The Mandatory Provident Fund (MPF) continues to be the foundation of Hong Kong’s retirement protection system. As of 2026, the MPF system is entering a stricter enforcement phase. The MPFA has introduced proposals such as a two-tier surcharge mechanism to penalise late contributions, along with broader reforms including investment flexibility, contribution threshold reviews, and the push towards full MPF portability. These changes signal a shift from basic compliance to a more tightly regulated and employee-centric system.
For employers, these changes have real money and paperwork effects. They can’t use required MPF payments to balance out severance payments (SP) or long service payments (LSP) earned after the change date.
This guide explains the changes, what will happen in 2026, and how employers can handle MPF duties well while keeping employees’ retirement money safe.
Review of Default Investment Strategy (DIS)
The MPFA is also reviewing the Default Investment Strategy (DIS) to ensure it remains cost-efficient and aligned with long-term investment goals. Any adjustments may impact fund allocation, fees, and returns for employees who rely on default investment options.
Getting to Know the End of the MPF Balancing System
What was MPF offsetting and why did it stop?
Since MPF began in 2000, companies could use their mandatory MPF contributions to balance out statutory severance and long service payments. This approach faced heavy criticism as time went on because it cut into employees’ retirement funds to pay for job ending costs.
After much public input and lawmaker talks, the Employment and Retirement Schemes Legislation (Offsetting Arrangement Amendment) Ordinance took effect on 1 May 2025.
By 2026, this rule is in full force and applies to all job types without any exceptions.
Refer more: Know the Difference Between Retirement Schemes in Hong Kong -MPF and ORSO.
How the Grandfathering Arrangement Works in Practice
To be fair, the law brought in a grandfathering mechanism that splits employment service into two periods: work before 1 May 2025 and work after that date.
For work before 1 May 2025, employees can still use both mandatory and voluntary MPF contributions to offset SP or LSP. For work after 1 May 2025, the law bans offsetting using mandatory MPF contributions. voluntary contributions or contractual gratuities can apply.
The law’s formula to calculate SP and LSP stays the same. It uses two-thirds of what an employee earned in their last full month, with a limit of HKD 22,500. The Employment Ordinance sets a total lifetime cap of HKD 390,000.
Learn more: Types Of MPF And How To Enrol Employees In An Organisation.
What Employers Must Do for MPF in 2026
Required payments and how they affect funding
Starting in 2026, companies will have to pay the full amount in cash for SP and LSP that come from service periods after the transition. This change makes it much more crucial to plan the workforce, budget for terminations, and predict long-term costs.
The required MPF payments still go to employees’ retirement funds. Employers can no longer use them as a financial cushion during company restructuring, downsizing, or layoffs.
Businesses that used to rely on offsetting now face higher costs when letting employees go. They need to factor these expenses into their financial plans and payroll budgets.
Stricter Penalties for Late MPF Contributions
In 2026, compliance enforcement has tightened significantly. The MPFA is introducing a two-tier surcharge system aimed at penalising employers who delay MPF contributions. This means late payments will not only incur penalties but may escalate depending on the delay period, increasing financial and reputational risks for businesses.
Know more: Payroll Compliance Guide In 2025 And How To Automate Now.
Voluntary MPF Contributions and Gratuities
While required payments are safeguarded, voluntary MPF contributions (ERVC) and length-of-service gratuities remain valid tools to offset costs in 2026. Companies can apply these to SP/LSP both before and after the transition as long as they spell them out in job contracts or benefit policies.
The MPFA is currently reviewing the minimum and maximum relevant income levels for MPF contributions as part of its 2022–2026 statutory review cycle. Any increase in these thresholds may result in higher mandatory contributions for both employers and employees, making payroll forecasting even more critical.
The eMPF Platform: What Employers Need to Do in 2026
Current status of the eMPF rollout
By 2026, the eMPF Platform is no longer just in transition—it is becoming the centralised infrastructure for MPF administration, with more employers and trustees fully onboarded into the system.
Another major development in 2026 is the push towards full MPF portability. This reform will allow employees to transfer their MPF benefits more freely across providers, including employer contributions in future phases. For employers, this means increased transparency and potential shifts in employee expectations around fund performance and flexibility
This platform brings MPF administration under one roof doing away with scattered trustee portals and paper-heavy methods. It offers a single system for handling contributions signing up employees keeping accounts up-to-date, and creating reports.
What employers need to do
Employers must make sure their payroll systems can produce data that works with eMPF. Teams in HR and finance need to check employee files, MPF membership info, and contribution records before making the switch.
Slow processing, data inconsistencies, or wrong filings can lead to compliance issues or payment mistakes. This makes early planning crucial even in 2026.
Compliance Issues and Real-World Hurdles
The new MPF rules after offsetting have put more pressure on businesses to follow the rules. Companies now face risks in three main areas:
First, if you don’t split pre- and post-change service times, you might break the law by offsetting. Second, if your payroll systems don’t match eMPF standards, you might send in payments late or with mistakes. Third, if you don’t keep good records of extra contributions or severance terms, you could end up in arguments when employees leave their jobs.
Additionally, late MPF contributions are now under stricter scrutiny, with enhanced penalty mechanisms being introduced. Employers must ensure timely submissions to avoid escalating financial consequences.
Beyond compliance, the MPF system is evolving into a more robust and flexible retirement framework. Key developments include enhanced investment flexibility for trustees, ongoing reviews of Default Investment Strategy (DIS) funds, and regulatory changes aimed at improving long-term returns for employees.
These reforms indicate that MPF is not just becoming stricter—but also more competitive, transparent, and employee-focused in the years ahead.
To Sum Up: Staying MPF-Compliant Without Worry
Getting rid of MPF offsetting is the biggest change to Hong Kong’s retirement system in over 20 years. By 2026, companies need to work under this new system balancing higher costs when letting employees go with better retirement protection for employees.
Getting things right now hinges on having reliable payroll systems well-written job contracts making good use of optional perks and connecting with the eMPF system. Companies that jump on board cut down on rule-breaking risks and build more trust and openness with their employees.
If your company’s taking another look at its MPF methods, payroll setup, or planning for exit costs, it’s time to take action with a clear head and self-assurance. Call us today!
Frequently Asked Questions:
Will Hong Kong do away with MPF offsetting in 2026?
Yes. Starting May 1, 2025, companies can’t use required MPF payments to offset severance pay (SP) or long service pay (LSP) for work done after this date. By 2026, this rule applies to all industries, without exceptions.
Do businesses have any options to offset SP or LSP with MPF contributions?
Companies can use optional MPF contributions or agreed-upon bonuses to offset SP or LSP as long as their employment contracts or benefit policies state this. Required MPF contributions are set aside solely for employee retirement and can’t be used for offsetting.
How does the grandfathering arrangement work after 2025?
The grandfathering arrangement splits employment service into two periods: pre-transition (before May 1, 2025) and post-transition. Employers can use both mandatory and voluntary MPF contributions to offset SP/LSP for pre-transition service. However, for post-transition service, they can’t use mandatory MPF contributions for offsetting.
What is the employer’s responsibility under the eMPF platform in 2026?
By 2026, companies need to make sure their payroll and HR systems work with the eMPF platform. This means they must send accurate MPF contribution data online, keep employee records current, and switch to the new trustee system as the government rolls it out in stages.
