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Hong Kong's Legislative Council to consider Cancellation of MPF Offsetting

06 October 2021. Published by Andrea Randall, Partner and Sakshi Buttoo, Registered Foreign Lawyer

Under the Employment Ordinance, employers can offset long service payment or severance payment due to an employee against the employer's mandatory and voluntary contributions to the Mandatory Provident Fund (MPF), Hong Kong's pension system.

This MPF offsetting mechanism has long been controversial and has been exacerbated during the pandemic with a wave of business closures leading to a drain on workers' retirement funds.

After much debate in recent years, the Chief Executive's 2021 Policy Address announced that a draft bill to abolish the MPF offsetting mechanism will be introduced into the Legislative Council in the next legislative session. The bill would seek to amend several pieces of legislation which permit MPF offsetting, including the Employment Ordinance, the Mandatory Provident Fund Schemes Ordinance and the Occupational Retirement Schemes Ordinance.

Considering the complexities of the legislative amendments, the Legislative Council's papers predict that the abolition of MPF offsetting would come into effect in around 2025 at the earliest.

Further details will be revealed in the next legislative year.