Mandatory Provident Fund (MPF): A Guide to Employer Obligations in Hong Kong

The Mandatory Provident Fund (MPF) is Hong Kong's mandatory retirement savings scheme, established under the Mandatory Provident Fund Schemes Ordinance (Cap. 485) (MPFSO) and regulated by the Mandatory Provident Fund Schemes Authority (MPFA). Since its introduction in December 2000, the MPF has been a cornerstone of Hong Kong's retirement protection framework, requiring both employers and employees to make regular contributions to privately managed pension funds. For employers, understanding and complying with MPF obligations is not only a legal requirement but also an important aspect of managing employment relationships and avoiding penalties.

Who Must Be Enrolled?

Employers must enrol in the MPF all relevant employees — defined as employees aged 18 to 64 (inclusive) who have been employed for 60 days or more under a continuous contract or under a fixed-term contract of 60 days or more. The 60-day rule means:

• An employee on day 1 of employment is not immediately required to be enrolled, but the employer must enrol them no later than the first day of the second month following the commencement of employment
• Casual employees (employed on a day-to-day basis or for a fixed period of less than 60 days) are treated as relevant employees from the first day of employment (special rules apply for the catering and construction industries)

Exempt Persons

Certain categories of employees are exempt from the MPF requirement:

• Employees who are members of an ORSO scheme (Occupational Retirement Schemes Ordinance scheme) that is exempt from MPF participation, provided the ORSO scheme provides equivalent or better benefits
• Domestic helpers (covered by separate arrangements under the Employment Ordinance)
• Employees who are already permanent residents of countries outside Hong Kong admitted to work for a period not exceeding 13 months
• Members of approved occupational retirement schemes that have been granted MPF exemption certificates
• Self-employed persons (who must contribute to MPF for themselves if their net income exceeds the minimum relevant income)

Contribution Requirements

Contribution Rates

Both employer and employee are required to contribute 5% of the employee's relevant income. Contributions are subject to minimum and maximum relevant income levels:

Type	Minimum Relevant Income	Maximum Relevant Income (Cap)	Monthly Contribution (at cap)
Employee contribution	HK$7,100/month	HK$30,000/month	HK$1,500
Employer contribution	No minimum (employer must always contribute 5%)	HK$30,000/month	HK$1,500

Key points:

• If an employee earns less than HK$7,100/month, the employee is exempt from making contributions (but the employer must still contribute 5% of the employee's actual income)
• If an employee earns more than HK$30,000/month, contributions are capped at HK$1,500 per month per party (i.e., maximum monthly employer contribution is HK$1,500; maximum employee contribution is HK$1,500)
• "Relevant income" includes wages, salary, leave pay, commission, bonus (subject to specific rules for irregular payments), and other contractual payments. It excludes reimbursements of genuine expenses and severance payments/long service payments.

Contribution Period and Deadline

Contributions must be paid within the first 10 days after the last day of each contribution period (generally, each calendar month). Failure to pay contributions on time is a criminal offence and also triggers surcharges and late payment charges.

Employer's Obligations on Enrolment

When a new relevant employee joins, the employer must:

1. Provide the employee with a notice of enrolment within the first month of employment
2. Allow the employee to choose a registered MPF scheme (or default to the employer's chosen scheme if no preference is expressed)
3. Enrol the employee in the chosen (or default) scheme within the required timeframe
4. Provide the trustee of the scheme with the required information about the employee

Employer Voluntary Contributions and Additional Voluntary Contributions

Employers may make employer voluntary contributions (EVCs) above the mandatory 5% as an employment benefit or retention incentive. Such voluntary contributions can be structured with vesting conditions (e.g., the employee only retains the employer's voluntary contributions after a certain period of service), making them a useful tool for long-term employee retention.

Employees can also make additional voluntary contributions (AVCs) above the mandatory 5%, which are invested in the same or additional constituent funds chosen by the employee.

Investment and Fund Selection

MPF schemes offer a range of constituent funds (investment options) with different risk profiles (e.g., equity funds, bond funds, money market funds, capital preservation funds). Employees choose how to allocate their contributions among available constituent funds. The Default Investment Strategy (DIS), introduced in 2017, is a default option for employees who do not make an active choice: it automatically adjusts the asset allocation between two DIS funds (Core Accumulation Fund and Age 65 Plus Fund) as the employee ages, becoming progressively more conservative.

