LSP Valuation for Asia-based Group
Valtech’s Valuation Team has recently completed a valuation for an Asia-based group specializing in luxury brand distribution. This assessment focused on Long Service Payment (LSP) obligations for the group’s Hong Kong subsidiaries, as dictated by Chapter 11 of the Employment Ordinance and the Mandatory Provident Fund (MPF) scheme requirements. Previously, employers could offset LSP payments with accrued MPF contributions. However, with the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 coming into effect on 1 May 2025, this practice will be abolished for post-transition employment periods (for employer’s mandatory contribution). Employers can still use pre-transition accrued benefits for offsetting, regardless of when the MPF contributions were made or their nature (mandatory or voluntary).
This regulatory change necessitates a revision of actuarial assumptions and estimates in LSP liability calculations, significantly affecting companies with large workforces in Hong Kong. Our valuation model, reviewed by an international audit firm, showcases the financial impact of these changes in a user-friendly manner. As financial reporting standards evolve, Valtech remains committed to maintaining rigorous valuation practices and financial governance.
