Cathay Pacific halts ‘unlawful’ benefits payments to US crew

More than 400 Cathay Pacific employees face the loss of government retirement payouts and post-retirement healthcare insurance protection as the Hong Kong airline halts contributions. The move will save the company US$1 million (HK$7,76 million) annually.

According to the airline, the contribution it has been making for years to an employee benefits scheme provided by the US government was a mistake, since Cathay is a non-American employer with employees working on non-American registered aircraft, meaning it’s exempt from such payments.

In fact, according to the airline, it would be unlawful to continue the benefits payments.

“Cathay Pacific has thoroughly researched this complex area of US Social Security law over the past year, since the exemption has been brought to our attention. We have also sought professional advice from multiple advisers who confirm that it will not be lawful to continue to contribute social security in respect of our US-based cabin crew, and there is no option for voluntary contribution”, a spokesperson told Human Resources magazine in an email.

Crew who had social security contributions deducted from their salaries are eligible for a refund, but that won’t entitle them to future retirement and healthcare benefits.

The staff-unfriendly move comes just months after Cathay reported underwhelming half-year results and announced it would watch its budget. Yet, despite the alleged US$1 million in savings, the airline says the change in policy is not related to the company’s finances.

“This decision was made due to the need to comply with local laws, and not due to any cost concern,” a spokesperson said.

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Photo / Cathay Pacific