Employer Contribution in Hong Kong

Hong Kong is a Special Administrative Region (SAR) of China and one of the world’s leading financial centers. It has a highly developed, open, and market-oriented economy, with a strong emphasis on international trade and finance.The economy of Hong Kong is characterized by low tax rates, a high degree of economic freedom, and a strong rule of law. As a result, it has attracted a large number of multinational corporations and has developed a sophisticated and efficient business environment.

Hong Kong has a highly skilled and educated workforce, with a high level of English proficiency. It also has a well-developed infrastructure, including a modern transportation system and telecommunications network. Despite its small size, Hong Kong is a major hub for international trade and finance, with a large port and airport, and a major financial center. It is also home to a number of major multinational corporations, and is a center for business services, such as accounting, consulting, and legal services.

However, when consider expanding to Hong Kong, there are a few local labor regulations that you need to pay attention to when hiring in Hong Kong. Aside from monthly salaries, employers in Hong Kong need to contribute to the Mandatory Provident Funds of their employees according to the local labor law.

What does MPF mean for Employer Contributions in Hong Kong?

As an employer, you may be aware of the need to make some deductions from your employees’ monthly gross salary to then be distributed elsewhere. This is no different in Hong Kong. If you are planning to employ talents from Hong Kong, there are some monthly contributions that you have to make towards the employees’ retirement funds, namely the Mandatory Provident Fund (MPF), as required by the local law.

To ensure your compliance as an employer in Hong Kong, let’s take a look at the cost breakdown of hiring talents from Hong Kong in the following highlights:

Mandatory Provident Fund

Mandatory Provident Fund, or simply referred to as MPF, was first launched in 2000. It is a fully funded retirement scheme/pension fund, created by the Hong Kong government and provided for by the approved private organizations,  that requires the participation of those who wish to retire in Hong Kong. MPF is an integral part of the management of  Hong Kong companies and plays a crucial role for employees. In general, both employers and employees are expected to contribute 5% of the employees’ monthly remuneration each.

Employer’s Obligations

One-time assistance in opening MPF accounts must be provided by employers to their employees. A full-time or part-time employee under 65, except for exempt employees, should be enrolled in an MPF scheme during the first 60 days of their employment. However, in the event an employment relationship ends before the 60th day of employment, there is no requirement to establish a MPF arrangement.

As soon as an employee successfully enrolls in an MPF scheme, employers must meet their ongoing obligations of remitting contributions to the scheme once every contribution period. Contributions for monthly-paid full-time employees are typically made on the 10th day of each month.

The contribution rates for both employers and employees are 5% of the employee’s relevant income each, subject to relevant income levels. For monthly-paid employees, the minimum and maximum relevant income levels are HKD7,100 and HKD30,000 respectively. Additionally, employees are free to make voluntary contributions to their MPF account in addition to the mandatory contributions.

In each contribution period, employers must calculate the relevant income of their employees and the mandatory contribution amount they must pay . Furthermore, the employer must also determine the amount payable by their employees and deduct the calculated amount from their employees’ income accordingly and remit that sum to their MPF account.

Potential Enforcement Against Employers

Mandatory Provident Fund Schemes Authority (MPFA) is a statutory body established under the Mandatory Provident Fund Schemes Ordinance (MPFSO). When there’s any discovery on employers who are not complying, Mandatory Provident Fund Schemes Authority (MPFA) will take action by  investigating complaints and proactively inspecting their premises. MPFA will enforce against any employers who don’t comply with the law (including those attempting to avoid paying MPF contributions). If the employer fails deducts employee pay for MPF contributions or fails to enroll their employees in an MPF scheme, they will be penalized. The following measures may be enacted:

• Request employers to take immediate action to rectify the situation
• Subject to a surcharge of 5% if an employer defaults on their contributions
• File a civil claim in court to recover mandatory contributions and surcharges that are in arrears
• Impose fines on employers who do not comply with the law 
• Prosecutes non-compliant employers or individuals, along with their officers, directors, and partners

If an employer does not comply with MPFA, they may be subject to the following penalties: 

In the case of non-compliant employers, MPFA may initiate criminal prosecutions. Penalties that may apply include:

Employers who do not comply with MPFA’s regulations may be penalized financially, with penalties as follows:

Source: MPFA Enforcement Against Employers

The above highlights are the main scope of contributions that employers need to take on for hiring employees in Hong Kong. Since Hong Kong social insurance and labor acts are more rigid and complicated than other countries, the cost may vary depending on the salary interval of employees; in addition, the extra bonus will increase the cost of tax for employers as well. 

Handling employer contribution and salary calculation in foreign countries are prone to error if not handled properly by the experts. Through Slasify, you can avoid potential law enforcement issues regarding payroll errors in Hong Kong. If you would like to learn more on Hong Kong Labor act and to process a payroll in Hong Kong, get connected with our experts to consult further!

Slasify is designed for remote worker. We provide payroll calculation, social security payment and tax filing in more than 150 countries around the world, allowing business owners/talents to seamlessly connect with the world. We have practical experience in serving the world’s top 100 companies. If you have relevant needs, please feel free to contact us.

In addition, if you are a “remote worker” or are on the way to becoming a “remote worker”, and if you want to know more about it, you are welcome to visit Slasify’s website. If you have any questions, you are welcome to write an email to us.