Tips to Avoid Surcharge

Tips to Avoid Surcharge

Reasons for Receiving a Payment Notice

Under the law, employers should remit MPF contributions for their employees by remitting payment with a duly completed remittance statement to the trustee on or before the contribution day.

If you fail to make contributions on time (whether payment is late or insufficient), you are required by law to pay a surcharge calculated at 5% of the default amount. The surcharge in full will go to the affected employees' MPF accounts.

Your trustee, as required by law, will report your default to MPFA. Based on the reports provided by your trustee, MPFA will then issue a payment notice to you to recover the default contributions and surcharge for the employees.

You should contact your trustee to enquire about the amount of surcharge and settle the default contributions and surcharge together as soon as possible without waiting for the payment notice issued by MPFA.

The most common reasons why your trustee will report to MPFA on your default are:

  • no contributions or insufficient contributions received;
  • late payment, i.e. payment received after the contribution day even though the amount of contributions is correct;
  • incomplete or inaccurate information in the remittance statement making your trustee unable to verify whether the amount of contributions you have paid is correct; or
  • failure to report the termination of employment of your employee(s).

What to Do When You Receive a Payment Notice

Contact your trustee

The MPFA does not possess any information about the contributions you made to your trustee. Hence, the first thing you should do is to enquire with your trustee directly and immediately to find out the reason for your default, such as the trustee not having received your contributions until after the deadline, incorrect calculation of the contribution amount, incomplete or inaccurate information in the remittance statement, or cheque clearance problems.

Rectify the default and pay the surcharge

The default contributions together with the surcharge should be settled immediately. You must also prepare and submit a separate remittance statement, set out the employees’ names, as well as the amounts of default contribution and surcharge for each of the affected employees.

The surcharge is an amount equal to 5% of the contributions in default and is fully due to the employees. You may enquire with your trustee directly to confirm the surcharge amount and the administrative procedures for remitting the surcharge. Upon receipt of the default contributions and surcharges, your trustee will allocate the money to the account of each affected employee according to the information you provide in the remittance statement.

If an employer fails to rectify the default contribution, MPFA may impose a financial penalty on the employer or initiate legal proceedings against the employer.

File an objection

If you believe you have made proper contribution arrangements and thus should not be imposed surcharge, you may file an objection to MPFA on condition that you meet the following criteria:  

  • Contributions were paid to your trustee in full for each employee and on time with complete and accurate remittance statement submitted; and/or
  • No contribution is required to be paid for the employee(s) concerned.

You should first verify with your trustee your payment status and contribution data. To file an objection, you must submit a duly completed "Surcharge Objection Form" together with all supporting documents to MPFA within 14 days after the date of the payment notice.

Upon receipt of your objection, MPFA will issue an acknowledgement letter to you and contact you to obtain more information if needed. The MPFA will pass your objection case to your trustee for investigation. After receiving the information from your trustee, MPFA will review the case and notify you of the results in writing.


Mechanism of Filing An Objection

Avoiding Surcharge

Surcharge caused by administrative errors can be prevented. Here are some useful tips for your reference.

Make timely contributions

Making timely contributions means you should remit MPF contributions in full together with the complete remittance statement to your trustee on or before the 10th day of the following month. For example, the contributions for May should be remitted to your trustee on or before the 10th of June. For the contribution day of each month in this year, please refer to the "MPF Contribution Days" Calendar.

Remember, without a complete remittance statement, even if your trustee has received your payment on time, your trustee will not be able to verify whether the amount of the contributions is correct and thus cannot allocate your payment into your employees’ accounts. As a result, your trustee will report your case as a default to MPFA.

There are a number of ways you may remit contributions to your trustee, such as by post, through auto-pay, etc. You should discuss with your trustee in advance to decide on the method that is most suitable to you. The following table summarizes the different methods of remitting contributions and the points to note:

Payment method / channel Contribution is considered "paid" You should make sure
By post (cheque) on the date the cheque is received by your trustee, not the date you posted it. Allow sufficient mailing time! there are sufficient funds in your bank account for cheque clearance. A bounced cheque will be considered as default.
In person (cheque put in drop box) on the date the cheque is deposited in the drop box at the collection centre of your trustee.
Direct debit (Auto-pay) on the date the employer’s remittance statement is received by your trustee. there are sufficient funds in your bank account for debiting. Unsuccessful debiting will be considered as default. Make sure the information in the remittance statement is complete and accurate.
Direct credit on the date the MPF scheme’s bank account is credited. funds are credited to the MPF scheme’s bank account on or before the 10th day of each month.

You should also make a habit of keeping a copy of the cheque and remittance statement for records before sending them to your trustee. If you send the remittance statement to your trustee by fax, you are also advised to keep a journal recording the submission date in case subsequent verification is required.

Note: You should avoid making contribution payments in cash. Moreover, payments through intermediaries, whether by cash or cheque, should be avoided. Always make payments directly to the trustees or their designated bank branches or customer service counters.

Complete remittance statement

You must ensure the calculation of the amount of contributions stated in the remittance statement is accurate and tallies with the amount on the cheque. You should also make sure that the information is complete. Otherwise, your trustee will not be able to process the contributions and may report the case to MPFA as a default.

In case an employee has no relevant income for a particular contribution period, you should enter “0” as the employee’s relevant income in the remittance statement.

You should also remember to sign and affix the company chop to the completed remittance statement before sending it to your trustee.

Go electronic

You should make use of online systems or contribution software to submit the remittance statement to your trustees as electronic submissions help ensure accuracy and save time. Most trustees are providing such electronic services, please contact your trustees for details.

Other misconceptions on handling MPF contributions

For other points-to-note when making contributions, please refer to the Employers' Common Misconceptions in Handling MPF Contributions.