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A Detailed Guide On Mandatory Provident Fund (MPF) in Hong Kong

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MPF Hong Kong Employers Contribution

Hong Kong employers (local and overseas) are expected to provide their employees with numerous benefits till the expiration of their contracts. Retirement savings is one of the top benefits employees look for when seeking an organization to apply for work. The Hong Kong government mandates this benefit to protect employees. But what exactly is it? This piece will look at MPF Hong Kong Employers Contribution. By learning all the essential details about MPF, users will find out the fund’s requirements and how to avoid falling short of them.

What Is A Mandatory Provident Fund (MPF)?

The Mandatory Provident Fund (MPF) in Hong Kong is a unique employee savings scheme. This fund aims to ensure that employed and self-employed Hong Kong citizens can access retirement savings. Employers may be required to contribute to these funds depending on the employee’s classification. More often than not, employers are mandated to contribute to this fund. But in some scenarios, low earners, non-citizens, and certain professionals are exempt from this payment. Global employers who fall short of the requirements of the Mandatory Provident Fund will be subject to hefty fines and penalties.

The Mandatory Provident Fund is split into Master Trust Schemes, Employer-sponsored Schemes (designed for large companies), and Industry Schemes (designed for casual employees). Any multinational company in Hong Kong that employs citizens between the ages of 18 – 64 must enroll as part of this program within 60 days of offering employment to full-time and part-time employees. However, casual workers’ enrollment is due on the day of their employment. Casual workers are those without any guaranteed employment with the employer. These types of workers are those without any guaranteed payment period.

What Are The Types of MPF In Hong Kong?

As mentioned earlier, there are three different types of Mandatory Provident Fund. The type of MPF your company chooses depends on its size and the nature of the industry in which you operate. Each of these Mandatory Provident funds focuses on different factors too. Now, let’s look at the different types of MPF individually.

Master Trust Schemes

Master Trust Schemes is one of the most common MPFs in Hong Kong. The Master Trust Schemes are accessible to employees of participating companies, former employees with accrued benefits, and self-employed people. This MPF works by asking global employers to pool resources for different employees, depending on their risk level. The Master Trust Scheme is a perfect alternative for owners of small and medium-sized businesses who intend to look out for their employees.

Employer-Sponsored Schemes

The Employer-sponsored MPF schemes are meant for large companies with excess resources. These companies have enough money to set up their pension schemes by themselves. These companies do not need to merge with other organizations to create a pool for their MPF. While master trust schemes are usually designed so that the company can access several investment options, employer-sponsored schemes are designed based on the investment options provided by the employer.

Industry Schemes

Employees who change workplaces frequently miss out on these coveted retirement savings benefits. However, the MPFT has identified a way to protect them. They have designed a scheme to protect these casual workers. Casual workers, such as construction workers, caterers, and employees with high labor mobility jobs, can register under an industry scheme. These types of schemes are not tied to any employer.

How Do MPF Hong Kong Contributions Affect Taxes?

MPF Hong Kong contributions affect the annual taxes of both employers and employees. Both parties can claim contributions on their annual taxes. Employers are eligible to claim as much as 15% of the annual taxes of their employees. This amount is capped at 18,000 HKD. Most employees will only be able to enjoy an employer contribution of up to 5% of their salary. This amount will be capped at 1,500 HKD.

What Do You Need To Know About Hong Kong MPF Contributions?

Undoubtedly, the Mandatory Provident Fund is compulsory for global employers in Hong Kong. It serves as a way to protect the retirement savings of employees. All employees eligible for this benefit between 18 and 64 should be registered within 60 days of employment. Employers are not allowed to avoid this contribution or miss its deadline. Failure to comply with the regulations of the MPF will lead to consequences and penalties.

As a global employer, you must note that the following employees are exempt from MPF Hong Kong Employer Contributions;

  • Employees who are older than 64 years old before 1st Dec 2000
  • Self-Employed Hawkers
  • Employees are covered by a statutory pension or other provident fund schemes, including grant school teachers and civil servants
  • Domestic workers
  • People who have only recently migrated to Hong Kong for employment or self-employment for less than 13 months
  • People who have migrated to Hong Kong for employment or self-employment but are covered by overseas retirement schemes

How Can We Help?

In the earlier parts of this article, it’s been established that local and global employers in Hong Kong are mandated to provide the Mandatory Provident Fund for their employees. You’re expected to comply with MPF regulations if you have employees aged 18 – 64, except those classified as exempt from the fund scheme. However, we know that accounting for your MPF can be quite lengthy. That’s why we’ve developed comprehensive services to help you out.

At Premia TNC, you will get access to the best business consultancy services. We’ll work with you to ensure that you comply with MPF regulations. We have a proven record of working with local and overseas employers. Our teams of Chartered Secretaries and Senior Managers will provide you with ideal International Business Solutions.

FAQs

How much MPF does an employer pay?

Employers must pay 5% of an employee’s relevant contributions into an MPF account. This amount is subject to the relevant minimum and maximum income levels.

What is MPF Rate in Hong Kong?

Employers are allowed by law to claim up to 15% for MPF. But most employers deduct 5% of their salary. This amount is capped at 1,500 HKD for high-salary earners.

Is MPF deducted from salary?

Any MPF contribution higher than 5% would be considered voluntary contributions to the MPF and can’t be taxed. This means you’re allowed to contribute more than 5% of your salary.

What's the latest legal amendment about the MPF?

According to the Legislative Council and the Retired Schemes Legislation, employers are not allowed to use accrued benefits under the MPF to settle severance payment (SP) and long service payment (LSP), it will be expected to take effect from 2025.