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Legal Update

MPFA Begins Review of the Minimum and Maximum Relevant Income Levels

21 December 2017
Mayer Brown JSM Legal Update

Under the Mandatory Provident Fund Schemes Ordinance (Cap 485) (MPFSO), employers and employees in Hong Kong are each required to make a monthly contribution of 5 percent of the employees' relevant income to a MPF Scheme. However, this is subject to the minimum and maximum levels of relevant income, which currently stand at HK$7,100 and HK$30,000 respectively.

An employee whose relevant monthly income is less than the minimum level is not required to make any contribution, even though his employer remains obliged to do so. Meanwhile, where the employee's relevant income exceeds the maximum level, the employee, together with his employer, will not be required to contribute for the portion in excess of HK$30,000. Therefore, they will each be required to pay the maximum monthly contribution, i.e., HK$1,500.

Pursuant to section 10A of the MPFSO, the Mandatory Provident Fund Schemes Authority (the "MPFA") is required to conduct a review of both the Minimum and Maximum Relevant Income every four years. The MPFA has kick-started the said review and will submit its proposal to the Government for consideration by July 2018.

In considering whether the relevant income levels should be adjusted, the MPFA must observe the following factors under section 10A:

  • in respect of the Minimum Relevant Income, 50 percent of the monthly median employment earnings prevailing at the time of review; and
  • in respect of the Maximum Relevant Income, monthly employment earnings at 90th percentile of the monthly employment earnings distribution prevailing at the time of the review.

The MPFA now proposes to increase both the Minimum Relevant Income and Maximum Relevant Income to HK$8,000 and HK$45,000 respectively. If the proposal is adopted by the Government, an employee whose monthly relevant income exceeds HK$45,000 (together with his employer) would need to pay up to HK$750 more mandatory contributions per month to the MPF scheme.

The MPFA is currently seeking views from the stakeholders on the implementation arrangement of the Maximum Relevant Income, in particular whether it should be adjusted upwards in one go, or progressively in two or three phases.

Authors

  • Duncan A. W. Abate
    T +852 2843 2203
  • Hong Tran
    Partner
    T +852 2843 4233
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