LCQ2: Subsidy Scheme for Abolition of MPF Offsetting Arrangement
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Question:
The Government launched the Subsidy Scheme for Abolition of MPF Offsetting Arrangement (SSA) on May 1 last year. Employers, after settling severance payment (SP) and long service payment (LSP) to their employees in accordance with the Employment Ordinance (Cap. 57), may apply for subsidies under the SSA. In this connection, will the Government inform this Council:
(1) of the number of applications received by the authorities and the average processing time for each case since the launch of the SSA; among such cases, the respective numbers and percentages of applications (i) approved, (ii) refused and (iii) withdrawn (set out in Table 1); whether it has complied statistics on the main reasons for refusal and withdrawal of the applications;
Table 1
| Application results | Number of cases | Percentage |
| (i) | ||
| (ii) | ||
| (iii) | ||
| Total |
(2) of (i) the number of applications received by the authorities, and (ii) the number of applications approved and their percentages since the launch of the SSA, and set out in Table 2 a breakdown by the type of trade of employers involved;
Table 2
| Type of trade of employers involved | Number of applications received | Percentage | Number of cases approved | Percentage |
| Arts, entertainment and recreation | ||||
| Catering | ||||
| Construction | ||||
| Education services | ||||
| Finance | ||||
| Health care services | ||||
| Hotels and accommodation activities | ||||
| Import and export trades | ||||
| Information and communications | ||||
| Insurance | ||||
| Manufacturing | ||||
| Professional services, administrative and other business support services | ||||
| Real estate | ||||
| Retail | ||||
| Social work activities | ||||
| Storage | ||||
| Transportation, postal and courier services | ||||
| Wholesale | ||||
| Work activities within domestic households | ||||
| Other personal services | ||||
| Others not elsewhere classified | ||||
| Total |
(3) of the total amount of subsidies for all approved cases and the average amount of subsidies for each case since the launch of the SSA;
(4) among the cases in which approval has been completed, of the respective numbers of applications in which an applicant has lodged a review as he/she is not satisfied with the amount of subsidies approved or has lodged an appeal as he/she is not satisfied with the refusal of his/her application since the launch of the SSA, and the percentages of successful appeals or reviews among them; whether it has compiled statistics on the main reasons for refusal of the review or appeal applications;
(5) as according to the paper submitted by the Government to the Finance Committee of this Council on November 22, 2024, the Labour Department (LD) will engage a processing agent to assist in the administration of the SSA, of the following information on the processing agent's implementation of the SSA since February 1 last year: (i) the preparatory fee collected, (ii) the staffing establishment and strength involved, (iii) the average fee for processing each subsidy application, (iv) the number of spot checks performed on cases processed, (v) the number of enquiries received and processed, and (vi) the number of public engagement activities organised and the number of participants;
(6) as some employees may receive less aggregate benefits due to the change in calculation of the SP/LSP entitlement after the abolition of the offsetting arrangement, and these "worse-off" employees can apply to the LD for a subsidy to make up for the shortfall in their aggregate benefits, of the number of applications for the subsidy received by the authorities and the amount of subsidy involved since May 1 last year; and
(7) whether the LD has received any complaints about suspected premature dismissal of employees by employers before the abolition of the offsetting arrangement took effect in order to save SP or LSP expenses since 2025; if so, of the number of complaints received by the LD, the industries in which the complainants are engaged, and the follow-up on the complaints?
Reply:
President,
The Government implemented the abolition of the Mandatory Provident Fund (MPF) offsetting arrangement on May 1, 2025 (the transition date). Since then, employers can no longer use the accrued benefits derived from their mandatory MPF contributions to offset an employee's severance payment (SP)/long service payment (LSP) payable under the Employment Ordinance in respect of the employment period starting from the transition date (the post-transition portion of SP/LSP).
In tandem with the abolition of the MPF offsetting arrangement, the Government launched the Subsidy Scheme for Abolition of MPF Offsetting Arrangement (SSA) on the same day to provide financial assistance to the affected employers to assist them in adapting to the policy change by sharing out their expenses on the post-transition portion of SP/LSP.
In addition, after the abolition of the offsetting arrangement, should employees receive less aggregate benefits (i.e. SP/LSP together with the remaining employer-funded MPF scheme accrued benefits, vested employer-funded occupational retirement scheme benefits, and gratuities receivable (if any) after offsetting with SP/LSP) than they would have before the abolition arrangement, they may apply to the SSA for subsidy to make up for the shortfall in aggregate benefits such that their benefits will not be reduced due to the policy change.
