The HKSAR government has officially announced that the "2022 Employment and Retirement Schemes Legislation (Offset Arrangement) (Amendment) Ordinance" will come into effect on May 1 of this year, implementing the cancellation of offsetting arrangements. In the long term, this ordinance will inevitably increase labor costs. The government has provided details on its implementation to the public and employers through various documents, including examples for calculating Long Service Payments (LSP) and Severance Payments (SP), as well as guidance on applying for government subsidy programs.
How should Finance and HR departments respond and strategically plan? Key considerations include planning to reduce labor costs, revising HR policies accordingly, clearly defining post-offsetting arrangements for LSP and SP in the employee handbook, formulating voluntary contribution and contract gratuity policies to protect employers’ rights. They should also ensure the accurate calculations of LSP and SP to avoid potential criminal liability.
Content:
1. Overview of the Ordinance
2. Financial Modelling After the Ordinance Takes Effect
How to accurately create financial models to assess and calculate the increase in labor costs and expenditures, and formulate corresponding business plans?
3. Calculation Methods and Examples for LSP and SP After the Ordinance Comes into Effect:
a) Explanation of examples of different calculation methods (The calculation for employees who joined the company before the transition date is particularly complex. The speaker will provide relevant Excel templates for finance and HR colleagues to facilitate calculations).
b) How to calculate for monthly-paid employees employed for less than 30 days before the transition date?
c) How to calculate for daily-paid employees?
d) If LSP/SP exceeds the statutory cap of HKD 390,000, how should the offsetting arrangement be calculated?
e) For companies still using the ORSO Scheme, how to calculate after deducting the "excluded amounts" benefit balance? (Note: The calculation method is quite complex).
f) In what situations would an employee's LSP/SP benefits be lower after the cancellation of offsetting compared to before? How will the government assist employees in such situations?
g) What types of employees are not subject to the offsetting arrangement?
4. Recommendations for HR System Adjustments
How to suggest revisions to HR systems to simplify the calculation process? (Note: Calculation errors may involve criminal liability).
5. Details and Examples of the Government Subsidy Program:
a) How to maximize government subsidies?
b) For employers whose annual LSP/SP expenditure is less than HKD 500,000, the subsidy cap is highly attractive. How can effective planning ensure maximum subsidies?
c) Can the same employer apply for subsidies separately for different companies to maximize government funding?
d) Must employers pay LSP/SP first to apply for government subsidies?
e) HKD 500,000 is the subsidy program's threshold. How should cases exceeding HKD 500,000 be handled?
f) What data should HR departments retain to apply for subsidies?
g) Which organizations are not eligible for subsidies to avoid "double subsidies" under the law?
h) Under what circumstances might employers not be eligible for subsidies?
6. Voluntary Contributions and Legal Policies
Even after the ordinance takes effect, voluntary contributions can still be offset. How to draft a voluntary contribution policy that best protects the employer's rights? (Note: Policy examples will be provided for reference).
7. Contract Gratuities and Legal Considerations
Contract gratuities can still be offset after the Ordinance takes effect. What legal issues should be noted when drafting contract gratuity guidelines or policies? (Note: Policy examples will be provided for reference).
8. Drafting Updated Employee Handbook Provisions
How to draft clauses in the employee handbook regarding the calculation methods for relevant benefits after the cancellation of offsetting? (Note: Clause examples will be provided for reference).
9. Key Financial and HR Long-Term Strategies in Response to the Ordinance:
a) Terminating employers with long-serving employees before the transition date and rehire them, what are the financial (Expenses Increment) and legal risks?
b) The financial and legal risks of employing more contract-based, temporary, or self-employed workers to offset labor costs.
10. The Maximum Relevant Income Level of the Forward MPF May Be Raised
a) According to the June 2023 Government review paper, the Mandatory Provident Fund Schemes Authority will conduct a review of the minimum and maximum relevant income levels for calculating mandatory MPF contributions
b) As the minimum and maximum relevant income levels have not been adjusted since 2013, it is expected that this review may increase the relevant income levels
c) How to estimate the potential increase in employers' mandatory contribution expenditure from a financial/human resource perspective and formulate future business plans?
Target Audience:
Finance Managers and Finance Professionals, Human Resources Managers and HR Professionals, and Management Staff
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