MPF Retirement Fund in Hong Kong​

Key Takeaways 

• MPF stands for Mandatory Provident Fund, and it is a Hong Kong retirement savings scheme for employees and self-employed persons (SEPs). 
• The employer must ensure that an MPF account for the new employee is set up within 60 calendar days of their employment. 
• MPF contributions for both employees and employers vary based on income levels. For employers, if their employee’s salary is under HK$30,000, they shall contribute 5% of their employee’s relevant income. If the employee’s salary exceeds HK$30,000, the employer shall contribute HK$1,500. 
• Employers must remit MPF contributions on the 10th day on each month 
• Employees in Hong Kong qualify for MPF withdrawal when they reach 65 years of age 

For foreigners establishing a business presence in Hong Kong for the first time, hiring local employees can seem like a daunting task. 

The MPF can cause some confusion for first time HK employers, and it’s understandable. The guide below will equip you with the knowledge to navigate Hong Kong’s hiring landscape. 

Retirement Fund in Hong Kong: Mandatory Provident Fund (MPF)

MPF stands for Mandatory Provident Fund. In response to Hong Kong’s aging workforce, the Hong Kong government implemented the MPF in the year 2000, setting up a retirement savings system for both employees and the self-employed. 

Both employers and employees are legally required to contribute to the MPF, and employers must deduct the employee’s contribution from their salary prior to paying their employee. Compliance with MPF is overseen by the Mandatory Provident Fund Schemes Authority (MPFA). 

Prior to the introduction of the MPF, only 33% of Hong Kong’s workforce was covered by retirement protection. Today, that number has risen to 85%, with the MPF system accumulating over HK$ 1 trillion in assets.

There are 3 types of MPF schemes, tailored to different employment types: 

1. Master Trust Schemes: This is the most common type of MPF scheme. It’s open to employers, employees, and self-employed individuals (SEPs), and it works by pooling together contributions from all these participants and employees 
2. Employer-sponsored schemes: Only available to employees of a specific company 
3. Industry Schemes: Designed for casual workers (employed on a daily basis or for a fixed period of less than 60 days) in the catering or construction industry (source for definition of casual worker)

Retirement Fund MPF Hong Kong Withdrawal

Scheme members (your employees) can withdraw their MPF upon reaching the age of 65. This includes funds from mandatory contributions and tax-deductible voluntary contributions. However, under certain circumstances, such as early retirement, terminal illness, and permanent departure from Hong Kong, your employees may also be eligible for early MPF withdrawal.

Choosing an MPF scheme

MPF trustees are companies appointed by the MPFA to manage MPF schemes in Hong Kong, and there are currently 12 MPF Approved Trustees, with the largest ones being HSBC, AIA, and Manulife. Your job as an employer is to choose a scheme and a trustee that would best suit your employees’ needs. You may consider the factors below: 

1. The quality and range of the trustee’s services  
2. The suitability of fund offerings   
3. Fees and charges: Different trustees have different ways of charging you management fees. It’d be wise to check for joining fees, annual fees, and transaction fees and charges deducted from scheme members accounts. (source)

How to set up your employee’s MPF account

It is the responsibility of employers to enrol employees (both full-time and part-time) into an MPF scheme within 60 calendar days of employment. You may do so through: 

• Giving your worker your MPF scheme’s enrolment form. It will elicit details like your worker’s personal information, tax residency, and investment portfolio
• Submit the completed form to your trustee, who will set up your employee’s MPF account 
• If your employee is unable to return the form within the 60-day period, you must still submit an incomplete form to your trustee.

MPF Contribution: how does it work?

Both employers and employees are required to make mandatory deposits of 5% of the employee’s relevant income straight into the employee’s MPF account, but the exact amount depends on the employee’s income level. SEPs are also required to make MPF contributions. Below, we outline the contribution amounts for each monthly income level. 

Monthly Relevant income of employee/ SEP	Employer’s Contribution	Employee’s contribution	SEP’s contribution
Less than HK$7,100	Relevant income x 5%	No contribution required	No contribution required
Between $HK7,100 to HK$30,000	Relevant income x 5%	Relevant income x 5%	Relevant income x 5%
More than HK$30,000	HK$1,500	HK$1,500	HK$1,500

Example: Jane works at a marketing firm and is paid HK$50,000 per month. Since her income exceeds HK$30,000, both her and her employer’s contributions are capped at HK$1,500. By contribution day, then, HK$3,000 will be remitted to Jane’s MPF account 

When do you start making contributions to your workers?

Employees get a “contribution holiday,” meaning that they do not have to contribute to the MPF for the first 30 days of their employment, nor for any incomplete wage period that follows the 30-day period. 

For example, Jane joins a company on 5 April. 

From 5 April to 4 May, there is a 30-day contribution holiday.

5 May to 31 June is less than 1 month, and is therefore an incomplete wage period. Therefore, Jane would only have to make MPF contributions starting from 1 July. 

For Employers, however, there is no such thing as a contribution holiday. You are required to make MPF contributions from the day you hire an employee. 

Contribution Day

Employers of monthly-paid workers must pay contributions to the trustees on the 10th day of each month. For new employees, employers must make the first contribution on or before the 10th day of the month that comes after the 60th day of employment.

For example, Erica starts her new job on 31 March. The 60th day of her employment is 28 May. If you were her employer, you’d remit your contribution to your trustee by 10 June.  

And, if the contribution day falls on a non-weekday/ public holiday, the contribution day will be extended to the following weekday. 

MPF Retirement Fund: Pros and Cons

The MPF has often been criticised for its administrative complexity. Indeed, complying with MPF involves multiple manual processes, like making deductions from your employee’s salary and manually remitting contributions to your trustee each month. Missteps can lead to heavy penalties, as we’ll see below. (source)

Type of Employer Non-compliance	Penalty
Failure to enrol employees in an MPF scheme	Maximum penalty involves a HK$350,000 fine and imprisonment of 3 years
failing to make mandatory contributions to trustees after deducting 5% from employees’ relevant income,	Maximum penalty involves a HK$450,000 fine and imprisonment of 4 years
failing to make mandatory contributions to trustees without deducting 5% from employees’ relevant income	Maximum penalty involves a HK$350,000 fine and imprisonment of 3 years
Providing false or misleading information to trustees or to the electronic MPF Platform	Maximum penalty involves a HK$100,000 fine and imprisonment for one year on first conviction; for each subsequent conviction, a maximum penalty of a HK$200,000 fine and imprisonment of 2 years

Though making MPF contributions might appear to be a wearisome obligation to fulfil, it also presents benefits. 
Employers can voluntarily contribute more than the mandatory 5% to their employee’s MPF. The good news is that both mandatory and voluntary contributions made by employers are tax deductible under profits tax. The maximum deductible amount is as much as 15% of the employee’s total annual salary. (source) Savvy employers, then, are those who not only navigate MPF regulations diligently, but also willing to consider how to turn this system to their advantage.

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Frequently Asked Questions