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LCQ4: Mandatory Provident Fund Schemes
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     Following is a question by the Hon Chan Yuen-han and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (July 2):

Question:

     Under the Mandatory Provident Fund Schemes Ordinance, an employer may use the accrued benefits derived from his contributions to a Mandatory Provident Fund (MPF) scheme for an employee to offset the severance payments or long service payments payable to that employee under the Employment Ordinance (the offsetting arrangement). The Chief Executive pledged in his election manifesto that "we will adopt measures to progressively reduce the proportion of accrued benefits attributed to employer's contribution in the MPF account that can be applied by the employer to offset long-service or severance payments". In this connection, will the Government inform this Council:

(1) as the Chief Executive indicated at the Question and Answer Session on May 22 that the Government could not initiate any legislative amendment exercise before the community had reached a consensus on the abolition of the offsetting arrangement, whether it has assessed if this reflects that the Chief Executive has no intention to fulfil his election pledge to initiate work on the abolition of the offsetting arrangement within his current term;

(2) whether it will take the lead to cease incorporating the offsetting arrangement into the terms of employment of non-civil service contract staff, and require that the contracts made between government outsourced service contractors and their employees must not include the offsetting arrangement; and, at the same time, establish dedicated funds for reimbursement of expenses on making, on the premise of not offsetting MPF contributions, severance payments and long service payments to the assistants and other staff members of Members; if it will, of the details; if not, the reasons for that; and

(3) whether it will establish an inter-departmental joint working group dedicated to handling and studying issues in relation to the abolition of the offsetting arrangement, and formulate a legislative timetable concerned, with a view to completing the legislative work on the abolition of the offsetting arrangement within the current term of the Government; if it will, of the details; if not, the reasons for that?

Reply:

President,

     The Government's reply to the question of the Hon Chan Yuen-han is set out below:

(1) The arrangement of offsetting severance payments (SP) and long service payments (LSP) against Mandatory Provident Fund (MPF) accrued benefits arising from employer's contribution is an issue of concern to the community. It involves the interests of various stakeholders, affecting both the retirement benefits of employees and operating costs of employers. In fact, there have been opposing views on the offsetting arrangement among different sectors of the community since this issue has emerged. On the one hand, the labour sector actively requests abolishing the offsetting mechanism, such that the entire sum of MPF contributions from employers and the accrued benefits could be preserved to strengthen the retirement protection for employees. On the other hand, many business chambers, employers' organisations and enterprises oppose strongly the abolition of the offsetting arrangement. They consider that the abolition of the arrangement to use MPF contributions accrued for years to offset SP and LSP will not only seriously distort at one stroke their provision of expenditure for retrenching and terminating the employment of employees, but will also significantly increase their operating costs. This will impose substantial financial burden on enterprises, especially small and medium-sized ones, and may deal a blow to their operations, or even affect employees' terms of employment and job opportunities.

     At the Question and Answer Session of this Council on May 22, 2014, the Chief Executive stated clearly that the offsetting arrangement was a rather complicated issue and that there were different ways to deal with the offsetting mechanism gradually. Given that different approaches will have varying impact on employers and employees, the Government would need to continue to listen to the views of different sectors through the existing platforms and consider and examine the issue in a holistic and careful manner before deciding on the way forward.

(2) According to the Employment Ordinance (EO), under certain circumstances employers are obliged to pay SP or LSP to eligible employees. As the employers of non-civil service contract (NCSC) employees, relevant bureaux and departments are required to follow the relevant EO stipulations in granting SP and LSP to NCSC staff employed by them. Before the community has reached a consensus on whether to revise the offsetting mechanism and the relevant legislative amendments are made, the Government will not change the existing arrangement of offsetting SP and LSP against MPF accrued benefits attributed to employer's contribution.

(3) Currently there are divergent views in the community on whether to change the offsetting arrangement. We will continue to listen to the views of various parties through existing channels. At the present stage, we have no plan to establish an inter-departmental joint working group dedicated to handling and studying the abolition of the offsetting arrangement.

Ends/Wednesday, July 2, 2014
Issued at HKT 17:29

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