Employers Will Not Save Severance Payment/Long Service Payment Expenses by
Dismissing Employees Before the Abolition of MPF Offsetting Arrangement

The abolition of MPF offsetting arrangement will take effect on 1 May 2025 (i.e. the transition date).  The Labour Department would like to stress that dismissing existing employees before 1 May next year and employing new ones cannot save money; it may even incur additional costs.  Since the abolition of MPF offsetting arrangement has no retrospective effect, employers can still use the accrued benefits of their MPF mandatory contributions to offset employees’ pre-transition portion of severance payment (SP) and long service payment (LSP).  On the contrary, employers can no longer offset SP/LSP of newly hired employees after the transition date.

Furthermore, the pre-transition portion of SP/LSP will be calculated on the basis of the monthly wages immediately preceding the transition date.  In other words, irrespective of the length of employment of an existing employee after the transition date and whether there is a pay rise, the pre-transition portion of SP/LSP of that employee would be the same as if the employee is terminated right before the abolition.

Please refer to the attached leaflet or visit our thematic website on the abolition of MPF offsetting arrangement at https://www.op.labour.gov.hk/en for detailed information.  We appreciate if your association/ organisation would further distribute this message and the relevant attachment to your members.

Attachment:

Leaflet – Employers dismissing existing employees and employing new ones cannot save money under the abolition of MPF offsetting arrangement

Employment Benefits Support Division

Labour Department

Email address: ebsd@labour.gov.hk