MPF in Hong Kong: enrolment, contributions and filing

The Mandatory Provident Fund is Hong Kong's compulsory retirement savings system. For employers it is a monthly obligation with statutory deadlines, surcharges for lateness, and a set of edge cases around joiners, leavers and part-time staff that generate most of the errors we find when taking over a payroll.

Who must be enrolled

Employers must enrol employees aged 18 to 64 who are employed for 60 days or more. Casual employees in the construction and catering industries are covered from the first day, regardless of the 60-day rule, through industry schemes designed for short engagements.

The 60-day test is about the period of employment, not the number of days worked, so a part-time employee working one day a week on a continuous contract is generally covered. Genuinely exempt categories exist (domestic employees, self-employed hawkers, people covered by statutory pension or provident fund schemes, and certain short-term expatriates), but they are narrower than employers assume.

Contributions, minimum and maximum

Both employer and employee contribute 5% of the employee's relevant income, subject to statutory minimum and maximum relevant income levels. Relevant income is broad: wages, salary, leave pay, fees, commissions, bonuses, gratuities and allowances, in money or money's worth. Severance and long service payments are excluded.

Below the minimum relevant income level, the employee's own mandatory contribution is not required but the employer's 5% still is. Above the maximum, both are capped. Voluntary contributions above the mandatory level are allowed and are increasingly used as a retention benefit, but they should be documented in the employment contract so the entitlement is clear.

The first contribution period

This is where mistakes cluster. A new employee has a 60-day enrolment window, and their own mandatory contribution is not required for the first 30 days of employment, but the employer's contribution runs from day one, and the first employer contribution is due on or before the tenth day of the month following the end of the employee's second contribution period.

Interpreting that combination on a mid-month start date, for a monthly-paid employee, is the single most common MPF error we see. Both the amount and the due date are affected, and a wrong first period usually goes unnoticed until the trustee statement is reconciled months later.

Monthly mechanics

The cycle is: calculate contributions with the payroll run, deduct the employee portion, remit both portions to the trustee with a remittance statement by the statutory deadline, and give each employee a monthly pay record showing relevant income, the amounts contributed by each party, and the contribution period.

Employers must also tell the trustee when an employee joins or leaves, so the member record closes correctly. A leaver left open on the scheme causes contribution demands for someone who has already gone.

Records and enforcement

Keep remittance statements, pay records and enrolment documentation for the retention period required, and keep them reconcilable to payroll. The Mandatory Provident Fund Schemes Authority pursues late or missing contributions with a surcharge on the outstanding amount plus financial penalties, and arrears are recovered from the employer: the scheme does not absorb them.

Directors of a defaulting employer can be personally pursued in persistent cases, which makes MPF one of the few payroll obligations with individual exposure attached.

Practical hygiene

Reconcile the trustee's statement to the payroll register every month, not annually. Check that every joiner has an enrolment date within 60 days and a correctly calculated first period. Confirm leavers are notified. And review the relevant income definition whenever a new allowance or bonus scheme is introduced, because new pay elements default to being contributory unless they genuinely fall outside.

We handle scheme enrolment, monthly remittance, joiner and leaver notifications and the record keeping as part of payroll, so contributions and payroll never disagree, and the annual employer's return is prepared from the same data.

A Beginners Guide to MPF Filing Hong Kong

The Hong Kong Mandatory Provident Fund (MPF) is basically a retirement savings scheme for Hong Kong employees designed to provide them with a safety nest after they retire from active employment. As the name suggests, it’s mandatory, and most employees in Hong Kong are required to make contributions to the fund from their income. This particular article is intended to provide a comprehensive understanding of the MPF Filing Hong Kong and will include such pieces of information as eligibility, deadlines, exemptions, relevant remittance rates, and the calculation of contributions.

The MPF system was introduced to ensure that employees in Hong Kong can have access to their retirement savings in their later years. Understanding what MPF is, its benefits, and how to go about MPF filing Hong Kong is essential in helping employees make informed decisions about their retirement planning and that whatever they do during their employment years is geared towards achieving their overall pension goals.

