Regardless of geographical location, retirement savings is usually one of the
top benefits that employees look for. While employer matching can be a great
perk, in certain countries it’s actually a requirement.
The Mandatory Provident Fund (MPF) is Hong Kong’s government-mandated approach
to retirement savings. Depending on employee classification, global employers
may be required to contribute to these funds. By familiarizing yourself with
the specific requirements and scenarios, you can stay compliant—and avoid
hefty penalties and fines.
1. What is a mandatory provident fund?
The mandatory provident fund, or MPF, in Hong Kong is a structured savings
scheme designed to provide retirement savings for employed and self-employed
Hong Kong citizens. In most cases, participation is mandatory for employers
and employees. But there are some exceptions for low earners, certain
professions, and non-citizens.
These schemes come in three types:
- Master trust schemes (common)
- Employer-sponsored schemes (best for larger companies)
- Industry schemes (best for casual/mobile employees)
Multinational companies that employ citizens in Hong Kong between the ages of
18 and 64 years old are required to participate with compulsory enrollment
due by the 60th day of employment for full- and part-time employees.
Enrollment is due on the first day of employment for casual employees (those not guaranteed
employment for a specific duration like seasonal bartenders.)
2. Understanding the types of MPF in Hong Kong
The size of your company and your industry will determine which type of MPF
you will use. But even within each type, there are dozens of individual
choices that can get a little tricky.
Master trust schemes
The most common type of MPF in Hong Kong is a master trust scheme. These are
open to employees of participating companies, self-employed individuals, and
former employees with accrued benefits. These MPF schemes pool contributions
from different participants at different levels of risk. They’re the perfect
option for most small and medium-sized businesses.
Common Investment Options for Master Trust & Employer-Sponsored Schemes | |||
Investment Type | How it Works | Risk Level | Fees |
Money Market Funds | Short-term; high-quality interest-bearing securities
| Low-Risk | Administrative fees charged as a percentage of asset value |
MPF Conservative Fund | Special type of money market fund that invests exclusively in short or long-term HKD investments | Low-Risk | Administrative fees are restricted to months that meet or exceed prescribed savings rates |
Guaranteed Fund | Investments with a guaranteed rate of return suitable for risk-averse groups | Lower risk; varies depending on the conditions of the guarantee | Strict guarantee conditions like minimum investment period or withdrawal requirements |
Bond Fund | Earns stable income from interest | Low to medium risk; known for stability | Fees assessed as a percentage of asset value |
Mixed Asset Funds | Focuses on asset appreciation and higher rates of return | Medium to high risk; flexible to meet different stages of investing | Fees assessed as a percentage of asset value |
Equity Fund | Uses stocks to achieve capital appreciation and high rates of return | Relatively high risk | Fees assessed as a percentage of asset value |
Index Fund | Uses stocks to earn return rates similar to index funds | Medium to high risk
| Tends to accrue lower fees than other stocks options due to less frequent trading |
Employer-sponsored schemes
Larger corporations with the resources (including a large number of
participants) have the option to create their own pension schemes instead of
pooling with other companies. Master trust schemes generally have access to a
larger selection of investment options while employer-sponsored schemes are
limited to those selected by the employer.
Industry schemes
Employees who tend to change employers more frequently can miss out on
retirement savings benefits. But since the MPF in Hong Kong is compulsory,
they’ve designed a scheme to fit these casual employees. Caterers,
construction workers, and people employed in other highly mobile occupations
can register under an industry scheme that is not tied to a specific employer.
3. How to choose the right MPF funds
Unless your multinational company has a large number of Hong Kong-based
employees or you tend to employ transient workers, you’ll probably be choosing between the particulars of a master trust scheme.
That means that you’ll need to choose a portfolio of investment options that
meet the needs of your workforce. Luckily, investment principles are the same
across almost any economy. The same investment principles that work in the
U.K. or the U.S., for example, can also be applied in Hong Kong. For example,
a younger workforce can tolerate more risk, while those closer to retirement
will need more security.
When you decide on an investment portfolio, focus on risk level and
administrative fees to create a default investment strategy; then, add some
flexibility by choosing optional elections employees can use to tailor their
investment strategies based on age, income and retirement goals.
