The Mandatory Provident Fund (MPF) is a compulsory retirement savings system for employees that all employers, including foreign owners, must contribute to when hiring local talent. The contributions are made up of a percentage of the employee’s monthly income and matching company income that goes into a privately-managed MPF account by a third-party MPF service provider, and overseen by the Mandatory Provident Fund Schemes Authority (MPFA).
Which type of MPF scheme should I use?
SMEs in Hong Kong will typically use the Master Trust Scheme, as it pools the contributions of participating employees across companies across Hong Kong to make scalable investments
How do I enrol my company in an MPF scheme?
To get started, you must first register your company on the government’s centralized eMPF Platform. This is a one-time registration that allows you to manage all your MPF accounts and investment portfolios more easily, involving three main steps:
- Appointing a Company Authorized Person (CAP): This person is responsible for managing your company’s MPF schemes on the platform, and must be a holder of a Hong Kong Identity Card. Most companies in Hong Kong will designate a human resources representative to this role, or if not available, the company secretary.
- Provide Company Information: You will need to fill in your company’s details and provide personal particulars for the CAP and any other contact persons.
- Upload Supporting Documents: You must upload a copy of your company’s Business Registration Certificate or other valid registration documents to the eMPF platform.
Once your company is registered on the eMPF platform, you may approach one of the city’s 14 approved MPF providers, who will walk you through their onboarding process. Once your company has onboarded with them, you can begin enrolling your employees, for which your MPF provider will provide forms for them to fill and submit within their first 60 days of employment.
How much do Employers have to contribute to the Employee’s MPF?
All employers in Hong Kong are expected to make monthly contributions for each employee based on their “relevant income,” which includes their full compensation package with items such as:
- Wages & Salary
- Leave Pay
- Commissions & Bonuses
- Gratuities & Allowances
You and your employees’ contributions are calculated based on their income level, capped at HK$1,500.
| Employee’s Monthly Relevant Income | Employer Contribution | Employee Contribution |
| Less than HK$7,100 | Relevant income x 5% | Not required |
| $7,100 to HK$30,000 | Relevant income x 5% | Relevant income x 5% |
| More than HK$30,000 | Capped at HK$1,500 | Capped at HK$1,500 |
How and When do I have to contribute to my employee’s MPF?
After enrolment, your first contribution payment is due by the 10th of the month after your employee is enrolled.
Sarah is your new hire whose first day was June 5th, making her 60th day of employment August 3rd. As her employer, you must submit her first MPF contribution by July 10th to cover Sarah’s partial month of work in June. After that, all subsequent monthly contributions for Sarah are due by the 10th of each month.
Sarah gets a “contribution holiday” for her first 30 days plus the first incomplete pay cycle, meaning she does not have to contribute from her salary in June or July. As her employer however, you must pay your employer contribution for Sarah calculated from her first day at work.
What penalties should I be aware of?
The MPFA takes payments very seriously and imposes hefty penalties on employers for failing to pay contributions, ranging from financial to criminal, making it worthwhile to have a reliable CAP to stay on top of managing your MPF and avoiding potential trouble.
Late Surcharge
If you are late with your monthly contributions, the MPFA will impose a 5% surcharge on the outstanding amount. This surcharge is paid directly into your employee’s MPF account as compensation for the delay.
Legal Penalties
| Type of Employer Non-compliance | Penalty |
| Failure to enrol employees in an MPF scheme | Maximum penalty of a HK$350,000 fine and imprisonment for three years |
| Failure to pay mandatory contributions to trustees* (having deducted 5% from employees’ relevant income) | Maximum penalty of a HK$450,000 fine and imprisonment for four years
|
| Failure to pay mandatory contributions to trustees* (without deducting 5% from employees’ relevant income) | Maximum penalty of a HK$350,000 fine and imprisonment for three years |
| Providing false or misleading information to trustees*, eMPF Platform* or MPFA | Maximum penalty of a HK$100,000 fine and imprisonment for one year on first conviction; maximum penalty of a HK$200,000 fine and imprisonment for two years on each subsequent conviction |
Financial Penalties
| Type of Employer Non-compliance | Penalty |
| Failure to pay mandatory contributions to trustees* on time | Financial penalty of HK$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) | Financial penalty of HK$10,000 for the first failure, HK$20,000 for the second failure and HK$50,000 for subsequent failures |
| Failure to notify trustees* in writing of an employee’s cessation of employment (except for casual employees participating in Industry Schemes) | Financial penalty of HK$5,000 for the first failure, HK$10,000 for the second failure and HK$20,000 for the subsequent failures |
| Failure to notify trustees* in writing of updates on employer information such as company name, address, telephone number and Email address | Financial penalty of HK$5,000 for the first failure, HK$10,000 for the second failure and HK$20,000 for subsequent failures |
What Tax Deductions can I get from contributing to MPF?
