Mandatory Provident Fund Schemes (MPF Schemes)

The Mandatory Provident Schemes Ordinance is now effective. An Employer is required to arrange all his relevant employees to join a registered MPF scheme. Please note the legal significance on complying the laws. In some cases, failure to comply is a crimimal offence. Please read the relevant news .

Responsibilities

An Employer is required to make arrangements for relevant employees aged between 18 and 65, who have been employed for 60 days or more, to join a registered MPF scheme (except those who have attained age 64 at the commencement of the exemption provision in the Ordinance).

Employees employed under one employment contract for 60 days or more, whether working full-time or part-time, will be covered by the Ordinance.

An Employer may select one or more MPF schemes available in the market and make arrangements for relevant employees to become scheme members. An Employer is required to display the participation certificate issued by the MPFA.

An Employer is required to calculate individual employee's income and amount of contribution for each contribution period, deduct the relevant mandatory contribution from the employee's relevant income, and pay the employer's contribution, from the Employer's own funds, for the employee's benefit.

An Employer must provide each employee with a monthly pay-record showing the employee's relevant income and the amount of contribution. However, if an Employer is the employer of a casual employee participating in an industry scheme, the Employer does not need to comply with this requirement.

An Employer must pay the total mandatory contributions to the trustee of the scheme on or before the contribution day which is the 10th calendar day after the last day of the relevant contribution period. To put it simply, if an Employer pay monthly wages or salaries to employees on the last day of each month, the contribution day falls on the 10th calendar day following the pay day.

When remitting the payment, An Employer must provide the trustee with a remittance statement showing the relevant income and amount of contribution of each relevant employee.

If an Employer are the employer of a casual employee and an Employer has enrolled the casual employee in an industry scheme, the Employer must pay the total mandatory contributions to the trustee of the scheme on or before the contribution day, i.e., either :

the 10th calendar day after the last day of the relevant contribution period; or

the day on which the relevant income for the relevant contribution period is paid to the casual employee. In other words, the contributions should be paid to the scheme trustee on the pay day. However, when remitting the payment, the Employer does not need to provide the trustee with a remittance statement.

Tax Concession

An Employer MPF contributions are profits tax deductible, provided that the deduction does not exceed 15% of employees' total emolument. Visit the link of Related Tax Implications to know more details.

Cessation of Employment

When an employee ceases employment, an Employer should assist the employee to complete an election form in transferring the accrued benefits derived from mandatory contributions in the MPF scheme to another MPF scheme, or to another account in the same scheme.

An Employer cannot claw back any benefits accrued from the mandatory contributions previously made by an Employer for the employee's benefit.

Offsetting of Severance and Long Service Payments

An Employer can offset the long service payment or severance payment as required under the Employment Ordinance out of the accrued benefits derived from the contribution an Employer have made to the employee in the MPF scheme. An Employer can apply to the trustee to deduct a relevant amount for this purpose for payment to a leaving employee.

For example, if the benefit accrued from the employer's contribution is $55,000 and the amount of long service payment is $80,000, then an Employer can apply to withdraw $55,000 from the employee's MPF account for (partial) payment, and pay $25,000, from an Employer own funds, to the leaving employee.

As a further example, if the long service payment is only $40,000, an Employer can only request the trustee to pay $40,000 to the leaving employee. The remaining accrued benefits, viz., the balance of $15,000 derived from the employer's contributions, together with those derived from the total contribution made by the employee, have to be transferred to the MPF account designated by the employee and preserved until the employee retires.

Please note that in offsetting long service payment or severance payment, an Employer will need to follow other requirements set out in the Employment Ordinance concerning such payments.