How does MPF work in Hong Kong?
MPF (Mandatory Provident Fund) requires both employer and employee to each contribute 5% of the employee's relevant income monthly, capped at HKD 1,500 each (based on a HKD 30,000 relevant income cap). Employees aged 18-64 must be enrolled within 60 days of starting employment.
Detailed Explanation
## What Is MPF?
The Mandatory Provident Fund (MPF) is Hong Kong's compulsory retirement savings scheme, established in 2000 under the Mandatory Provident Fund Schemes Ordinance. It is mandatory for most employees and self-employed persons aged 18 to 64 working in Hong Kong.
MPF is administered by the Mandatory Provident Fund Schemes Authority (MPFA) and channelled through approved trustees such as HSBC, AIA, Manulife, Sun Life, and Principal.
## How Contributions Work
Contribution formula:
| Party | Rate | Cap | |---|---|---| | Employer | 5% of relevant income | HKD 1,500/month | | Employee | 5% of relevant income | HKD 1,500/month |
Relevant income cap: HKD 30,000/month
Employees earning more than HKD 30,000/month contribute based on HKD 30,000, not their actual salary. Employees earning less than HKD 7,100/month are exempt from the employee contribution, but the employer must still contribute 5% on the actual income.
Example calculations:
- Employee earning HKD 20,000/month: employer contributes HKD 1,000; employee contributes HKD 1,000
- Employee earning HKD 35,000/month: employer contributes HKD 1,500 (capped); employee contributes HKD 1,500 (capped)
- Employee earning HKD 6,000/month: employer contributes HKD 300 (5% of HKD 6,000); employee is exempt (below HKD 7,100 minimum)
## Enrolment Requirements
- Enrol employees within **60 days** of the commencement of employment
- All employees aged 18 to 64 must be enrolled
- Part-time and casual workers employed for 60 or more days in a 12-month period must be enrolled
- Exempt: domestic helpers (covered by a separate scheme), non-HK residents working in HK for less than 13 months continuously, employees covered by an exempt ORSO scheme
## Contribution Deadlines
Employer must remit both portions (employer's share and the employee's share withheld from salary) to the trustee by the 10th day of the following month (or next working day if the 10th falls on a holiday).
Late payment penalty: 5% surcharge on outstanding contributions. Persistent default: MPFA enforcement, criminal prosecution, and public naming.
## MPF for Self-Employed Persons (SEPs)
Self-employed persons (sole traders, partners, working directors drawing no salary but earning income from the business) must enrol in MPF on their own account. They contribute: - 5% of relevant income - Annual contributions for the year (not monthly) - Can use any approved MPF trustee scheme
## Types of MPF Funds
MPF trustees offer a range of constituent funds: - Conservative Fund
low risk, capital preservation, returns linked to HKD savings rate - **Bond Funds**: HK and global bonds - **Mixed Asset Funds**: balanced equity/bond allocation - **Equity Funds**: HK equities, global equities, China equities
Members choose their own fund allocation and can switch between funds at any time (typically free of charge). Default arrangement for those who do not choose: the Default Investment Strategy (DIS), which adjusts allocation between equities and bonds based on the member's age.
## Tax Treatment
- Employer mandatory contributions
fully deductible against Profits Tax as a business expense - **Employee mandatory contributions**: eligible for deduction from Salaries Tax assessable income - **Tax Deductible Voluntary Contributions (TVC)**: employees can contribute up to HKD 18,000/year extra to a dedicated TVC sub-account, deductible from their Salaries Tax assessment
## Portability on Leaving Employment
When an employee leaves a job, their accrued MPF benefits are portable: - Employee's own contributions: always fully portable immediately - Employer's contributions: portable after vesting (full vesting after typically 1 year, depending on the scheme) - On departure: transfer to the new employer's scheme, a personal account, or retain in the current scheme
Source: ird.gov.hk
Real-World Examples
New employer with first hire
A HK company hires its first employee at HKD 25,000/month on 1 March. The employer must enrol in an MPF scheme and register the employee within 60 days (by 30 April). First contribution covers March: employer HKD 1,250 + employee HKD 1,250. Payment due by 10 April.
Director-shareholder contribution
A sole director draws a salary of HKD 50,000/month. MPF: employer contribution (the company) HKD 1,500 (capped); employee contribution (the director) HKD 1,500 (capped). Total HKD 3,000/month. The company deducts the employer's HKD 1,500 as a Profits Tax expense. The director deducts their HKD 1,500 as a Salaries Tax deduction.
Low-income employee exemption
A part-time worker earns HKD 5,000/month. Below the HKD 7,100 minimum, so no employee contribution is required. However, the employer must still contribute 5% of HKD 5,000 = HKD 250/month. This is commonly missed by small employers.
Common Mistakes to Avoid
- Not enrolling an employee within the 60-day window and then remitting back contributions (late enrolment attracts MPFA scrutiny)
- Treating the contribution deadline as the last working day of the month rather than the 10th of the FOLLOWING month
- Failing to contribute for low-income employees (below HKD 7,100) — employee exemption does not exempt the employer
- Not computing relevant income correctly: relevant income includes salary, regular bonuses, commission, and most allowances, but may exclude irregular bonuses depending on the scheme rules
Frequently Asked Questions
What happens to MPF if an employee leaves Hong Kong permanently?
An employee who is not a permanent HK resident departing HK permanently can apply to withdraw their full MPF accrued benefits as a lump sum, tax free. They must provide evidence of permanent departure (visa cancellation, one-way permit, etc.).
Can I withdraw MPF before retirement?
Generally no. MPF can only be withdrawn on reaching age 65, on permanent departure from HK, on total incapacity, on terminal illness, or on death. Early withdrawal is not permitted and attempting it is a criminal offence.
What is the retirement age for MPF?
The normal retirement age for MPF withdrawal is 65. A member aged 60-64 who has permanently ceased employment can also withdraw, though the amount is subject to the same tax-free treatment.
Are employer MPF contributions deductible against Profits Tax?
Yes. Mandatory employer MPF contributions (5%, capped at HKD 1,500/month per employee) are fully deductible as a business expense against Profits Tax under Section 16 of the Inland Revenue Ordinance.
What is the Tax Deductible Voluntary Contribution (TVC)?
TVC is a voluntary MPF contribution of up to HKD 18,000 per year made to a dedicated TVC sub-account. It is deductible from the employee's Salaries Tax assessment. It is separate from mandatory contributions and is chosen voluntarily.
Practical Tips
- Set up a monthly payroll calendar with the 10th of every month marked as the MPF contribution due date. Many employers miss this by confused it with end-of-month payroll.
- Choose an MPF trustee with a good online portal — it makes monthly contributions, employee enrolment, and annual reporting much easier.
- Advise new employees about TVC immediately at onboarding. HKD 18,000/year in additional retirement savings is a valuable benefit that is also tax deductible.
- When an employee leaves, process the MPF departure notification promptly. Delay can result in MPFA inquiries and potential penalties.
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