of offsetting long service and severance payments with MPF, it is meeting with labour

groups starting from today to reach a consensus between employees and employers before its

term ends. Whether workers can enjoy the benefits earlier depends on the mutual understanding

and accommodation .

Scrapping the mechanism is what Chief Executive-elect Carrie Lam Cheng Yuet-ngor

described to pro-establishment legislators as one of the "three mountains" she was facing during

the later part of her tenure as chief secretary. The other two "mountains" are MTR fares and

the Link Reit that manages several public housing malls and car parks. The MTRC recently

announced freezing fares for the first time in eight years while offering a three per cent discount.

The Link Reit congratulated Lam on the day she was elected and made a statement that it hopes

to continue working closely with the government and other stakeholders.

Business sector worried about expenses, government willing to subsidize

Of the "mountains", the MTRC and Link Reit are individual organizations while the MPF

involves employees and employers who are not rigid but with shared interests and sometimes

tinted with politics. Reaching a consensus to solve the problem is a lot more complicated.

When an employee retires or is made redundant , the employer can use the MPF contribution

to offset the long service and severance payments. In the past 15 years, over $30 billion of MPF

contributions have been used in the mechanism. Last year alone, it was over $3 billion. In some

extreme cases, the employees lost 90 per cent of their long service and severance payments. The

mechanism has led to many complaints from employees when they retire.

Labour groups keep fighting to have the mechanism scrapped, but the business sector strongly resists because it will greatly raise costs especially exerting pressure on small and medium enterprises.

After prolonged brewing, the compromise of scrapping the offsetting mechanism was brought

up in the Policy Address delivered by Chief Executive Leung Chun-ying early this year with three key

elements. It will "have no retrospective effect. In other words, employers’ MPF contributions before

the implementation date of the proposal will be ‘grandfathered’." The payments for an employment

period from the implementation date will be "adjusted downwards from the existing entitlement of

two-thirds of one month's wages to half a month's wages as compensation for each year of service".

Finally, the government will share part of the expenses on payments to employers in the 10 years after the implementation date of the abolition to help them gradually adjust to it. It is expected to involve about $6 billion public money.

The nature of the proposal is that all parties make some compromise. The government will

also provide some subsidy. However, the labour side is dissatisfied with long service and severance

payments becoming smaller while the business sector hopes that the government will subsidize extra

expenses, only willing to slightly increase MPF contributions. The government is concerned that such

subsidy will become an abyss and be abused by unscrupulous employers like the Protection of Wages

on Insolvency Fund.

Reducing opposition benefits employees and employers

Now the government is meeting with labour and business groups creating a new round of

struggle between employees and employers. If there is no compromise, it is not known how long the

anticipated scrapping of the offsetting mechanism will be dragged on. In the end, it will still be the

many employees suffering loss. In recent years, there has been no trust and compromise between the

two sides. After the minimum wage issue, there has been no major measure to promote labour welfare. Matters as simple as gradually increasing statutory holidays to match up with public holidays remain stagnant, let alone complex issues such as scrapping the MPF offsetting mechanism and standard working hours. If there can be compromise, employees will enjoy better protection. Remaining flexible and keeping down opposition to boost social harmony will also benefit businesses.