The MPF carrot: Using retirement benefits to retain talent
The Classified Post HR Conference hears why contributions to Hong Kong’s MPF fund have skyrocketed since 2006
Organisations that want to reach the top need to keep their talent. Losing it can result in higher recruitment costs, lower profitability, weakened customer service and a blow to the morale of the workforce, according to data cited by AIA.
Listening and responding to employees specific compensation and benefits (C&B) concerns in particular markets is one way for organisations to show that they care about their employees, speakers at the Classified Post HR Conference in Hong Kong said.
Take the example of Starbucks, which has just announced a new benefit for its employees in China. In a savvy move that recognises the importance to China’s workers of the welfare of their elderly parents, the company has announced that it will provide insurance that supplements the country’s national healthcare for up to 10,000 of its employees’ parents should they become critically ill, according to a report published by Caixin Global.
The initiative was inspired by an employee survey that showed that 70 per cent of Starbucks’ staff were concerned about their parents’ healthcare.
Healthcare during retirement ranks high as a concern among employees in Asia, according to Mercer’s research, which suggests that for employees in Hong Kong and China, a good retirement plan is one of the top four most attractive benefits employers can offer.
In Hong Kong, retirement plans are centred on the MPF, or mandatory provident fund. Employers and employees each pay into the fund and can top up their contributions with additional voluntary payments.
That option that has become increasingly popular, said MPF provider AIA, which found voluntary contributions have skyrocketed from HK$3,254 billion in 2006 to HK$16,071 billion in 2016.
It signals a C&B opportunity for HR. Employees see voluntary contributions by employers to their MPF funds as a pay rise, and this provides employers with a competitive opportunity to retain talent.
AIA suggest three ways HR can use MPF effectively. Employers can increase their contributions and remove the contributions ceiling according to employees’ years of service and rank; they can match employees’ voluntary contributions to the MPF; or employers can vary the vesting scale based on employees’ rank and years of service. The vesting scale specifies the percentage of benefits derived from employers’ contributions that the member is entitled to, based on their years of service.
These solutions create a win-win outcome for employers and employees, said Stephen Fung, chief executive officer at AIA MPF. Employers can get a cut in profit tax of up to 15 percent of employees’ annual salary for voluntary contributions, and it also saves them time and money on choosing C&B strategies, he said. Employees, meanwhile, see the VCs as a pay rise and gain enhanced retirement coverage.