How to navigate the Mandatory Provident Fund (MPF) as an employer
15 minute read
According to the MPF authority and official government documents, ‘The MPF System (The Mandatory Provident Fund System) is the second pillar of the multi-pillar retirement protection framework recommended by the World Bank’.
Simply put, this is a compulsory saving scheme (pension fund) for the retirement of Hong Kong residents. Most employees and their employers have to contribute to mandatory provident fund schemes on a monthly basis.
The amount allocated to this fund varies depending on the salary range and employment period. All employees and self-employed individuals aged 18 to 64 are required to contribute.
However, there are exemption cases under the MPFSO (the Mandatory Provident Fund Schemes Ordinance). If you’re interested in finding out more about MPF Hong Kong and how to handle all the processes as an employer, keep reading.
The Different MPF Schemes
Every employer has to select the appropriate MPF trustee(s) and scheme(s). In addition, displaying a participation certificate at office premises is necessary.
Below are listed all the types of MPF schemes.
Master Trust Scheme
This type of scheme is the most common one. It is open to relevant employees of participating employers and self-employed individuals.
The individuals opting for this scheme enjoy economies of scale from pooling the contributions of small employer units together for administration and investment.
Master Trust Scheme is particularly suitable for small and medium-sized businesses.
This scheme was specifically established for industries with high labor mobility such as catering and construction industries.
Workers in such industries are casual employees on a day-to-day basis or for a period shorter than 60 days, so this type of scheme makes it easier and more convenient for employers to calculate MPF contributions and handle MPF procedures.
This option is limited to specific employees of a single employer and its associated companies. In practice, this scheme is only used by large corporations.
When Do I Need to Register?
Let’s first explain the 60-day rule. Employees who are employed for less than 60 days, excluding casual employees as defined under the MPFSO, are exempt from joining an MPF scheme.
However, it is mandatory to enroll both full-time and part-time employees, as well as those undergoing a probation period, within the first 60 days of employment (holidays and weekends included). Keep in mind that the 60-day employment rule does not apply to casual employees in the construction and catering industries.
Also, it is important to note that if the 60th day of employment is a Saturday, a public holiday, a gale warning day, or a black rainstorm warning day, the enrolment deadline is extended to the end on the next following day which is not a Saturday, a public holiday, a gale warning day, or a black rainstorm warning day.
Still, there are a few cases when exemptions apply:
- employees and self-employed persons who have attained 64 years of age on the date of the implementation of the relevant provision in the Mandatory Provident Fund Schemes Ordinance, i.e. 1 Dec 2000
- self-employed hawkers
- domestic employees
- members of occupational retirement schemes which are granted exemption certificates
- people covered by a statutory pension or provident fund schemes, such as civil servants and subsidized or grant school teachers
- people from overseas who enter Hong Kong for employment or self-employment for not more than 13 months
- people from overseas who enter Hong Kong for employment or self-employment and who are covered by overseas retirement schemes
- employees of the European Union Office of the European Commission in Hong Kong
When Can I Withdraw My MPF?
Once you have reached the age of 65, you can withdraw the benefits you amassed during your career as a lump sum or in installments. However, you can also withdraw your benefits early. According to the law, there are specific circumstances when benefits can be withdrawn before you turn 65.
- Early retirement
One has to be at least 60 years old and have ceased all employment and self-employment with no intention of becoming employed or self-employed again. You can withdraw your accrued benefits in a lump sum or installments.
- Permanent departure from Hong Kong
You must declare that you have departed or will depart from Hong Kong to reside elsewhere with no intention of returning for employment or to resettle in Hong Kong as a permanent resident. You also need to provide proof that you are permitted to reside in a place outside Hong Kong.
- Total incapacity
It is necessary to provide a medical certificate issued by a registered medical practitioner or registered Chinese medicine practitioner certifying that you have become permanently unfit to perform the particular kind of work you were doing.
- Terminal illness
It is necessary to provide a medical certificate issued by a registered medical practitioner or registered Chinese medicine practitioner stating that in the practitioner’s opinion, you have an illness that is likely to reduce your life expectancy to 12 months or less.
- Low balance
One must have a balance of not more than $5,000 in an MPF scheme and not have MPF benefits in any other MPF scheme. As for the date of your application, at least 12 months must have elapsed since your last contribution date. You must declare that you have no intention of becoming employed or self-employed.
According to the law, the accrued benefits of a deceased member are a part of the member’s estate and therefore must be claimed by the scheme member’s personal representative or the Official Administrator.
How Much Is MPF in Hong Kong?
Both employees and employers are required to make mandatory contributions of 5% each (a total MPF percentage of 10%) of the employee’s relevant income to an MPF scheme regularly. Both groups are subject to the minimum and maximum relevant income levels. If an employee receives paychecks monthly, the minimum and maximum relevant income levels are $7,100 and $30,000 respectively.
The current minimum relevant income level of $7,100 per month applies to contribution periods starting on or after 1 November 2013, while the current maximum relevant income level of $30,000 per month applies to contribution periods starting on or after 1 June 2014.
Also, relevant income refers to all monetary payments paid or payable by an employer to an employee, including:
- leave pay
However, this rule excludes severance payments or long-service payments under the Employment Ordinance.
As an employer, it is required to calculate your employee’s relevant income and the number of mandatory contributions for each contribution period (wage period), deduct the amount from the employee’s income as their mandatory contributions, and remit the employee’s contributions to the MPF trustee, together with the employer’s contributions from your funds.
Finally, the mandatory contributions for a contribution period should be remitted to your MPF trustee on or before the contribution day. In general, for monthly-paid employees, the contribution day is the 10th day of each month. For example, the contributions for the contribution period of September should be paid to your trustee on or before 10 October.
Common MPF Service Providers
You should take a few factors into consideration before you choose the right MPF provider for your company.
According to the Hong Kong Monetary Authority (HKMA), there are 14 approved trustees in the market providing this service from either local banks or insurance companies.
It is recommended that you consider the following before you make a decision:
- stability of the company
- different fund choice
- charges applied
- service level
HSBC Holdings is a British bank and financial services holding company established back in 1865. HSBC branches were first opened in Hong Kong and in Shanghai. The HSBC name is derived from the initials of the Hong Kong and Shanghai Banking Corporation.
They offer two schemes. The first one is the HSBC Mandatory Provident Fund – SuperTrust Plus. The second one is the HSBC Mandatory Provident Fund – ValueChoice. Both of these are Master Trust Schemes.
Manulife Hong Kong has been a popular name for over 120 years. This institution has become one of the city’s top providers of financial services, offering a diverse range of protection and wealth products and services to 2.2 million customers in HK and Macau.
The Manulife Global Select (MPF) Scheme provides a total of 29 constituent funds covering diversified fund choices of equity funds (international, regional, single-market and sector), bond funds (international, regional and single-market), mixed assets funds (lifestyle and target date), guaranteed funds, and money market fund.
Sun Life Financial, Inc. is a Canadian financial services company mainly known as a life insurance company. It is one of the largest companies of the kind in the world.
This company offers a total of four schemes:
- Basic Scheme
- Comprehensive Scheme
- Master Trust Scheme
- Rainbow Scheme
Contributing to an MPF scheme means contributing to your employee’s future. And that is something all good employers want to do. After all, every hard-working individual deserves a nice pension fund following the end of their career.
If you want to find out more and get additional help, feel free to consult Sleek. No finance-related questions are too difficult for Sleek to answer.