The reply to the Member's question is set out below:
(1) As at March 2026, the SSA received a total of 20 790 applications from employers, of which 16 793 applications had been processed. The application results are tabulated below:
| Results of application | Number of applications* | Percentage |
| Approved | 15 504 | 92.3 per cent |
| Refused | 646 | 3.9 per cent |
| Withdrawn | 643 | 3.8 per cent |
| Total | 16 793 | 100 per cent |
In general, employers will be notified of the application results within 30 working days upon submission of an application and all necessary information and documents.
Refusal of applications is primarily due to factors such as that the employers were not affected by the abolition of MPF offsetting arrangement (for example, the employees involved were exempted persons under the Mandatory Provident Fund Schemes Ordinance, or had reached the age of 65 before the transition date and thus the employers were not required to make MPF contributions for the employees in respect of the employment periods from the transition date onwards); or the employees involved did not meet the eligibility criteria for SP/LSP as specified by the Employment Ordinance at the time of termination of employment contracts. The SSA does not inquire about the reasons for withdrawal of applications from the employers concerned.
(2) As at March 2026, a breakdown of applications received and approved under the SSA by industry of the employers involved is at Annex.
(3) As at March 2026, the SSA disbursed a total amount of $42.24 million of subsidy to employers, with an average of $2,700 for each approved application.
(4) Applicants may request reviews of their applications with justifications if they disagree with the results, and may lodge appeals if they disagree with the review results.
As at March 2026, the SSA received 294 review applications from employers, of which 130 were approved (44.2 per cent) after review. Besides, 16 appeal applications submitted by employers under the SSA were refused. The reason for refusing the review or appeal applications was that the applicants could not provide sufficient justifications for altering the original vetting decisions.
(5) The Labour Department (LD) appointed a processing agent (PA) to set up the Service Centre for the SSA and process subsidy applications. Breakdowns of figures for PA's assistance in the implementation of the SSA are as follows:
(i) The preparatory fee received by PA was $8,800,000.
(ii) The Tender Documents require PA to provide no less than 76 staff members. To ensure quality of service, the actual number of staff members provided by PA as at April 15, 2026, was 93. Details are as follows:
| Post | Tender requirement on manpower | Actual number of manpower (as at April 15, 2026) |
| Key personnel | 3 persons | 6 persons (including 3 Deputy Key Personnel) |
| Vetting team leader Examination team leader Customer services team leader |
8 persons | 10 persons |
| Vetting officer Approving officer Examiner Customer services officer |
60 persons | 70 persons |
| Supporting staff | 5 persons | 7 persons |
| Total | 76 persons | 93 persons |
In addition to the above, PA provided five operations management supporting staff.
(iii) As at April 15, 2026, the service fees received by PA for the implementation period of the SSA were $56,888,280. The service fees included the costs for operating the Service Centre and back office, provision of manpower, processing applications in accordance with the operation guidelines and instructions provided by the LD, handling enquiries and complaints, conducting quality assurance checks and internal audit checks on applications, assisting in organising publicity and public engagement activities, executing technical proposals as committed in the Tender Proposal, and carrying out all the tasks as required in the Service Contract. As the service fees reflected the aforementioned services as a whole, the average cost of processing each application cannot be determined.
(iv) As at March 2026, the Service Centre selected a total of 123 applications with processing completed for conducting audit checks.
(v) As at March 2026, the Service Centre received 27 798 enquiries and completed processing of 27 619.
(vi) To assist employers in understanding the SSA, the Government has conducted extensive publicity, including launching the TransitionEase website to disseminate details about applying for subsidies, and organising briefing sessions for employers, employees and human resources practitioners. From January 2025 to March 2026, the LD held a total of 63 briefing sessions, with over 18 800 participants. Besides, the Service Centre organised two briefing sessions in April 2026 to introduce SSA to employers, attracting around 140 participants.
(6) As at March 2026, the SSA received a total of 14 applications from employees applying for subsidy to make up for the shortfall in aggregate benefits. After vetting, two applications were approved with a total subsidy of about $12,000 disbursed and no shortfall in employees' aggregate benefits after the abolition of the offsetting arrangement was found in respect of four applications. The remaining eight applications are being processed.
(7) The LD has been conducting publicity through various channels to remind employers that dismissing serving employees before the transition date and subsequently rehiring them will not save expenses on SP/LSP. The LD has not received any complaint involving employers allegedly dismissing employees before the abolition of the offsetting arrangement took effect for the purpose of reducing SP/LSP expenses.
Ends/Wednesday, April 29, 2026
Issued at HKT 12:45
Issued at HKT 12:45
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