Portability: Transferring MPF Benefits

When an employee leaves an employer (for any reason), the employee's employee mandatory contributions (and vested employer mandatory contributions) must be transferred to a scheme of the employee's choice (or retained in the former employer's scheme). Employers cannot retain any portion of the employee's mandatory contributions as a condition of termination.

From 2025, the eMPF Platform — a centralised MPF administration platform developed by the MPFA — has been progressively implemented to consolidate MPF account management and improve portability. Employees can view and manage their MPF accounts across multiple schemes through the eMPF Platform.

Offsetting MPF Against Severance/Long Service Payments

Previously, Hong Kong employers could offset the employer's mandatory MPF contributions against severance payments (SP) and long service payments (LSP) payable under the Employment Ordinance. This practice has been a significant controversy and was finally abolished: under the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022, the MPF offsetting arrangement for SP/LSP was abolished with effect from 1 May 2025.

This is a significant change for employers. From 1 May 2025:

• Employer mandatory contributions accrued on or after 1 May 2025 can no longer be used to offset SP/LSP obligations
• Employer mandatory contributions accrued before 1 May 2025 (the "pre-enactment amount") can still be used to offset SP/LSP for the pre-enactment portion only (transitional arrangement)
• As a result, employers may face higher SP/LSP costs for long-serving employees upon redundancy or upon the employee reaching 65 years of age

Employers should review their long-term financial exposure for SP/LSP and consider provision strategies accordingly.

Employer Penalties for Non-Compliance

The MPFA has broad enforcement powers under the MPFSO. Non-compliance by employers can result in:

• Criminal prosecution: Failure to enrol employees, pay contributions, or comply with other MPFSO obligations is a criminal offence, punishable by fines (up to HK$350,000 per offence) and imprisonment (up to 3 years for repeat offenders)
• Late charges: A surcharge of 5% per annum (calculated monthly) applies to late contributions
• Civil enforcement: The MPFA can issue contribution surcharge notices and apply to court for enforcement orders requiring payment of outstanding contributions and penalties
• Reputation risk: The MPFA publishes lists of employers who have been convicted of MPF offences, which can harm employer brand and recruitment

Common MPF Compliance Issues

Employers frequently encounter the following MPF compliance challenges:

• Misclassification of "relevant income": Failing to include bonuses, commissions, or other irregular payments in the contribution calculation. All contractual payments are generally relevant income.
• Late enrolment: Not enrolling employees within the statutory timeframe, particularly for part-time or casual workers
• Failure to contribute during leave: Contributions are required during periods of paid leave (annual leave, maternity leave, sick leave). Unpaid leave may reduce or eliminate relevant income, but the obligation must be analysed carefully.
• ORSO scheme non-compliance: Employers relying on ORSO scheme exemptions must ensure the ORSO scheme remains compliant with the conditions for MPF exemption
• Incorrect offsetting calculations: Particularly with the post-May 2025 changes to the offsetting arrangement

Practical Recommendations for Employers

• Implement robust onboarding procedures: Ensure HR processes trigger MPF enrolment automatically for all new hires at the correct time
• Audit payroll calculations regularly: Check that relevant income is being calculated correctly, including all contractual payments
• Review SP/LSP provisions: Model long-term SP/LSP exposure following the abolition of the MPF offset from May 2025
• Train HR and payroll staff: Ensure staff are aware of the post-May 2025 offsetting changes and new eMPF Platform requirements
• Engage a scheme trustee with robust systems: Choose an MPF trustee with good member communication and administration systems to minimise compliance errors

Conclusion

MPF compliance is a non-negotiable aspect of employing staff in Hong Kong. The abolition of the offsetting arrangement from May 2025 marks the most significant change to the MPF system in over two decades and has material financial implications for employers with large workforces. Employers should review their MPF and SP/LSP exposure now and take proactive steps to ensure compliance and manage financial risk.

Alan Wong LLP advises employers on employment law compliance, including MPF obligations, employment contract drafting, and SP/LSP planning. Contact us to discuss your employment law needs.