Circulars

MPF

 


Mandatory Provident Fund Schemes Ordinance (Cap.485)("the Ordinance")
Prorating of Minimum and Maximum Levels of Relevant Income for Mandatory
Contribution Purposes


Since the above subject was first covered by our letter of 5 July 2000, some enquiries have been received. In response, the Authority would like to promulgate the following for general information. Please note that, in this letter, the term "employee" means all relevant employees except casual employees who are members of an industry scheme.


First contribution of an employee from after the 31st day of employment to the end of the contribution period ("the Period")


Principle


In addressing this subject, the principle adopted is that the employee's contributions made for the Period should be identical to the amount which he should have contributed for the Period if he were required to contribute for the first 30 days of his employment.


Accordingly, the employer may wish to calculate the mandatory contributions payable by the employee for the entire contribution period and prorate the amount of the mandatory contribution attributable to the Period, as illustrated in Method A, or calculate the mandatory contributions for the Period using the method suggested in our letter of 5 July, and now illustrated in Method B.


The same methods can also be used to calculate an employee's contribution for the period from 31 December 2000 to the next contribution period end.


Method A


An employee commences employment on 11 April and his monthly salary is $18,000. His contribution holiday ends on 10 May. For the purpose of calculating his mandatory contribution for the month ending 31 May:-


- The number of days from 11 May to 31 May = 21 days.


- The number of days in May = 31 days


- The relevant income of the employee in May = $18,000


- The maximum relevant income level for May = $20,000


- The minimum relevant income level for May = $4,000


- Since the relevant income of the employee is between $4,000 and $20,000, the mandatory contribution for the month ending 31 May = $609.68 (being $18,000 x 5% x 21/31).


Method B


The employer may wish to determine the mandatory contributions by the prorating method. Accordingly, from 11 May to 31 May:-


- The relevant income of the employee = $12,194 (being $18,000 x 21/31).


- The maximum relevant income level = $13,650 (being $650 x 21).


- The minimum relevant income level = $2,730 (being $130 x 21).


- Since the relevant income is between $2,730 and $13,650, the mandatory contribution for the month ending 31 May = $609.68 (being $12,194 x 5%).


Mandatory contributions for an employee who is not remunerated on a monthly basis


The table below has been set out in our letter on 5 July 2000. In order to illustrate how this table should be used to determine the mandatory contributions of an employee, an example is provided below. :


Remuneration basis Minimum level of relevant income Maximum level of relevant income
Daily $130 $650
Weekly $910 $4,550
Fortnightly $1,820 $9,100
Twice a month $2,000 $10,000
Once every two months $8,000 $40,000
Quarterly $12,000 $60,000

Example


A weekly paid employee received $470, $550 and $660 for his work in the first, third and sixth day of the week. He did not work and therefore received no income on the remaining days of the week. In this case:


- His total relevant income in the week = $1,680(being $(660 + 550 + 470).


- His minimum and maximum levels of relevant income are $910 and $4,550 respectively.


- As his relevant income in the week is between $910 and $4,550, both the employee and his employer are required to contribute 5% of his relevant income in the week. Total contributions for the employee for this week is therefore 10% of his relevant income, which is $168.

Last Revision Date: 17/10/2014