Towers Watson

August 2011

Hong Kong: Proposed Changes in MPF Relevant Income Levels May Result in Higher Employer Contributions

Employer Action Code: Monitor

In June 2011, the Hong Kong government proposed an increase to the minimum and maximum relevant income (RI) levels for the purpose of determining contributions to the Mandatory Provident Fund (MPF).

Key Details

The main provisions of the proposal are:

• Effective November 1, 2011, the minimum RI will increase from the current level of HK$5,000 per month to HK$6,500 per month.
• The maximum RI will be increased from HK$20,000 per month to HK$25,000 per month, with a later effective date of June 1, 2012.

Implications for Employers

This change will have the following effects on employers:

• Higher employer contributions for basic MPF plans
• Lower take-home pay for some employees
• For MPF top-up plans, a higher portion of benefits will be immediately vested, with potentially higher net employer cost and a potential need to review the Occupational Retirement Schemes Ordinance (ORSO) vesting scale
• Changes in the maximum RI may increase the MPF preservation amount for ORSO members
• Higher MPF levels may lead to lower long service and severance payments
• Potentially higher tax relief for contributing members
• The need to review plan documentation, internal processes and systems

For more complete details of these changes and implications for employers, please visit: Budgeting for Changes to the MPF Relevant Income Limits — What Do Companies Need to Consider?

For other MPF information, please visit Towers Watson's mfexpress.com.