A Guide to Hong Kong’s MPF & Employer Responsibilities
Last updated 31st August
What is Hong Kong’s MPF?
Retirement savings schemes are an important part of an employee benefits package. In Hong Kong, citizens are required to sign up for a compulsory government retirement scheme called a Mandatory Provident Fund (MPF), implemented in December 2000 due to the aging population.
MPF is the equivalent of the 401K pension fund in the US and Canada. MPF is a set of compulsory savings schemes for working individuals in the Hong Kong region that is enforced by the government through the Mandatory Provident Fund Schemes Authority (MPFA) – set up in September 2000.
The MPFA outlines that an MPF scheme will apply to:
- Regular employees: aged 18 and 64 who have been given an employment contract of 60 days or more.
- Casual employees: aged 18 to 64 and who are employed in the catering or construction industries, on a day-to-day arrangement or a fixed period of fewer than 60 days.
- Self-employed: persons working for themselves, providing a trade, services, or products, other than that of an employee. Sole proprietors and partnerships are classed as self-employed (persons)
Based on these requirements, global organizations operating in the region may need to register and contribute to a scheme to comply, ensuring their employees have the right scheme in place for their future retirement.
What Types of Hong Kong MPF Schemes are Available?
There are three schemes available:
- Master trust scheme – the most common offering for small to medium-sized companies. This is open to workers who have multiple employments and the self-employed.
- Employer-sponsored scheme – targeted at the single employer, which is generally larger companies with the resources (including a greater number of participants) to set up their own schemes.
- Industry scheme – for remote and casual working employees who change employers more frequently.
1. The master trust scheme
The master trust scheme is the ideal solution for small to medium-sized businesses and is the most common type of MPF in Hong Kong. It’s offered to employees with multiple employments, the self-employed, and former employees who have accumulated their savings benefits from their working service. In this scheme, the pension contributions are amalgamated from participating members at various levels of risk and provide more choices for investing options.
2. The employer-sponsored scheme
The employer-sponsored scheme is aimed at larger businesses that can offer their own savings schemes to their employees. This is unlike the master trust scheme, which adds funds together with other companies. In turn, the employer-sponsored scheme is restricted to the specific options on offer by the company itself.
3. The industry scheme
This scheme is the perfect option for companies in the catering and construction industries. Additionally, it’s also ideal for companies that require short-term, remote, or casual working employees not contracted to a single employer. To avoid these employees missing retirement income, the MPFA designed this scheme specifically for them.
Your Hong Kong MPF business obligations to stay compliant
If you have Hong Kong-based employees as a part of your global organization, you will want to provide the correct MPF scheme and avoid the pitfalls, serious penalties, and costly fines for non-compliance. This is a simple, top-level list of the obligations for your business:
- Enroll Hong Kong-based employees in an MPF scheme
- Pay mandatory contributions to MPF trustees on time
- Avoid providing false or misleading information to MPF trustees or the MPFA
- Provide monthly pay records to employees
- Notify MPF trustees in writing of an employee’s termination of employment
- Notify MPF trustees in writing of updates on employer information
Enrollment of your employees in an MPF scheme
As an employer, you are legally required to enroll your employees into an MPF scheme in Hong Kong. Fortunately, IRIS FMP is equipped to support and guide you with your MPF employee enrollment needs and procedures, but here is a quick overview of what you need to be aware of:
- The needs of your employees first and foremost
- Identifying and enrolling both full and part-time employees aged 18–64 years of age, who have been employed for a continuous period of 60 days or more, in an MPF within the first 60 days of their employment
- The exempt person’s criteria
Exemptions to MPF scheme enrollment
The MPFA outlines those who are exempt from joining an MPF scheme:
- Employees and self-employed persons who are under 18 or over 65 years of age
- Domestic employees
- Self-employed hawkers
- People covered by statutory pension or provident fund schemes, including civil servants and subsidized or grant schoolteachers
- Members of occupational retirement schemes, granted MPF exemption certificates
- Overseas persons entering Hong Kong under section 11 of the Immigration Ordinance for employment purposes and not more than 13 months duration, or who are covered by overseas retirement schemes
- European Union Office of the European Commission (in Hong Kong) employees.
Common Offences and MPFA Penalties
There are substantial penalties for companies (and the individuals) found negligent in their responsibilities from incorrect MPF planning and due diligence. These penalties are not only financial, but they can also result in imprisonment of the persons involved. The below tables provide the type of employer non-compliance offence with the corresponding penalty.
Criminal penalties that the MPFA may enforce on employers for non-compliance:
|Failure to enroll employees in an MPF scheme||Maximum of $350,000 and three-years’ imprisonment|
|Failure to pay mandatory contributions to MPF trustees (having deducted 5% from employees’ relevant income)||Maximum penalty of $450,000 and four-years’ imprisonment|
|Failure to pay mandatory contributions to MPF trustees (without deducting 5% from employees’ relevant income)||Maximum of $350,000 and three-years’ imprisonment|
|The provision of false or misleading information to MPF trustees or MPFA.||Maximum of $100,000 and one-year’s imprisonment on first conviction Maximum penalty of a $200,000 and two-years’ imprisonment on each subsequent conviction.|
Financial penalties that the MPFA may enforce on employers for non-compliance:
|Failure to pay mandatory contributions to MPF trustees on time||$5,000 or 10% of the amount due (whichever is greater)|
|Failure to provide monthly pay records to employees (except for casual employees participating in Industry Schemes)||$10,000 – first failure|
$20,000 – second failure
$50,000 – subsequent failures
|Failure to notify MPF trustees in writing of an employee’s termination of employment (with the exception of casual employees participating in Industry Schemes)||$5,000 for the first failure|
$10,000 for the second failure
$20,000 for the subsequent failures
|Failure to notify MPF trustees in writing of employer information updates, such as company name, address and telephone number||$5,000 for the first failure,|
$10,000 for the second failure
$20,000 for subsequent failures
MPF trustees must report any defaulting contributions by employers to the MPFA. MPFA will then issue those employers payment notices:
|Failure to pay MPF trustees mandatory contributions on time||Issued payment notice to employers to recover the default contributions with a 5% surcharge of the default amount.|
Additionally, employees also have the authority to make a complaint to the MPFA if they suspect their employer is infringing their MPF rights.
How Can IRIS FMP Help?
To ensure you’re getting your Hong Kong-based employees’ MPF schemes implemented correctly and compliantly, speak to IRIS FMP. We can help as your trusted partner for global employee benefits and compensation. Get in touch today.