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LCQ2:Default payments of Mandatory Provident Fund contributions by employers

    Following is a question by the Hon Lau Kong-wah and a reply by the Secretary for Financial Services and the Treasury, Professor K C Chan, in the Legislative Council today (November 28):


     Regarding default payments of Mandatory Provident Fund ("MPF") contributions by employers, will the Government inform this Council if it knows:

(a)  the total amount involved in the complaints received by the authorities concerned about employers defaulting on MPF contributions over the past three years, and the number of cases in which the amount defaulted have not been successfully recovered from the employers;

(b)  whether the authorities concerned have imposed heavier penalties on employers who have repeatedly defaulted on MPF contributions; apart from the plan to raise the maximum penalty for default payment on MPF contributions, whether the authorities concerned have other measures to stop the employers from defaulting payments on MPF contributions repeatedly; and

(c)  given that employers defaulting on MPF contributions will only be fined in most cases and are not required to pay any compensation to the employees concerned, whether the authorities concerned will conduct a study to see if it should be stipulated that employees have the right to recover from employers the employees' potential loss in investment returns arising from the default payments of MPF contributions by employers; if not, of the reasons for that?


Madam President,

(a)  The amounts involved in the complaints received by the Mandatory Provident Fund Schemes Authority (MPFA) about employers defaulting on Mandatory Provident Fund (MPF) contributions in the past three years were around $75,000,000, $78,000,000 and $68,000,000 respectively.  Around 83%, 90% and 94% of the respective amounts had been successfully recovered.  

     The number of complaints received over the last three years were 6,018, 5,598 and 5,102 respectively.  The proportions of cases where the amount in arrears could only be recovered partially were 5%, 4% and 3% respectively.  The MPFA could not recover any of the amount in arrears for around 15%, 9% and 6% of the respective number of cases over the past three years. Detailed statistics are set out in the Annex for Members' information.

     Overall, there is a downward trend in the number of default contribution cases received each year, while the successful recovery rate of default contributions is on the rise.

(b)  The MPFA takes enforcement actions against employers defaulting on MPF contributions according to the Mandatory Provident Fund Schemes Ordinance (MPFSO).  To further enhance the effectiveness of enforcement actions against repeated defaulters, the MPFA has set up an investigation task force to closely monitor the compliance with the contribution requirements by those employers.  The task force will take immediate action once default contribution is detected.  The passage of the proposed legislative amendment to remove the 30-day settlement period by the Legislative Council is expected to help the MPFA to speed up its enforcement actions.

     In taking prosecution actions, when there is sufficient evidence, the MPFA will apply for prosecution against company directors so as to impose on them criminal liability for better deterrent effect.  Besides, the Department of Justice will submit previous penalty records of repeated defaulters for the court's consideration in passing judgment.

     When there is no sufficient evidence for instituting criminal prosecution, the MPFA may impose financial penalties on employers defaulting on MPF contributions at the higher of $5,000 or 10% of the amount in arrears.  The MPFA will step up the imposition of financial penalties against repeated defaulters having regard to circumstances of individual cases.

     Moreover, the Government plans to introduce an amendment bill into the Legislative Council in the current legislative session with a proposal to raise the maximum penalty for defaulting on MPF contributions to a fine of $350,000 and imprisonment for three years so as to put it on a par with the maximum penalty for defaulting on wages under the Employment Ordinance.  We believe that the new measure will raise the deterrent effect of the MPFSO against default contribution cases.

     The MPFA will review the effectiveness of the enforcement measures from time to time in the light of operational experience.  It will also discuss with the industry about other practicable measures that could better protect employees' MPF benefits.

(c)  Under the MPFSO, a contribution surcharge calculated at 5% of the amount in arrears is imposed on employers who default on MPF contributions.  The surcharges received are eventually credited into the employees' MPF accounts as compensation.

     Furthermore, section 45G of the MPFSO stipulates that a person who has sustained financial loss that is attributable to the failure of another person to comply with a requirement under the Ordinance is entitled, by proceedings brought in a court, to recover from that other person the amount of that loss as damages.  Section 45G provides sufficient legal basis to facilitate the employees in recovering loss in investment returns that is attributable to the employers' default on contributions.

Ends/Wednesday, November 28, 2007
Issued at HKT 14:29


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