What is MPF? A Guide for Employers and Employees in HK

If you’re living or working in Hong Kong, chances are you’ve heard of MPF — the Mandatory Provident Fund. But what exactly is it, and why does it matter to both employers and employees?

The MPF system in Hong Kong is a retirement savings scheme introduced in 2000 to ensure that working individuals, including both locals and expats, have financial security after retirement.

What is Mandatory Provident Fund in Hong Kong and how does it work?

The Mandatory Provident Fund (MPF) is Hong Kong’s official retirement savings scheme, which was introduced in December 2000.

For the sake of people, it ensures that both employers and employees contribute regularly to a pension fund, helping individuals save for retirement. MPF is managed by the Mandatory Provident Fund Schemes Authority (MPFA). This system is a crucial component of Hong Kong’s financial planning framework. It is designed to provide financial security in retirement schemes.

MPF Contribution Requirements for Employers and Employees in Hong Kong

Now what happens is, under the MPF system, both employers and employees are required to contribute 5% of the employee’s relevant income to their MPF account, with a monthly income cap set at HK$30,000. This means the contribution from each side is HK$1,500 per month.

Here’s an easy breakdown:

• Employers must enroll eligible employees in an MPF scheme within 60 days of employment.
• Employees between the ages of 18 and 64 who are employed for 60 days or more must contribute.
• This also includes self-employed individuals, but they handle their own enrolment and payment schedule.

How Much Do Employers Contribute to MPF in HK?

Employers in Hong Kong are legally required to contribute 5% of an employee’s relevant income to their MPF account. This applies to employees aged 18 to 64 who have been employed for at least 60 calendar days.

1. Maximum contribution from employers: HK$1,500/month, based on the income cap of HK$30,000.
2. Minimum income rule: Mandatory MPF Hong Kong employer contributions are deposited by the employer directly into the employee’s MPF account. The employee’s contribution is also deducted from the salary.
3. Payments, subject to the minimum and maximum income caps. It means that although the employer must always make an MPF contribution, employees earning under 7,100 HKD a month do not need to make mandatory payments.
4. Payment due: Contributions must be made on or before the 10th day of each month following the pay period.

It’s important to note that these are statutory minimums: employers can offer voluntary contributions on top of this if they want to provide additional benefits.

When Are MPF Contributions Due in Hong Kong?

The policy strictly states that contribution payments must be made monthly and in accordance with the schedule issued by the Mandatory Provident Fund Schemes Authority (MPFA). Hence for both employers and employees, contributions are to be made on or before the 10th day of the month following the month in which wage payments are made.

For example,

An employee is paid on the 30th of June, so the contributions must be made to the MPF by the 10th of July. Repeating: This deadline is mandatory each month, regardless of whether there are public holidays or weekends. If the 10th falls on a non-working day, the due date stays put.

What Happens If You Miss the MPF Deadline?

Late contributions are considered a serious offense under Hong Kong labor laws. Here’s what may happen to employers:

1. Financial Penalties: A fine of 5% of the default amount is payable to be deposited into the employee’s MPF account.
2. Prosecution: Employers may also be prosecuted and may face a maximum fine of HK$350,000.
3. Interest and Claims: The MPFA may require the payment of interest, and employees can initiate claims through the Labour Department.

How to Choose an MPF Provider in Hong Kong

Choosing the MPF provider is an important task for the employing company. Think about these:

1. Types of funds: Look for providers with funds from every class, i.e., conservative, equity, bond, and lifecycle. This is to meet the needs of employees who have little or a lot of risk tolerance.
2. Fees: The fees diminish any returns. Most funds charge anything above 2% per annum for management and administration, while there are some funds that charge below 1%.
3. Features and Usage: Ideally, look for a provider who has a convenient employer portal, digital tools, and a customer service response time.

Step-by-Step MPF Setup Guide for New Businesses in Hong Kong

If you’re one of the personalities who is going to start a business in Hong Kong and will be hiring employees, setting up an MPF scheme is a must. You should follow the steps below:

1. Register Your Business

You need to get a valid Business Registration Certificate from the Inland Revenue Department.

5. Choose an MPF Provider

Make sure to compare approved MPF trustees like HSBC, Manulife, etc., based on fees, fund options, and user experience, and don’t fall for false traps.

Be thorough with your research.

6. Enroll Employees

• It is mandatory for employees aged 18–64 working 60+ days
• It is your responsibility to provide forms and fund details.
• Submit enrolment within 60 days of hiring. It applies to all.

7. Start Contributions

• Both the employer and employee will contribute 5% of relevant income.
• Never forget that the deadline is by the 10th of each month
• Use the MPF provider’s standard remittance forms.
• Keep contribution records for audits and other legalities.

Thus, MPF is essential for both employers and employees. If you still have more queries, please contact us.