Mandatory Provident Fund (MPF) in Hong Kong
The Mandatory Provident Fund (MPF) is a monetary savings system established by the Hong Kong government on December 1st, 2000. The MPF System is an integral part of the retirement protection structure in Hong Kong that helps the working population gather sufficient savings for their retirement. The scheme enforces employees (full-time or part-time) and self-employed individuals aged 18 to 64, except for certain exempt persons, to participate in the scheme. Both employees and self-employed individuals covered by the MPF scheme must make compulsory contributions amounting to 5% of their income.
How do Employers Arrange MPF Setup?
Let’s say you are new to Hong Kong, and you just opened a company. You just hired a few employees, and you need to arrange MPF enrolment for them, but you are not sure exactly what to do. Here are the following items you need to prepare before the enrolment: full name of the employee, date of birth, HKID number, contact information (residential address and phone number), choice of MPF funds, tax residency, self-certification (i.e. declaration on whether the employee is a tax resident outside of Hong Kong), email address (if any) and the last but not least; employee’s signature. Not to mention, the MPF trustee will not be able to complete the registration process if the employee fails to provide a self-certificate of tax residency.
As for the deadline for enrolment, employers should complete the enrolment process for their employees (full-time or part-time) aged 18-64 within the first 60 days of their employment, except for exempt persons. Keep in mind that this does not apply to employees in the construction and catering industries. Now, what if one of your employees decides to terminate their employment? As an employer, one should notify their MPF trustee through a written notice within 10 days after the last day of the calendar month in which the employee terminates his or her employment.
After you successfully register your company in an MPF scheme, your trustee will provide a notice of participation to your company. The notice of participation will declare basic information of the employee such as the name of the scheme, the name of the employer and the issue of the notice etc.
Employees Contribution
The following are examples of different scenarios that showcase how much one should contribute to an MPF scheme based on their monthly salary.
- Barista
A barista earns an income of approximately HKD $7000 to $HKD 10,000 on average per month. Let’s just say one earns HKD$ 7,000 a month, therefore 5% of this person’s monthly income contributes to an MPF scheme shall amount to HKD$ 350, and the total monthly salary he or she will receive after the MPF deduction is HKD$ 6,650.
2. Accountant
The average monthly salary for an accountant in Hong Kong is approximately HKD$ 23,000 to HKD $25,000. Assuming one earns a monthly salary of HKD $25,000 and 5% of this person’s income contributes to an MPF scheme shall amount to HKD$ 1,250. The total monthly salary he or she will receive after the MPF deduction is HKD$ 23,750.
3. Senior Bank Manager
A senior relationship bank manager in Hong Kong earns an average of HKD$ 40,000 to HKD $60,000 a month. Assuming one earns HKD$ 50,000 per month and 5% of this person’s income contributes to an MPF scheme shall amount to HD$ 2,500. The total monthly salary he or she will receive after the MPF deduction is HKD $ 47,500.
Exemptions Under the MPF Scheme
The MPF scheme applies to employees aged 18-64 except for the following personnel.
- Anyone who is employed for less than 60 days;
- Anyone who has been granted to land or remain in Hong Kong does not exceed 13 months;
- Anyone who is a member of a provident, pension, retirement or superannuation scheme established outside Hong Kong; (This does not apply to a person who is a permanent resident of the Hong Kong SAR);
- Anyone who is an officer to which the Pensions Ordinance or the Pension Benefits Ordinance applies.
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