Enhancing the Mandatory Provident Fund System
188. The Government proposes to progressively abolish the
“offsetting” of severance payments (SP) or long service payments
(LSP) with MPF contributions. The proposal contains three key
elements. First, the abolition will have no retrospective effect. In
other words, employers’ MPF contributions before the
implementation date of the proposal will be “grandfathered”.
189. Second, as some SP and LSP functions overlap with those
of the MPF system, we propose that the amount of SP or LSP
payable for an employment period from the implementation date
be adjusted downwards from the existing entitlement of twothirds
of one month’s wages to half a month’s wages as
compensation for each year of service. Third, the Government
will share part of the expenses on SP or LSP of employers in the
10 years after the implementation date of the abolition to help
employers, especially SMEs.
190. The above arrangement will only apply to employees
covered by the Mandatory Provident Fund Schemes Ordinance
or other statutory retirement schemes.