What you need to know about the MPF system

As earlier mentioned, the Mandatory Provident Fund (MPF) is a retirement savings scheme designed to provide HK employees with a safety nest during their retirement years. The MPF system is such that both employers and employees contribute to the fund. It’s a requirement that employers make a contribution of 5% of the employee’s pay/salary to the fund. Consequently, employees are also expected to contribute 5% of their salary in a given month to the MPF.

The contributions made don’t just lie idle in a savings account. No. The funds contributed are invested in various profitable financial products such as bonds and stocks with the sole aim of ensuring that the funds grow over time. It’s instrumental in the sense that after retirement, employees have a safety nest and can continue enjoying the things they enjoyed when employed without struggling. MPF contributions are paid or remitted monthly.

Eligibility

The majority of those in employment in Hong Kong are eligible for the Mandatory Provident Fund (MPF). Whether you are a casual, full-time, or part-time employee, MPF contributions are mandatory. However, self-employed individuals and foreign domestic workers are exempted from making MPF contributions.

MPF Contribution Rate

The employer and the employee are both required to make a minimum contribution of 5% of the employee’s salary to the MPF. Based on the existing agreement between employer and employee, the payment can be combined to meet the minimum requirement or the employer can choose to pay a higher contribution.

MPF Contribution Deadline

MPF contributions are made monthly and the deadline is the last day of the month. Generally, employers are responsible for making contributions on behalf of their employees and it’s essential that such remittance is made on time or within the stipulated period.

MPF contribution exemptions

While we had mentioned that all casual, part-time, and full-time employees in Hong Kong are required by law to make contributions, there are certain circumstances under which an employee may be excused from remitting MPF contributions . For instance, if one is on maternity leave or is ill and therefore unable to work, they are exempted from making MPF contributions.

Secondly, foreign nationals in Hong Kong whose stay is less than 13 months are not required to contribute to the fund. Consequently, employers have a responsibility to ensure that not only are correct contributions made but that exemptions are accurately recorded.

Calculating your MPF contributions

When we talk about the MPF contributions calculation , we are simply talking about the process of determining the amount that an employee will contribute to the MPF scheme . An employee is required to contribute 5% of their paid salary to the MPF . An employer is also required to contribute 5% of the employee’s salary to the MPF scheme. Both employer and employee contributions can be combined in order to meet the MPF minimum contribution requirement.

How do you determine your MPF contribution as an employee?

To determine the exact amount you are required to contribute to the MPF , you need to calculate 5% of your taxable salary . Your taxable salary includes your basic salary, bonuses, and allowances. In a situation where you have multiple sources of income, say from a business or company you are operating on the side, your MPF contribution will be calculated based on your total taxable income .

Important tips for maximising your MPF contributions

While it’s okay to make the mandatory contributions as per by law, you can choose to also make voluntary contributions to ensure that by the time you retire, you have a healthy safety net to see you through retirement. Some of the important tips that will see you maximise your MPF contributions include:

Going about and beyond the minimum 5% MPF contribution . You should endeavor to contribute more than what is stipulated by law. Voluntary contribution especially if you are a casual worker is key.

Review your MPF portfolio regularly and make any necessary changes to maximise your returns.

Diversifying by considering other saving options. You need not just rely on MPF contributions for your retirement plan. You could also consider personal savings, and term life insurance plans, Money market funds, to mention a few that will complement your pension during rainy days.

Invest in a mix of high-risk and low-risk funds with the goal of ensuring that you get the most out of your investments.

The ultimate goal is ensuring that your retirement years are a breeze and that begins by doing what is necessary today to secure your retirement years.

Keeping track of your MPF Contributions

If you are in the MPF scheme , it, therefore, follows that you must keep track of your contributions to see the progress you are making and areas that you need to improve in order to maximise returns. To do this, you need to check your MPF contribution statement . This is a statement that typically provides you (the employee) with a summary of all your contributions as well as your investments.