4. What you need to know about enrollment and cessation
All eligible employees between the ages of 18 and 64 should be enrolled within
the first 60 days of employment. This is non-negotiable and missing the
deadline will lead to massive consequences.
Keep in mind:
- There are no exceptions for conflicting company policies. If your company enforces a 90-day probation period, you will still be required to enroll probationary employees in an MPF in Hong Kong by the 60-day deadline.
- Some employees may not cooperate. Your company can still comply by submitting your portions of the appropriate paperwork before the deadline.
- Employers are required to make regular, monthly contributions by the 10th day of every month for regular salaried employees. With the exception of casual employees, employers and employees are obligated to contribute at least 5% of their minimum relevant income (HKD 7,100 per month). For employees earning more or less than the minimum relevant income, contributions are adjusted as follows:
| Minimum MPF Contributions for Employers & Employees | ||
|---|---|---|
Salary Range | Employer Contribution
| Employee Contribution |
Less than 7,100 HKD | 5% of Salary
| Not Required |
7,100 - 30,000 HKD
| 5% of Salary | 5% of Salary |
More than 30,000 HKD
| 1,500 HKD Max | 1,500 HKD Max |
- Employers are required to provide proof of contributions (e.g. pay stubs) within 7 working days of any contribution disbursement. Employers should also maintain records of contributions for each employee for up to 7 years .
Who is exempt?
Of course, there’s an exception to every rule.
Certain employees may be exempt from participation in a provident mutual fund
scheme. For example, anyone who reaches the age of 64 years old by December
1st is considered near retirement and is no longer required to participate.
Certain types of employees that may have retirement plans provided through
other means, like grant-funded school teachers, may be exempt. And foreign
employees who enter Hong Kong for fewer than 13 months, or who are otherwise
covered by an overseas retirement fund, are also exempt from participation.
What you need to enroll a new employee
Your company will set up a mutual provident fund scheme with a trustee, or
designated party, that manages the scheme independent from your company. A
complete enrollment, submitted by the 60th day of employment, includes:
- Selection of appropriate investment options
- Personnel details, including name, date of birth, Hong Kong ID numbers, etc.
- A signed personal declaration of residency in Hong Kong
Terminating participation for cessation of employment
It’s a fairly simple two-step process to terminate participation in an MPF
fund:
- Calculate the employee’s final pay and contributions , and submit payments prior to the next monthly deadline with your regular payroll contributions.
- Provide written notice by the next contribution period (10th day of the following month) to the trustee that identifies the terminated employee and last day of employment.
5. Understanding your risks: fines and penalties
Unfortunately, you can’t just leave this one on the back burner—employer
compliance is extremely important when it comes to the MPF.
The Hong Kong government enforces MPF participation by using hefty fines—and
even potential imprisonment—for individuals or companies who shirk their
responsibilities.
For example, missing the 60-day enrollment deadline can cost your company up
to $350,000 HKD in fines per offense. Non-compliance is
thoroughly investigated in Hong Kong. If liable parties acting on behalf of a
company are convicted, they face up to three years in jail.
Forgetting to notify trustees when employment is terminated can also rack up
big fines. The first offense is typically 5,000 HKD with each additional
offense at 20,000 HKD .
6. How MPF Hong Kong contributions affect taxes
Both employees and employers can claim MPF Hong Kong contributions on their
annual taxes.
Employers can claim up to 15% of an employee’s annual salary. For most employees, the employer-required
contribution is 5% of their salary, capped at 1,500 HKD for higher earners.
Employees can claim up to 18,000 HKD in contributions annually when filing
their taxes.
The bottom line on compliance for MPF in Hong Kong
While retirement savings is mandatory in Hong Kong, you don’t need to navigate
it yourself. If your multinational company is expanding into Hong Kong,
consider a global managed payroll company
to help you set up
compliant and efficient payroll processes.
Keep in mind, though, the MPF isn’t the only challenge you may face as you
expand internationally. You won’t want to miss this ebook:
Check out the ebook now to better understand what it means for an
organization like yours to have true Global Fluency—and master the
complexities of multinational business.
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