Following on from our brief update published on 9 June 2022, this article provides a detailed overview of the amendments put forward by the long-awaited Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 (the "Bill"), which was finally passed by the Legislative Council on 9 June 2022. The main feature of the Bill is the abolishment of the offsetting mechanism of the Mandatory Provident Fund ("MPF").
Background – The Current Law in Hong Kong
Under current laws, employers and employees are required to each contribute 5% of the employee's monthly salary, up to a combined maximum of HK$3,000, as MPF. Upon termination of employment, employers may deduct their portion of MPF contributions from the severance and long-service payments payable under the present MPF offsetting mechanism. This mechanism was introduced to the business sector in exchange for its support for the MPF scheme when it launched in 2000. Since then, it has been the subject of controversy as it essentially diminishes employees' retirement protection with labour unions campaigning for its abolishment.
The Bill
According to the Bill, the offsetting mechanism will be abolished as early as 2025 and on a date to be appointed ("Transition Date") following the full implementation of the eMPF Platform which is being developed by the Mandatory Provident Fund Schemes Authority.
The highlights of the Bill are:
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