The reimbursement process for the subsidy for the abolition of MPF offsetting announced

The abolition of MPF offsetting for Severance Payment (“SP”) and Long Service Payment (“LSP”) came into effect on 1 May 2025. To help employers adapt financially to the new arrangement, the Labour Department has launched the Subsidy Scheme for the Abolition of the MPF Offsetting Arrangement (“SSA”) to take effect at the same time.

The Labour Department has set up a website for employers and employees to better understand how the SSA works, we set out a high-level summary below.

1. The subsidy will only cover the SP/LSP attributable to service completed from 1 May 2025 (“the Post-transition SP/LSP”).
2. The subsidy will be based on the net amount of Post-transition SP/LSP (i.e. after any eligible offset from employer voluntary contributions and/or gratuities etc.) actually paid to the employee.
3. The subsidy rate will be determined by
   • the subsidy year (which runs from 1 May to 30 April) in which the termination of employment occurs; and
   • the total Post-transition SP/LSP made in that subsidy year by the employer

   If the new application pushes the total Post-transition SP/LSP in that subsidy year to exceed HKD 500,000, all approved applications (new and old in that subsidy year) will be re-ordered in descending order according to amounts and the relevant subsidy rate re-applied to determine the relevant subsidy ratio. Note this recalculation may result in a decrease in the subsidy amount previously granted and could be clawed back with the latest application.

4. The employer must pay the SP/LSP first and then apply for reimbursement from the Labour Department.
5. Applications must be submitted within 3 months of the SP/LSP payment.
6. Employee consent must be obtained to provide his/her personal data and necessary information and documents for the subsidy application.
7. Aside from the usual paper submission route, the Labour Department has also set up an online portal, TransitionEase, to facilitate the process. Access the application form and guidance notes.
8. What supporting documentation do you need for the application?
   1. Proof of employer registration/identity
   2. Proof that payment is from employer account
   3. Company’s authorisation letter appointing the primary authorised person for handling application-related matters (for applications submitted through the TransitionEase Portal only)
   4. Employment and termination proof of the employee to which the application refers. Examples of proof include employment contract, termination notice, SP/LSP calculations etc.
   5. Wage records for the relevant employee, e.g., salary slips, bank records, etc.
   6. Membership proof of MPF Scheme or exempted ORSO scheme to show entitlement for offset, e.g. SP/LSP offsetting statement
   7. Proof of SP/LSP payment, and documents showing the off setting item(s) used to off set (if any) the post-transition portion of SP/LSP and the SP/LSP calculation, e.g., termination payment slip

Actions Required:

We would recommend the following:

• Visit the SSA website and decide the method of future submissions – online or paper.
• Ensure the wages records are complete and accessible.
• Ensure that your termination process is updated for the requisite submission information and that 3-month re-imbursement submission deadline is observed.
• SP/LSP calculations/statements have appeared as supporting evidence for some of items above. You may want to review your termination documentation and ensure that this information is captured to streamline the process.

For further information on the LSP offset and on how to contact us if we could be of assistance, access our webpage on Abolition of MPF offsetting and employers’ accounting provisions.

Authors

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Elaine Hwang

Senior Director & Business Development Lead, Greater China

email Email phone +852 6466 7833

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William Chow

Head of Retirement, Hong Kong & Macau

email Email phone +852 9860 3897

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