Key pointsThe Government will launch a 25-year subsidy scheme totaling over $33 billion (at 2021 prices) to share out employers’ expenses on post-transition portion of severance payment (SP)/ long service payment (LSP).
Key points of the scheme are as follows:
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There will be a specified share ratio in respect of the amount of SP/LSP payable to an employee by an employer each year.
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The threshold for an employer’s total expenses of SP/LSP in a year is set at $500,000. Specified share ratios/ “capped amounts” are set for cases falling within and beyond the threshold respectively.
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For cases where the accumulated expenses of SP/LSP fall within $500,000, there will be a “capped amount” per case in respect of the SP/LSP payable by an employer for the initial nine years. If the shared amount payable by an employer calculated according to the share ratio exceeds the “capped amount”, the employer only needs to pay the “capped amount”. The remaining amount of SP/LSP will be subsidised by the Government.
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For cases where the accumulated expenses of SP/LSP go beyond $500,000, the amount payable by an employer is calculated according to the share ratio with no “capped amount”. The remaining amount of SP/LSP will be subsidised by the Government.
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Given that nearly 90% of micro, small and medium-sized enterprises have no more than $500,000 SP/LSP liabilities a year, they will generally be benefited from a higher subsidy for each SP/LSP case within the $500,000 threshold.
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More subsidies are provided by setting a lower “capped amount” during the initial period. The "capped amount" of SP/LSP payable to an employee by an employer is as low as $3,000 for the initial three years. The subsidy level will be progressively reduced over the 25-year subsidy period to help employers gradually adapt to the policy change.
