities to act?
The offsetting mechanism had been part of the MPF scheme since it was introduced in December 2000. The scheme covers 4.75 million members with total assets of HK$1.338 trillion (US$168 billion) as of the end of March.
The sum, which accounts for investment gains and new contributions from members, comes to HK$279,100 per person, or 13 per cent higher than a year ago.
Under the scheme, employers and employees each contribute 5 per cent of the individual’s salary up to a combined maximum of HK$3,000 a month.
The mechanism had been criticised for being tantamount to robbing employees of their hard-earned money as it had allowed employers to take cash from workers’ pensions to offset their long-service and severance payments.
Chief Executive John Lee Ka-chiu said on Thursday that the cancellation would benefit the city’s three million-strong workforce and provide better labour protection.
