Offsetting of Severance Payments and Long Service Payments
An employer who is liable to pay an employee severance payments ("SP") or long service payments ("LSP") under the Employment Ordinance ("EO") (Chapter 57, Laws of Hong Kong), can offset the SP or LSP with the accrued benefits derived from the employer’s contributions made to an MPF scheme for the employee.
- Employers, after paying the employee SP or LSP in accordance with EO, can apply to the MPF trustee with supporting evidence for re-payment of the relevant amount from the employee’s accrued benefits derived from employer’s contributions.
- If an employer has not paid the whole SP or LSP to an employee in accordance with EO, the employee may apply to withdraw the outstanding sum from the accrued benefits derived from the employer’s contributions in his/her MPF account. To do so, the employee will need to apply in writing and provide supporting evidence to the MPF trustee.
- If the accrued benefits derived from the employer’s contributions are insufficient to cover the SP or LSP payable by the employer, the employee is entitled to recover the difference from the employer.
As regards the operational details of the offsetting arrangements, employers and employees are advised to approach their MPF trustees for assistance.