Contributing to your employees’ MPF is a tax-deductible business expense, allowing you to claim your company’s mandatory and any voluntary contributions on your Hong Kong Profits Tax return, capped at 15% of your employee’s total annual income.
Let’s say Sarah’s annual salary is HK$300,000, with your employer contribution calculated at HK$1,250 per month to her MPF, totalling HK$15,000 for the year. Since HK$15,000 is less than 15% of her salary (HK$300,000 * 15% = HK$45,000), you can deduct the full HK$15,000 from your company’s taxable profits, reducing your Profits Tax bill.
Common MPF Service Providers
Hong Kong has 14 government-approved trustees to manage the city’s retirement savings. Several of the largest and most common MPF service providers include:
HSBC
HSBC is a global bank with deep roots in Hong Kong, making it a very common and stable choice for MPF services. They offer two main Master Trust Schemes suitable for any new business to participate in.
Manulife
A major insurance and financial services company, Manulife is known for their wide array of investment fund choices within its MPF scheme, giving your employees more control over their investment strategy.
AIA
A well-established insurance group in Asia and a reliable choice for MPF services, AIA offers a range of funds and support for employers.
| MPF Service Providers |
| AIA Company (Trustee)Limited |
| Bank Consortium Trust Company Limited |
| Bank of Communications Trustee Limited |
| Bank of East Asia (Trustees) Limited |
| BOCI-Prudential Trustee Limited |
| China Life Trustees Limited |
| Cititrust Limited |
| HSBC Institutional Trust Services (Asia) Limited |
| HSBC Provident Fund Trustee (Hong Kong) Limited |
| Manulife Provident Funds Trust Company Limited |
| Principal Trust Company (Asia) Limited |
| RBC Investor Services Trust Hong Kong Limited |
| Sun Life Pension Trust Limited |
| Sun Life Trustee Company Limited |
| YF Life Trustees Limited |
How will my MPF contributions be invested?
Each provider offers a range of funds with different risk levels for your employees to select, from conservative money market funds to aggressive equity funds. If your employee doesn’t make a choice, their contributions are automatically invested according to the Default Investment Strategy (DIS).
The DIS is a government-mandated, ready-made solution that automatically adjusts investment risk based on an employee’s age consisting of two funds:
- Core Accumulation Fund (CAF): A higher-risk fund with about 60% in global equities and 40% in lower-risk assets, ideal for younger employees.
- Age 65 Plus Fund (A65F): A lower-risk fund with about 20% in global equities and 80% in global bonds and cash, aimed at employees nearing retirement.
As an example, let’s assume Sarah is 30 years old and didn’t choose her desired fund. Her young age means the majority of her MPF contributions will go into the CAF, and as she gets older, the DIS will slowly shift her money from the CAF to the more conservative A65F, reducing her investment risk as she approaches retirement. By the time she turns 65, all her savings will be in the A65F.
When can employees withdraw their MPF?
While the funds belong to your employees, they can’t access this money until they meet certain conditions, the primary one being reaching the retirement age of 65. Other conditions where they can legally withdraw their funds early include:
- Early Retirement: Where your employees can declare they have stopped working permanently at 60 years of age.
- Permanent Departure: If they are leaving Hong Kong for good.
- Total Incapacity: If a doctor confirms they are permanently unable to work.
- Terminal Illness: If a doctor certifies they have less than 12 months to live.
- Small Balance: If their account has less than HK$5,000 and has been inactive for a year.
- Death: The funds are paid to their estate.
Conclusion
The MPF system serves as Hong Kong’s retirement fund meant to help employees grow their savings while they work. As a foreign business owner, you should be aware of the enrollment and contribution processes if you wish to maintain an office within the city. If you have more questions or are looking for help with managing your MPF, drop us a message and we’d be happy to assist.