This very important document is issued on an annual basis and provides information on the:

Contributions amount made within a given period.

Why it is Important to Review Your Contribution History

As an employee in Hong Kong, reviewing your contributions regularly is very crucial. The single most important reason to review your MPF contributions is to ensure that correct contributions are being made and that your MPF investment portfolio is aligned with your overall retirement goals. Additionally, a review of your contributions is instrumental in helping you identify any discrepancies or errors and taking the necessary steps or actions to resolve any issues.

Accessing and Reviewing Your MPF Records

You can access your MPF records through the mobile app or the MPF scheme website. The MPF records provide you with a complete history of your contributions, your investment returns, and other important information regarding your contributions. All you need to do to access your MPF records is to log into your account and view your MPF contribution statement .

Choosing the Right MPF Scheme

As an employee in Hong Kong, there are a number of different MPF schemes you can choose from. Each of the schemes has its own set of benefits, investment options, and fees. Other than the popular Mandatory Provident Fund schemes , you can also choose Occupational retirement schemes or approved provident fund schemes .

It is imperative to note that each of the MPF schemes in Hong Kong has its own pros and cons. As such, it is recommended that you weigh your options before you settle on one that best suits your retirement goals. For instance, Mandatory Provident Funds are regulated by the government and offer a wide range of investment options and benefits. Approved provident funds on the other hand are flexible in terms of their fees and investment options.

That said, choosing the best MPF scheme that aligns with your needs requires consideration of a number of factors. These are:

Guidance and support provided by each scheme

The Bottom Line

As an employee in Hong Kong, the MPF system plays an integral role in ensuring that you have a soft landing after you are done with active employment. It provides you with an opportunity today to make contributions, invest the same, and ensure you maximise returns for a safety net during retirement years. Understanding how the MPF system works is instrumental in making informed decisions about contributions and ensures that you are on track to achieving your retirement investment goals!

Additional original detail

Hong Kong, crowned Asia’s premier financial hub is a popular business destination. As a new employer in Hong Kong, there are certain rules and different regulations that you need to be made aware of. There are numerous different regulations and schemes which people in Hong Kong must follow. This is especially seen with the Mandatory Provident Fund (MPF).

MPF stands for ‘Mandatory Provident Fund’, which is a compulsory savings scheme that covers all employees and self-employed people aged 18-64 in Hong Kong. To many people, it is a safety net for your retirement in Hong Kong. For others, it is a stockpile of money that can be used and taken out in time on the promise you have fully stopped working in Hong Kong. The MPF scheme and ordinance (MPFSO) was created and initiated by the Hong Kong Government in response to the rapidly ageing workforce back in 1995. The MPFSO creates a framework for implementing employment related MPF schemes for workers in the labour force to receive financial benefits when they retire.

Following this move, the MPFSA was set up in 1998 to administer the operation of the MPF System which was eventually launched in the year 2000. As of 2015, over 85% of the labour force in Hong Kong was safeguarded with some form of retirement protection plan. This is a dramatic increase of only 33% in 2000. Now that you’re familiar with the MPF we will now get into things that you get as an employer in Hong Kong. This includes opening an MPF account, making MPF contributions and MPF tax deduction.

The Different types of MPF Schemes

In total there are three different types of MPF schemes:

Master Trust Scheme

The Master Trust Scheme is the most common of the three different types of MPF schemes. It operates by pooling together contributions from different participating employers and their employees, as well as the self-employed. This scheme is open to workers whose employers are also participating in the Master Trust Scheme, as well as self-employed individuals with accrued current benefits. Examples of this are sick pay and personal time-off, which can be transferred from other schemes.

Employer-Sponsored Scheme

The employer-sponsored scheme is a limited to employees of a singular employer and any affiliate companies. Due to membership restrictions, the scheme is significantly more cost-effective for larger corporations rather than SMEs

Industry Scheme

The industry scheme is a scheme only applicable for those employees where there is a labour demand. This is more common if the business applying for the industry scheme MPF is in the catering or construction industry. This is also common if the employee in the company are casual employees. This means the employee is hired for a short-term engagement with less than 60 days. These casual employees are not required to change schemes when they change your occupation as long as they remain in these two specific industries, provided that the old and new employers have a registered number under the same industry name.

