MR CHAN KIN-POR (in Cantonese): Thank you, President. The Council is scrutinizing the Bill which proposes to abolish the Mandatory Provident Fund (“MPF”) offsetting arrangement today. Due to its highly controversial nature, the issue has been under discussion for more than 10 years. After taking on board the views of various sectors of the community, the Bill is finally put to the Legislative Council for vote today, which does not come easy indeed. I support the general direction of abolishing the offsetting arrangement in principle. However, during the scrutiny of the Bill by the Bills Committee, I still heard many voices of discontent from the business sector. I hope the Government can carefully listen to the concerns of the business sector. The problems which they are worried about are really existing but not unsubstantiated. Even if the Bill is passed today, the Government should still cater for the needs of the business sector in the future. If various problems arise after the law comes into effect, the Government should summon up courage to amend the legislation to plug all loopholes.
First of all, I would like to talk about the views of the insurance industry. As some insurance institutions are MPF trustees, the industry has assumed the role as the administrator of MPF who should act in strict accordance with the law. The content of the legislation should be discussed by various sectors of the community, while the administrator should remain neutral and impartial. As the administrator should only act according to how the law is written, the industry has not put forward any special views throughout the enactment of the law. I only hope that under the coordination of the Government, various sectors can come up with the best solution for Hong Kong. The industry will follow the law after it is passed.
As a Member of the Legislative Council, I support the general direction of abolishing the offsetting arrangement because the existing mechanism has been in place for many years and the community has discovered some inadequacies in the offsetting mechanism. In particular, the grass-roots workers have a meagre income, inadequate retirement protection, and insignificant amount in their MPF accounts. If their severance payments (“SP”) or long service payments (“LSP”) are offset, the amount they receive will be significantly reduced. On the other hand, Hong Kong is about to enter the stage of population ageing. The abolition of the offsetting arrangement can help people deal with the retirement problem properly and reduce the pressure on public finance. Therefore, I have been calling on the Government to explore abolishing the offsetting arrangement on the premise that the Government will help resolve the disputes between employers and employees and put forward a proposal supported by all sectors.
In fact, the Government has done a lot of work and proposed a number of arrangements to help the business sector through the transition. For example, the Government has introduced a 25-year subsidy scheme totalling $33.2 billion (“the Subsidy Scheme”) to subsidize employers’ SP and LSP during the initial period after the conversion. In addition, the abolition of the offsetting arrangement, which does not have retrospective effect, is currently expected to be implemented in 2025. SP or LSP payable to employees before the implementation date can still be offset in the interim. Therefore, the Government is of the view that the abolition of the offsetting arrangement will not lead to a significant increase in the operating costs of enterprises or affect the business environment of Hong Kong.
However, the business community has other concerns. Firstly, the Hong Kong economy has been hit by the epidemic, the trade war between the United States and China, etc. Many enterprises are encountering a challenging period. Although the Government has set up the Subsidy Scheme, employers will be required to set up a designated savings account and make a monthly contribution of 1% of each employee’s income to cover future SP and LSP after the Bill is implemented. Despite its saving element, the contribution will still be a burden to small and medium enterprises (“SMEs”). In addition, the business sector has also questioned why the Government has taken forward the legislative work in such a hasty manner. The Bill was introduced into the Legislative Council in February this year when Hong Kong was being hit by the fifth wave of the epidemic and various industries were busy dealing with the epidemic. As such, most employers are allegedly unaware of this legislation, not to mention the impact on them. This could potentially plant a time bomb for the future.
In my opinion, the business sector’s concerns are justified, particularly in view of the impact of the epidemic on the community. Not only is the business sector unfamiliar with the Bill, I believe most Hong Kong people who have been worrying about the epidemic know nothing about the legislation, making it difficult for the community to focus their discussion on the details of the Bill. In the event of another economic recession in the future, the business sector may have to pay large amounts of SP or LSP, which may indeed result in grievances or even closure of SMEs.
Therefore, even if the Bill is passed today, the Government should still pledge to give a helping hand to the business sector, especially SMEs, in the event of some special or unforeseen circumstances in the future. Of course, we do not need to be overly pessimistic. After the epidemic is over, I believe that Hong Kong will dovetail with the overall development of the country and integrate into the development of the Greater Bay Area. With such a highly optimistic economic outlook in Hong Kong, business activities will thrive, thereby enabling enterprises to pay for staff expenses.
In addition, some members of the business sector think that the Government has reneged on its previous pledge by abolishing the offsetting mechanism. Back in those years, in order to win the support of the business community for the MPF system, the Government had pledged to continue with the offsetting mechanism. Frankly speaking, the Government has indeed changed its policy stance, but the very pledge was made more than 20 years ago. With the changes over time, there is nothing wrong with amending the law should the need arise in society. Most importantly, the Government has provided financial assistance, such as the $33.2 billion Subsidy Scheme. While I believe that the Bill is worthy of support, the Government should of course tackle whatever problems it notices if they arise in the future.
The business sector is also concerned that the abolition of the offsetting mechanism will provide a strong incentive for employees to “act in a manner calculated to provoke termination”. Under the existing legislation, only employees who have been dismissed by their employer, but not those who have resigned on their own initiative, are eligible for LSP. In the past, under the offsetting arrangement, employees did not get much compensation on top of the offset amount. However, under the new arrangement, they will immediately receive LSP in full. As such, staff members who want to leave the job may try to get more benefits by “acting in a manner calculated to provoke termination” instead of resigning on their own initiative. While they may not go so far as to obviously disobey their employers, they may act in a way to provoke their employer to terminate their job to the extent which will not obviate their employer’s need to pay LSP. On the other hand, some academics in the community are worried that some employers may force their employees to become “falsely self-employed” in order to circumvent SP or LSP.
Frankly speaking, the passage of the legislation will certainly provide more incentive for employees to “act in a manner calculated to provoke termination”. However, the Government has reiterated that employees dismissed for serious misconduct are not entitled to LSP, while “false self-employment” is an offence punishable under the Employment Ordinance. In fact, problems such as “employees acting in a manner calculated to provoke termination” and “false self-employment” reflect the tension in employer-employee relations. The Government’s current legislative exercise will inevitably lead to further conflicts between employers and employees. The Government should therefore promote reconciliation between employees and employers along with this legislative exercise. The Labour Department has the responsibility to explain the legislation so that employees and employers understand their rights and responsibilities and refrain from committing illegal acts, and to provide more mediation services for both parties so that they will have the opportunity to resolve their conflicts.
Lastly, I would like to talk about the Subsidy Scheme. While the Subsidy Scheme is as long as 25 years and its amount of subsidy has increased compared with previous proposals, it is mainly in the first nine years that the amount of subsidy is relatively large and employers’ SP and LSP will be capped, while the amount of subsidy will be significantly reduced thereafter. In my view, it is insufficient to cap SP and LSP in the first nine years only. In the initial period after the abolition of the offsetting arrangement, given the absence of a retrospective period under the new system, employees’ years of service will have to be calculated afresh. As a result, the amount received by employees will be limited at the beginning. However, after 10 years or so, the amount will increase significantly, but the government subsidy will be reduced drastically by then. I therefore support an extension of the period for capping employers’ SP and LSP. The Government has pledged to conduct an interim review in the future. I hope that the Government will conduct a study as soon as possible after the implementation of the new system and put forward improvement proposals in the light of the actual situation.
Thank you, President