MPF System

Arrangements for Offsetting Long Service Payment and Severance Payment

Long Service Payment (LSP) / Severance Payment (SP) made by employers

Under the Employment Ordinance, employees may be entitled to LSP or SP payable by their employers.

For more information on the eligibility for and calculation of LSP/SP, please visit Labour Department’s website.

Offsetting LSP/SP against MPF

Employers can offset the LSP/SP payable to employees under the Employment Ordinance against the MPF derived from the employer’s mandatory and voluntary contributions.

Offsetting procedures

Offsetting may take place under two different scenarios, depending on whether or not the employers have already paid the LSP/SP to their employees.

If LSP/SP has been paid:

Employers may make an application with supporting documents to their trustees to withdraw the MPF derived from the employer’s contributions from the employee’s account.

Employers may require their employees to acknowledge receipt of such payment in writing to facilitate their application for offsetting with their trustees.

If LSP/SP has not been paid:

Employees may make an application in writing to their trustees directly to withdraw the MPF derived from the employer’s contributions from their accounts.

If the amount of MPF derived from the employer’s contributions is not enough to cover the LSP/SP, the employee is entitled to recover the shortfall from the employer.

In making the application, the employees may be required by their trustees to provide proof that they are entitled to the LSP/SP and that such payment has not been paid by their employers.

MPF Tips

Employees should ask their employers for a letter to confirm that the LSP/SP has not been paid to them.

The letter should include:

the employer’s authorized signature; and
the company chop.

Example:

Scenario 1: If the amount of MPF derived from the employer’s contributions exceeds the amount of LSP/SP, the remaining balance after offsetting has to be retained in the employee’s account and is vested in the employee.

MPF(from the employer's contributions) in the employee's account:$50000. Offset amount against MPF (from the employer's contributions):$30000. Balance of MPF(from the employer's contributions) in the employee's account:$20000. Additional amount paid by the employer to the employee for LSP/SP:0

Scenario 2: If the amount of MPF derived from the employer’s contributions is insufficient to fully offset the amount of LSP/SP, the employer is required to pay the outstanding balance to the employee.

MPF(from the employer's contributions) in the employee's account:$20000. Offset amount against MPF(from the employer's contributions):$30000. Balance of MPF(from the employer's contributions) in the employee's account:0. Additional amount paid by the employer to the employee for LSP/SP:$10000