Minimum and Maximum Relevant Income for MPF to Increase

On 30 June 2011, the Legislative Council approved the Government's proposal to increase the minimum relevant income ("Min RI") under the Mandatory Provident Fund Schemes Ordinance ("MPFSO") for the purpose of employee's contribution. As a result, with effect from 1 November 2011 ("Effective Date"):-

i. the monthly Min RI will be increased from $5,000 per month to $6,500 per month (applicable to employees remunerated on monthly basis or less frequently than monthly basis as prorated or self-employed persons);

ii. the daily Min RI will be increased from $160 per day to $250 per day (applicable to employees remunerated more frequently than monthly basis or casual employees of an industry scheme); and

iii. the annual Min RI will be increased from $60,000 per year to $78,000 per year (applicable to self-employed persons).

The effect of these amendments is that starting from the Effective Date, if the monthly relevant income of an employee is less than $6,500 or the daily relevant income of an employee is less than $250, the employee will not be required to make the employee's contribution, whilst his employer remains obliged to make the employer's contribution. As regards a self-employed person, if the relevant income of a self-employed person is less than $6,500 per month or $78,000 per year, the self-employed person would not be required to make contributions.

The Government has also proposed to increase the maximum relevant income ("Max RI") under the MPFSO. The proposal is yet to be approved by the Legislative Council, but it is intended that with effect from 1 June 2012 ("Proposed Effective Date"):-

i. the monthly Max RI will be increased from $20,000 per month to $25,000 per month (applicable to employees remunerated on monthly basis or less frequently than monthly basis as prorated or self-employed persons);

ii. the daily Max RI will be increased from $650 per day to $830 per day (applicable to employees remunerated more frequently than monthly basis or casual employees of an industry scheme); and

iii. the annual Max RI will be increased from $240,000 per year to $300,000 per year (applicable to self-employed persons).

Subject to approval by the Legislative Council, the effect of these amendments is that starting from the Proposed Effective Date, the maximum level of contribution required from both the employer and the employee or a self-employed person whose relevant income is more than the current income cap (i.e. more than $20,000 per month or $650 per day or $240,000 per year, as the case may be) will be increased.

For example, for an employee whose monthly relevant income is $22,000, the level of contribution required from both the employer and employee will be increased from $1,000 (i.e. $22,000 capped at $20,000 x 5%) to $1,100 (i.e. $22,000 x 5%). For an employee whose monthly relevant income is $25,000 or more, the maximum level of contribution required from both the employer and the employee will be capped at $1,250 per month (i.e. 25,000 x 5%).

Key Contacts

Cynthia Chung

Partner | Corporate Commercial | Employment and Pensions

Email or call +852 2825 9297