The abolition of the MPF offsetting arrangement will take effect on 1 May 2025, known as the "transition date.". After the transition date:
Accrued benefits from employers’ MPF mandatory contributions (ERMC) can no longer offset employees’ severance payment (SP) or long service payment (LSP) for years of service starting from the transition date. However, they can still offset SP/LSP for years of service before the transition date.
Accrued benefits from employers’ MPF voluntary contributions (ERVC) and gratuities based on years of service can continue to offset SP/LSP, regardless of whether the service years are before or after the transition date.
How payroll calculation is affected?
Employee will receive SP/LSP based on the new calculation, which is sum of 2 parts:
Pre-Transition Amount: calculated based on wage rate immediately preceding transition date
Post-Transition Amount: calculated based on wage rate immediately before termination of Employment
You will be preparing payroll as usual. And when deciding how much of the SP/LSP amount can be offset with accrued benefits from ERMC, the above figures will come in use.
What's new in Backstage to support the abolition of MPF offsetting arrangement?
Payroll Variable
The [LSP] variable is updated to give the new calculation result. By default, it is giving sum of both Pre and Post Transition amount.
If you would likely to clearly present each of the amount, there are variations [LSP(PRE_TRANSITION)] and [LSP(POST_TRANSITION)] for this purpose. Please create appropriate pay types and update your payroll formula for this.
Report
The updated SP/LSP Calculation report will give all key numbers involved in the calculation.