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Are companies allowed to reduce the owed severance by subtracting MPF contributions?

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  1. #1

    Join Date
    Aug 2011
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    Question Are companies allowed to reduce the owed severance by subtracting MPF contributions?

    Can companies simply subtract the the amount of severance they owe you, by deducting the amount of their MPF contributions?

    I worked for 4 years there. I think there is a maximum salary cap, so my owed severance is around $60k. However my company contributed $1000 every month towards my MPF, which equals $48k. They subtracted this amount from my owed severance.

    They have decided to let me go and told me my total severance to be paid is about $12k.

    This is hardly enough to make it through one month of unemployment. Is this right? I feel like I am being robbed.. Please help!

    dear giant likes this.

  2. #2

    Join Date
    Nov 2010
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    1,115

    yes it is within their right.

    from the relevant website:

    3.13
    OFFSETTING OF LONG SERVICE PAYMENTS/SEVERANCE PAYMENTS
    (a)
    Under the provisions of the Employment Ordinance, an employee may become entitled to a long service payment or a severance payment from the employer on the occurrence of circumstances specified in that Ordinance. The employer is entitled to offset such payments out of the accrued benefits derived from the contributions made by the employer in respect of the employee in the MPF scheme.
    (b)
    The employer can apply to the trustee to deduct a relevant amount for this purpose for payment to a leaving employee. Some examples will illustrate:
    3/22
    (i)
    If the amount of benefits accrued from the employers contributions is HK$55,000 and the amount of the long service payment is HK$80,000, the employer should pay HK$80,000 to the employee but he can apply to withdraw HK$55,000 from the employees MPF account as reimbursement of his payment of HK$80,000. The balance of HK$25,000 must be paid from his own funds to the leaving employee.
    (ii)
    If the long service payment is only HK$40,000 (with accrued benefits as with (i) above), the employer can only request the trustee to reimburse him for HK$40,000 paid to the leaving employee. The remaining accrued benefits, namely the balance of HK$15,000 derived from the employers contributions, together with those derived from the total contributions made by the employee, have to be transferred to the MPF scheme designated by the employee and preserved until the employee retires. (These comments apply to mandatory contributions. The employee may choose to withdraw his voluntary contributions subject to the governing rules of the scheme.)
    (c) The employer should note that in offsetting long service payments or severance payments, he will need to comply with other requirements set out in the Employment Ordinance concerning such payments.


  3. #3

    Join Date
    Oct 2010
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    That is a shockingly awful piece of legislation.

    dear giant likes this.

  4. #4

    Join Date
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    Quote Originally Posted by TheBrit
    That is a shockingly awful piece of legislation.
    No fcuking surprise though.

  5. #5

    Join Date
    Nov 2010
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    when have the rights of the little guy ever mattered to anyone in legislature in Hong Kong? i agree it's ridiculous, but not surprising...look at the clusterf*ck involved in getting a basic minimum wage in place (and then the horseshit about paid/unpaid lunches that followed...)

    dear giant likes this.

  6. #6

    Join Date
    Mar 2007
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    Gold Coast Marina
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    17,970

    Yes - it's allowed. It's appalling, I agree, and when we severed our last two people we chose not to apply it because it just felt so unfair.

    luckycat and Beanieskis like this.

  7. #7

    Join Date
    Aug 2007
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    504

    We actually paid the full amount ex employee and then MPF gave us our share back at market value so we got less than what we paid to the employee


  8. #8

    Join Date
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    Quote Originally Posted by neha
    We actually paid the full amount ex employee and then MPF gave us our share back at market value so we got less than what we paid to the employee
    Sorry, but what do you mean MPF gave you back your share?

  9. #9

    Join Date
    Feb 2010
    Posts
    7,446

    I am a bit confused (not hard you say!).

    OK, so you paid $1000 a month and your employer paid $1000 a month. Total $2000 a month to MPF. So after 4 years you paid $48,000 personally. Is that right?

    What makes you entitled to get this back?


  10. #10

    Join Date
    Jun 2005
    Location
    Hong Kong
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    23,221

    The law says that the employer may take back their contributions out of the MPF to fund a severance or long service payment to the employee.

    As others have said, this is an awful law, and good employers don't take advantage of it.


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