MPF Offsetting Arrangement 2025

The MPF "offsetting" system of the Mandatory Provident Fund (MPF) in Hong Kong was abolished on May 1, 2025. As the government pushes to abolish the "offsetting" arrangement, both employers and employees need to have a deep understanding of how this important change affects their rights and obligations. OneStart explains the key points you must know to help you cope with the changes easily.

1. What is MPF Offsetting?

MPF Offsetting refers to the fact that employers can use the MPF contributions and investment returns made for employees in the past to pay severance pay or long service payment. However, this mechanism has long been controversial because it causes employees' retirement savings to be "deducted" when they change jobs or are fired.

MPF Offsetting Changes

Phased Removal of Offsetting Arrangements

The government plans to phase out the offsetting mechanism in stages. The first phase will be implemented for new employees, and the offsetting arrangements for existing employees will be gradually adjusted during the transition period. The specific implementation schedule and detailed arrangements will be determined based on the progress of legislation and the completion of preparatory work.

Employer Responsibilities Changes

After the cancellation of offsetting, employers will need to bear the full amount of severance pay and long service payment liability, and can no longer use MPF contributions to offset these statutory compensation. This will require employers to re-plan their human resource costs and cash flow management.

Government Support Measures

To help employers adapt to the new system, the government is studying the introduction of a number of support measures, including providing subsidies for small and medium-sized enterprises, establishing special funds, and providing tax incentives. These measures are aimed at reducing the financial burden of employers and ensuring a smooth transition.

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2. Impact and Benefits on Employees

Strengthen Retirement Security: The most direct benefit of canceling offsetting is to strengthen employees' retirement security. Employees' MPF accrued benefits will no longer be reduced due to job transfer or dismissal, which will help build a more stable retirement reserve.

Increase Job-Changing Flexibility: Under the new system, employees do not need to worry about losing part of their retirement savings when changing jobs, which will enhance the mobility of the labor market and facilitate talent mobility and career development.

Optimizing Long-Term Financial Planning: Employees can more accurately predict the MPF accrued benefits at retirement, which helps to make more effective long-term financial planning and retirement arrangements.

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3. Employer Coping Strategies

Reassessing Human Resource Costs

Employers need to recalculate and budget their human resource costs, include severance pay and long-service payments in their normal operating expenses, and adjust their business strategies accordingly.

Cash Flow Management

It is recommended that employers establish special reserves or purchase relevant insurance products to cope with possible statutory compensation liabilities in the future and ensure sufficient cash flow to cope with emergencies.

Review of Personnel Policies

This is a good time to review personnel policies, including recruitment strategies, employee retention measures, training and development plans, etc., to reduce employee turnover and related compensation costs.

Planning and Preparation

Keep an Eye on Policy Developments: It is recommended that employers and employees pay close attention to the latest policy developments and implementation details announced by the government, and adjust their plans and preparations in a timely manner. You can refer to the official websites of the Hong Kong government and relevant institutions for the latest information and guidance.

Seek Professional Advice: In the face of system changes, it is recommended to seek the advice of professional financial advisors, human resources advisors or legal experts to ensure that you fully understand the impact of the new system and the response plan.

Pre-Planning and Preparation: Employers and employees should start planning and preparation in advance, including financial arrangements, policy adjustments, employee communication and other aspects.

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4. Summary

The MPF offsetting transformation has far-reaching impacts on both employees and employers. By fully understanding the new system, you can plan your retirement reserves or human resource strategies more effectively and face this system transformation calmly. Only by paying continuous attention to details and adjusting arrangements in a timely manner can you move forward steadily under the new system.

OneStart Business Center is always ready to provide you with a full range of services from MPF consultants. If you want to know more about the plan, please call 3575 6888 or contact us via WhatsApp.

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