MPF offsetting Hong Kong severance payment guide

MPF Offsetting Hong Kong

MPF offsetting in Hong Kong let an employer use accrued benefits from mandatory MPF contributions to reduce or eliminate a severance payment or long service payment owed to an employee. The arrangement was governed by the Employment Ordinance (Cap. 57) and the Mandatory Provident Fund Schemes Ordinance.

The mechanism worked by deducting the employer's mandatory contributions and the attributable investment returns from the statutory severance or long service payment calculation. The employer paid only the remaining balance, if any.

MPF Offsetting Abolition

The MPF offsetting arrangement was abolished with effect from 1 May 2025. From that date, employers may no longer use accrued benefits from their mandatory MPF contributions to offset severance payment or long service payment obligations.

Severance Payment MPF Offsetting

Before abolition, an employer could offset the entire severance payment using the employer's mandatory MPF contributions. Severance payment is triggered under Cap. 57 when an employee with at least 24 months' continuous service is dismissed due to redundancy or business closure.

Long Service Payment MPF Offsetting

The same offsetting rules applied to long service payment. An employee qualifies for long service payment after five years of continuous service, or fewer years if the employee is aged 65 or older and the termination is not due to redundancy.

Hong Kong MPF Offsetting Rules

The abolition has no retrospective effect. For employees whose employment began before 1 May 2025, accrued benefits from mandatory contributions may still offset the portion of severance or long service payment calculated on years of service before that date.

Accrued benefits from voluntary contributions and gratuities based on length of service may still be used to offset severance or long service payment.

The Government operates a subsidy scheme to share employers' expenses on severance and long service payment for service on or after 1 May 2025. The Mandatory Provident Fund Schemes Authority (MPFA) administers the MPF system.