Previously, we introduced the Things you need to know for filing Employers Return in Hong Kong. Mandatory Provident Fund (“MPF”) are compulsory retirement schemes / pension funds that are created by the Hong Kong government and are provided by approved private organisations. MPF’s are a key aspect in the management of a Hong Kong company and its staff. In this article, we look to explain what a Hong Kong MPF is and what are the contribution rules and regulations that employers must consider before hiring their first employee.
What you will learn from this article:
1. How to set up an MPF account?
Setting up an MPF account is a simple process. Hong Kong’s Mandatory Provident Fund Schemes Authority (“MPFA”) maintains a list of MPF Approved Trustees which employers may consider. For instance, the HSBC MPF plan provides individuals with a wide variety of investment schemes such as those focused more on global bonds, Hong Kong and Chinese equities and so on. Simply contact your chosen MPF providers and complete the relevant employer application forms for the scheme of your choice. Once an employer has successfully enrolled in an MPF scheme, they will be issued an employer’s identification number, demonstrating your obligation to assist your employees in their retirement schemes.
2. What are an employers’ obligations under the Hong Kong MPF regulations?
Employers must also complete the one-time obligation of assisting their employees in opening MPF accounts. Except for exempt persons, an employer should enroll both full-time and part-time employees who are at least 18 but under 65 years of age in an MPF scheme within the first 60 days of their employment. However, if an employment relationship ends prior to the 60th day of employment, no MPF arrangement is required.
Upon successful enrollment, employers must meet ongoing obligations of remitting contributions to their employees MPF schemes once every contribution period. Contributions for monthly-paid full-time employees are typically made on the 10th day of each month.
Employers and employees are each required to make regular mandatory contributions to an employees MPF scheme. The MPF employee contribution and MPF employer contribution should each be 5% of the employee’s relevant income, subject to relevant income levels. For a monthly-paid employee, the minimum and maximum relevant income levels are $7,100 and $30,000 respectively.
To make payments to their employees, employers are required to calculate their employee’s relevant income and the amount of mandatory contribution that must be made for each contribution period. The employer must then deduct the calculated amount from their employee’s income and remit that sum to their MPF account.
3. What are the employee contribution rules under the Hong Kong MPF regulations?
Employees do not face as many compliance obligations as their employers do. However, it is vital for employees to ensure that they make the regular mandatory contribution of 5% of their relevant income to their relevant scheme as mentioned above.
4. Are there exemptions under a Hong Kong MPF contribution rules?
Not all employees working in Hong Kong must be enrolled under an MPF scheme. Expatriates residing in Hong Kong for employment purposes can obtain permission to be exempted by the Hong Kong Government. Permission can only be granted if the employee in question is either a member of an overseas retirement scheme, or will reside in Hong Kong for a period of 13 months or less.
In the event an employer fails to adhere to their MPF obligations, the MPFA will issue the employer with a “surcharge notice”. This notice will impose a 5% surcharge on default contributions and the surcharge received will go entirely to the employee’s MPF account. In addition, defaulting on contributions is a criminal offence and the defaulter is liable to a maximum penalty of a HK$450,000 fine and imprisonment for four years. Employers who have failed to comply with their MPF employer obligations are liable to potential financial penalties of HK$5,000, or 10% of the default amount, whichever is greater, on the defaulting employer.
We understand that matters relating to MPF calculation and payroll administration are time-consuming tasks that require a significant amount of the company’s resources. FastLane can manage these essential business tasks, such as payroll, MPF account setup and your employee’s enrollment into your chosen MPF scheme on your behalf.
Next up, we will talk about how cloud payroll softwares are helping businesses manage their payroll tasks more efficiently nowadays.