How do you choose which MPF scheme is best for you

Because the main purpose of the MPF is to provide means of a retirement fund for the employees of the business, some major factors to consider when deciding which type of Mandatory Provident Fund you wish your employees will take will be dependent on numerous factors such as

and Customer Support (when choosing your trustee)

How do you enrol your employees in an MPF Scheme?

Enrolling your full-time and part-time employees into an MPF scheme within the first 60 calendar days of employment (not working days) is your legal obligation as an employer.

Your employee’s probation period is included within the 60-day employment rule. The process to enrol your employees in an MPF scheme is easy to digest and quite straightforward:

Provide your employees with an enrolment form for your MPF scheme of choice

They will then need to indicate to you their investment portfolio (there types of funds), personal particulars, self-certification which includes their tax residency (This is where they need to indicate whether they have been taxed outside of Hong Kong) and sign a form confirming whether they have or have not.

They will then submit a completed form to your trustee to set up an MPF account.

If your employee is unable to return the completed information to you by the expected time frame, the employer is still legally required to submit the form to your trustee before the 60-day deadline to fulfil your obligation as an employer even if its incomplete.

What is the employer contribution to MPF?

Both you as the employer and the employee must contribute 5% of the employee’s relevant income as mandatory contribution unless they are exempted under the MPF Schemes Ordinance. You are required to contribute to your employee’s income, even if it falls below the minimum monthly relevant income rate. This rate is capped at $1,500 if your worker’s income exceeds the maximum income level. If you have chosen to enrol your more casual employees in the Industry Scheme, your employer contribution will be based on their daily income not monthly income. Here is a table for employer MPF contribution scale:

If you want to improve your workers’ retirement protection, you can make additional voluntary MPF contributions on top of the mandatory 5%. Arrangements of such voluntary contributions are defined by the scheme, which you can find out from your designated trustee.

When do I start making MPF contributions for my workers?

You will need to remit contributions to your employees once every contribution period, which usually is in line with the salary period. Here is a general overview of the steps you will take:

You need to calculate your employee’s relevant income.

Then calculate your mandatory contribution for each salary period with MPF Calculator.

Deduct the employee’s mandatory contributions from their income.

Filing Tax Deductions for MPF Contributions

Employers can claim tax deductions for your mandatory and voluntary contributions under Profit Tax to the extent that is does not exceed 15% if your employee’s annual income. Depending on your business nature, you will need to file the profit tax return and supplementary forms with the IRD (Inland Revenue Department). If your business is a newly registered business, you will receive your first profits tax return about 18 months after the date of commencement or incorporation. This will need to be filed within 1 month from the date of issue. Employers who are eligible for e-filing services and choose to do so will be given a 2-week extension from the default due date.

Primasia’s Mandatory Provident Fund (MPF) Services and Packages

One way to ensure this is to outsource the payroll, tax and Mandatory Provident Fund (MPF) obligations to an outside provider such as Primasia Corporate Services Ltd. who will prepare all necessary documents, reports and filings, and will also remind you in good time to provide the information and to arrange funds.

MPF: HK’s Social Security System

Setting up a payroll or an MPF (mandatory provident fund) scheme for employees can be complex and setting up the MPF scheme late risks penalties. Primasia Corporate Services can arrange this for you,provide the necessary payroll calculation/ MPF filling services, as well as assisting with another legal requirement, Employee Compensation Insurance (“ECI”).

Salary Calculation and Payments

Preparation of Tailored Salary Slips

We can tailor this with our online (Xero) or traditional accounting services.

Hong Kong employers also have to make certain reports to the Inland revenue Department of Hong Kong with respect to joiners, leavers and those still in employment at the fiscal year-end (the Employer’s Return).