The Comprehensive Guide to MPF Contribution Calculations: Employer and Employee Contribution Rates, Limits, and Tax-Deduction Rules
MPF contributions may look complex, but a few key figures make them easy. We cover 5% employer/employee rates, income caps and floors, first payment dates, and tax deductions—MPF at a glance.
TL;DR: The Mandatory Provident Fund (Mandatory Provident Fund Schemes, abbreviated as MPF) requires both employers and employees to contribute 5% of the employee’s relevant income. The minimum monthly relevant income is HKD 7,100 and the maximum is HKD 30,000, with a maximum monthly contribution of HKD 1,500 from each party. Employees enjoy a contribution holiday for the first 30 days, and can claim a maximum salaries tax deduction of HKD 18,000 per year.
On payday, many employees notice the MPF deduction on their pay slip. So how are MPF contributions calculated? And what responsibilities do employers have? This article breaks down the contribution rate, income floor and cap, first-contribution arrangements, and key tax-deduction points—so whether you’re a new joiner, an HR colleague, or a business owner managing company finances, you can easily grasp the core knowledge behind MPF contribution calculations.
Basic Concepts of MPF Contributions
The MPF system was officially implemented in 2000. It provides retirement protection for Hong Kong’s working population through mandatory savings. Under the Mandatory Provident Fund Schemes Ordinance, full-time and part-time employees aged 18 to 64 who have been employed continuously for 60 days or more must join an MPF scheme—employees on probation are included.
What Is “Relevant Income”?
MPF contributions are calculated based on “relevant income”. According to the MPFA’s definition, “relevant income” includes wages, salary, holiday pay, commissions, bonuses, gratuities, and contractual remuneration, but excludes severance payments and long service payments.
Important: Non-cash benefits (such as supermarket cash vouchers and gifts in kind) are not considered relevant income and do not need to be included in MPF contribution calculations.
How MPF Contributions Are Calculated
Both the employer and the employee contribute 5% of relevant income as mandatory contributions, subject to the minimum and maximum relevant income levels.
Contribution Calculation for Monthly-Paid Employees
| Monthly income level | Employee contribution | Employer contribution |
|---|---|---|
| Below HKD 7,100 | No contribution required | Relevant income × 5% |
| HKD 7,100 to HKD 30,000 | Relevant income × 5% | Relevant income × 5% |
| Above HKD 30,000 | Capped at HKD 1,500 | Capped at HKD 1,500 |
Examples:
- Monthly salary HKD 20,000: employer and employee each contribute HKD 1,000; total HKD 2,000
- Monthly salary HKD 35,000: as it exceeds the cap, each party contributes HKD 1,500; total HKD 3,000
- Monthly salary HKD 6,000: the employee is not required to contribute; the employer must still contribute HKD 300
Daily-Paid and Weekly-Paid Employees
For non-monthly-paid employees, contributions are calculated on a “wage period” basis. The daily income floor and cap are HKD 280 to HKD 1,000 (maximum daily contribution HKD 50). Casual employees in the catering and construction industries must join an MPF scheme immediately and are not covered by the 60-day exemption.
Contribution Due Dates and First-Contribution Arrangements
Employers must remit the previous month’s contributions to the trustee on or before the 10th day of each month. If the 10th falls on a public holiday or weekend, the deadline is deferred to the next working day.
Contribution Holiday for New Employees
A new employee’s first contribution is subject to special arrangements. Two key rules to note are:
- 60-day rule: The employer only needs to make the first contribution payment to the trustee after the new employee has been employed for 60 days
- Employee contribution holiday: The employee is not required to contribute during the first 30 days of employment and the first incomplete wage period immediately thereafter
Example: If an employee starts on June 5, the contribution holiday runs from June 5 to July 4. Because the 30th day falls in July, July is also an incomplete wage period. The employee’s first contribution month is August, and the corresponding contributions must be remitted on or before September 10.
