What employers should review:
Hong Kong's employment market entered a new phase after the abolition of the MPF offsetting arrangement took effect on 1 May 2025. Under the new regime, employers can no longer use accrued benefits derived from mandatory employer MPF contributions to offset severance payment or long service payment for the post-transition employment period.
The change is especially relevant in 2026, the first full year in which employers are operating under the new framework. Recent discussion around the Government's Subsidy Scheme for Abolition of MPF Offsetting Arrangement has also highlighted the need for employers to understand eligibility, prepare documentation, and factor potential SP/LSP liabilities into people planning.
Impact on hiring and workforce planning:
The policy may influence how employers budget for headcount, retention, and restructuring decisions. While hiring demand is still shaped by business growth, talent supply, and sector conditions, the MPF offsetting abolition adds another cost factor for employers to consider when planning permanent roles, contract roles, and workforce changes.
Practical next steps for HR teams:
Employers should treat 2026 as a year to tighten compliance and documentation. A practical approach is to create an internal checklist, review employment contracts and handbook language, align payroll and finance teams, and seek professional advice before making redundancy or long service payment decisions. For candidates and employees, the change strengthens protection over retirement benefits and makes SP/LSP arrangements more transparent.
Why the MPF offsetting change matters now
For HR leaders and business owners, the abolition is more than a payroll update. It changes how companies assess employment costs when handling redundancy, long service payment, restructuring, or long-tenured staff transitions. Employees who continue working across the transition date may have both pre-transition and post-transition portions, so employers need clean records and clear calculations.
The priority for employers is to make sure internal systems can separate pre-transition and post-transition service periods accurately. Payroll teams should also review MPF contribution records, voluntary contribution arrangements, gratuity terms, termination workflows, and supporting documents needed for any subsidy application.
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