Crowned as Asia’s premier financial hub, Hong Kong is a well-liked enterprise destination. As a new employer in Hong Kong, that you must be aware of different rules and schemes – especially the Obligatory Provident Fund (MPF) – before you kickstart your hiring process. Along the way, should you will have any questions concerning MPF, drop us a chat and our professional accountants in Hong Kong will assist you. Let’s get you started with our guide to MPF in Hong Kong.
What is MPF in Hong Kong?
MPF stands for Necessary Provident Fund, which is a compulsory financial savings scheme that covers all employees and self-employed individuals aged 18-64 in Hong Kong. You may think of it as a safety net for retirement.
The Necessary Provident Fund Schemes Ordinance (MPFSO) was initiated by the Hong Kong authorities in response to the quickly ageing workpressure back in 1995. The MPFSO creates the framework for implementing employment-associated MPF schemes for workers within the labour power to receive financial benefits when they retire.
Following the move, the Mandatory Provident Fund Schemes Creatority (MPFA) was set up in 1998 to administer the operation of the MPF System which was ultimately launched in 2000. As of 2015, over eighty five% of the labour drive in Hong Kong was safeguarded with some form of retirement protection compared to only 33% in 2000.
Now that you have a basic understanding of MPF, let’s deep dive into your should do’s (additionally known as your authorized obligations), and things you get as an employer in Hong Kong (your entitlements), including: opening an MPF account, making MPF contributions and MPF tax deduction.
What are the different types of MPF Schemes?
There are three types of MPF schemes:
1. Master Trust Schemes
2. Employer-sponsored Schemes
3. Business Schemes
Master Trust Scheme is the commonest type of MPF scheme. It operates by pooling collectively contributions from completely different participating employers and their staff, as well as self-employed persons, to achieve economies of scale in investments. It is open to workers whose employers are participating in the Master Trust Scheme, as well as self-employed individuals and individuals with accrued benefits, like sick pay and personal day without work, to be switchred from different schemes.
The Employer-sponsored Scheme, on the other hand, is limited to workers of a single employer and its affiliated companies. Resulting from membership restriction, the scheme is more value-effective for large corporations.
Trade Scheme is only applicable for employees where labour mobility is high, particularly in the catering and building industries, and particularly casual staff (hired for brief-time period engagement of less than 60 days or on an ad-hoc basis). Casual workers usually are not required to vary schemes once they change jobs as long as they remain in these industries, provided the old and new employers have registered under the identical industry scheme.
How to decide on which MPF scheme is best for you
Since MPF is meant to provide retirement benefits on your staff, you may wish to consider factors similar to company stability, risk stage of funds, miscellaneous charges and customer help when it comes to choosing your trustee.
For instance, selecting a bank is comparatively low-risk while opting for an insurance firm could provide you with a more diversified funding portfolio. You possibly can refer to the list of MPF approved trustees that will help you make an knowledgeable decision.
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