The contribution holiday applies only to employees. Employers must start calculating their contribution liability from day one, and make a lump-sum back payment after 60 days.
Contributions for Self-Employed Persons and Part-Time Employees
Self-Employed Persons
Self-employed persons must assume both the employer and employee contribution responsibilities, calculated at 5% of assessable income. No contribution is required if annual income is below HKD 85,200, and the cap is HKD 18,000 per year. They must enroll within 60 days of commencing business, and may contribute monthly or quarterly.
Part-Time Employees
Part-time employees who meet the eligibility criteria are also required to join an MPF scheme. If an individual holds multiple jobs, contributions are calculated separately for each job, with each employer bearing responsibility for its own contributions.
Tax Deduction: MPF Tax-Saving Guide
Salaries Tax Deduction
Employees may claim a salaries tax deduction for mandatory contributions, capped at HKD 18,000 per year. For an employee earning HKD 30,000 per month, annual mandatory contributions amount to exactly HKD 18,000 and can be fully deducted.
Tax-Deductible Voluntary Contributions
In addition to mandatory contributions, you may make “Tax Deductible Voluntary Contributions” (Tax Deductible Voluntary Contributions, abbreviated as TVC) and claim an additional tax deduction of up to HKD 60,000. For those planning for retirement over the long term, this mechanism can increase the room available for tax deductions.
Note: Ordinary voluntary contributions are not eligible for tax deduction. Only mandatory contributions and TVC qualify for deductions.
Employers’ Compliance Obligations
Making MPF contributions on time is a statutory obligation for employers. Non-compliance may result in a 5% surcharge on the outstanding amount. The MPFA also has the power to prosecute and to publish the names of defaulting employers.
Key employer responsibilities include:
- Enrollment: Complete MPF scheme enrollment within the first 60 days of a new employee’s employment
- Record-keeping: Keep each employee’s income and contribution records for at least 7 years
- Provision of contribution records: Provide employees with contribution records within 31 days after payday each month
Frequently Asked Questions
Does an employee with a monthly salary of HKD 7,000 need to contribute to MPF?
Employees with monthly income below HKD 7,100 are not required to make contributions, but the employer must still make employer contributions at 5% of the employee’s relevant income. For a monthly salary of HKD 7,000, the employer must contribute HKD 350 per month.
Does an year-end bonus need to be included in MPF contribution calculations?
Yes. Bonuses, gratuities, and commissions are all “relevant income” and must be included in contribution calculations. If the bonus causes the month’s relevant income to exceed HKD 30,000, contributions from each party are capped at HKD 1,500.
How should an MPF account be handled when changing jobs?
After leaving a job, the employee portion of contributions can be transferred to the new employer’s scheme or kept in a personal account. Consolidating fragmented accounts can help reduce the impact of administrative fees on long-term returns.
When can MPF be withdrawn?
In general, MPF can only be withdrawn after retirement at age 65. Early withdrawal is allowed under the following circumstances: reaching age 60 and permanently ceasing employment, permanently leaving Hong Kong, or total incapacity.
Summary
The core of MPF contribution calculation is: both employers and employees contribute 5% of relevant income, with a monthly income floor and cap of HKD 7,100 to HKD 30,000, and a maximum monthly contribution of HKD 1,500 from each party. Understanding the contribution holiday rules, first-contribution arrangements, and key tax-deduction points helps employers manage compliance and enables employees to make better use of the tax benefits associated with retirement savings.
MPF is the foundation of retirement reserves. If you want to further strengthen your overall financial planning, consider diversifying your allocations through a range of investment products, while using market tracking tools to monitor portfolio performance. Which tool you choose depends on your investment objectives, risk tolerance, market views, and experience level. Regardless of the investment tools you select, you must fully understand how they work, their risk characteristics, and trading rules, and establish an appropriate risk management plan. You can learn more about investing through Longbridge Academy or download the Longbridge App to learn more about investing.
