What Hong Kong employers need to know about the Subsidy Scheme for Abolition of MPF Offsetting Arrangement

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Eligible employers may apply for subsidies after settling severance payments and long service payments to their employees under SSA after the abolition of the offsetting arrangement on 1 May 2025.

The HKSAR Government has announced the implementation of the abolition of the offsetting arrangement under the Mandatory Provident Fund (MPF) System on 1 May 2025.

To assist employers in adapting to the policy change, the Government will introduce a 25-year Subsidy Scheme for Abolition of MPF Offsetting Arrangement (SSA) on the same date to help share employers’ expenses on the post-transition portion of severance payment (SP) and long service payment (LSP).

The Finance Committee of the Legislative Council has approved on 22 November 2024 the creation of a new non-recurrent commitment of HK$33,551.9mn for implementing the SSA.

From 1 May 2025, eligible employers, after settling SP/LSP to their employees in accordance with the Employment Ordinance (EO), may apply for subsidies under SSA.

Details about SSA are as follows.

Coverage

There will be a specified share ratio in respect of the amount of SP/LSP payable to an employee by an employer each year after the abolition of the offsetting arrangement. Employers shall pay the amount calculated according to the share ratio.

Specified share ratios / ‘capped amounts’ will be set based on the total expenses of SP/LSP an employer pays in a year. The threshold is set at HK$500,000.

For cases where the accumulated expenses of SP/LSP fall within HK$500,000:

• There will be a ‘capped amount’ per case in respect of the SP/LSP payable by an employer for the initial nine years.
• If the shared amount payable by an employer calculated according to the share ratio exceeds the ‘capped amount’, the employer only needs to pay the 'capped amount'. The remaining amount of SP/LSP will be subsidised by the Government.

For cases where the accumulated expenses of SP/LSP go beyond HK$500,000:

• The amount payable by an employer is calculated according to the share ratio with no ‘capped amount’. The remaining amount of SP/LSP will be subsidised by the Government.

Employer’s share of post-abolition SP/LSP under the SSA:

Eligibility

Employees who are currently not covered by the MPF System or other statutory retirement schemes are not affected by the abolition of MPF offsetting arrangement. Their employers will not be eligible for Government subsidy.

Public bodies/subvented organisations will not be eligible for Government subsidy if their employees’ SP/LSP has been fully funded by the Government.

Details of the application eligibility are to be announced.

Method of application

Employers may submit applications and upload related supporting documents, e.g. company registration proof, salary record of the employee concerned, proof of settlement of the claimed SP/LSP, information of bank accounts for receiving subsidies, etc., through a one-stop online portal ‘TransitionEase Portal’, which is under development.

Employers may also choose to submit applications by other means, e.g. email, fax or post or in person.

Method of subsidy

The Government will disburse the subsidy to employers on a reimbursement basis. Employers should pay SP/LSP to employees in accordance with the provisions under the EO and then submit applications for disbursement of Government subsidy.

Employers should prepare all supporting documents required when submitting their applications to facilitate approval of applications and disbursement of subsidies as soon as possible.