Abolition of MPF Offsetting Takes Effect on 1 May 2025
Starting from, May 1, 2025, employers can no longer use the money they contribute to the Mandatory Provident Fund (MPF) to reduce severance payments (SP) or long service payments (LSP). This change is called the abolition of the offsetting arrangement.
From May 1, 2025, employers cannot use their mandatory MPF contributions to reduce severance payments (SP) or long service payments (LSP) for work done after this date. However, they can still use voluntary contributions or contractual gratuities based on years of service to offset SP/LSP. This change does not apply to work done before May 1, 2025, so employers can still offset SP/LSP for those earlier periods.
The rule stopping employers from using mandatory contributions to offset severance or long service payments also applies to occupational retirement schemes under the Occupational Retirement Schemes Ordinance (Cap. 426), the two school provident funds under the Grant Schools Provident Fund Rules (Cap. 279C) and Subsidized Schools Provident Fund Rules (Cap. 279D), and overseas retirement schemes for employees from outside Hong Kong that are exempt from the MPF System.
Starting May 1, 2025, the Labour Department launches a 25-year Subsidy Scheme (SSA) to help employers cover severance (SP) and long service payment (LSP) costs after the MPF offsetting rule ends. Employers can apply for the subsidy from today but must first pay SP/LSP to employees as required by the Employment Ordinance.
