16 November 2000

To : All approved trustees and
All registered MPF corporate intermediaries

Dear Sirs,

Misleading Information on Enrolment and Contribution Requirements and Non-refusal
of Self-employed Persons

It has been brought to the attention of the Authority that certain MPF trustees, service providers and intermediaries might have been giving incorrect and misleading advice to employers relating to the enrolment and contribution requirements of the mandatory provident fund ("MPF") system. There may also be some misunderstanding regarding the requirement for the enrolment of self-employed persons in MPF schemes who earn less than $48,000 a year and the acceptance by trustees of self declaration of relevant income in writing made by self-employed persons. We would like to clarify the views of the Authority on these issues to facilitate compliance by employers, employees and self-employed persons with the Mandatory Provident Fund Schemes Ordinance ("Ordinance").

Employee Mandatory Contributions for 31 December 2000

According to the Ordinance, an employee (other than a casual employee) who is being employed by an employer at the commencement of the MPF system on 1 December 2000 is exempt from making the employee portion of mandatory contributions for the first 30 days of employment after the said commencement. It follows that such an employee is required to make employee mandatory contribution by way of deduction from the employee's relevant income by the employer starting from 31 December 2000. In any event, the employer is required to make the employer portion of mandatory contributions starting from 1 December 2000.

There is a rumour that the employee mandatory contributions for 31 December 2000 will be exempted so that the employee mandatory contributions will start from 1 January 2001 instead. This is inconsistent with the law and the employer has a statutory obligation to deduct from the employee's relevant income and make the employee mandatory contribution for relevant income earned on 31 December 2000.

Consecutive Employment Contracts of Less than 60 Days

There is another rumour that an employer could make use of associated companies within the same group to employ relevant employees using consecutive short-term employment contracts (the duration of each being less than 60 days) so as to avoid the legal obligation to enrol its employees in MPF schemes and make contributions. It should be noted that under the Employment Ordinance, change of employment amongst associated companies does not break the continuity of the period of employment. Such employees are deemed to be employed under a continuous contract and thus fall within the scope of the MPF system, and the employer is still required to enrol the employees concerned in MPF schemes and make mandatory contributions.

Refusal of Self-employed Persons

Cases have been reported to the Authority whereby a self-employed person has been refused enrolment in an MPF scheme because the relevant income of the person is less than $48,000 a year. According to the Ordinance, all self-employed persons must enrol and become members of MPF schemes within the permitted period regardless of the level of their relevant income. Any trustee who rejects a self-employed person on such grounds may have contravened the non-refusal requirement imposed upon all approved trustees.

Self Declaration of Relevant Income by Self-employed Persons

As explained in my circular letter of 10 August 2000, a self-employed person may use his assessable profits as the relevant income for the purpose of making mandatory contributions. The assessable profits can either be the amount as stated in his most recent notice of tax assessment or as declared in writing by the self-employed person. Refusing an application for membership of a registered scheme made by a self-employed person on the ground that the person only provides a declaration of his relevant income in writing could constitute a breach of the non-refusal of scheme applicants requirement.

The Authority would like to stress that all the representations made by MPF trustees, service providers and intermediaries must be correct, especially the last category who work on the front line. If an MPF intermediary gives incorrect or misleading advice, such an act will constitute a breach of the Code of Conduct for MPF Intermediaries. The Authority would not hesitate to take action against the parties and individuals responsible. You should therefore ensure that your MPF intermediaries understand fully the MPF requirements and explain such requirements accurately to prospective and participating employers, scheme members and self-employed persons.

Should you have any queries on the above, please do not hesitate to contact your case officer.

Yours sincerely,

(Raymond Tam)
Executive Director
Services Supervision

Last Revision Date: 17/10/2014