With effect from 1 June 2012, the maximum relevant income (RI) level for the purpose of determining contributions to the Mandatory Provident Fund (MPF) in Hong Kong will be increased from HKD20,000 per month to HKD25,000 per month. The move follows the previous change, effective 1 November 2011 which increased the minimum RI from HKD5,000 per month to HKD6,500 per month.
These changes have several implications for employers. Firstly, this will result in higher employer contributions for basic MPF plans, and may also mean a lower take-home pay for certain employees. For MPF top-up plans, a higher proportion of the benefits will be immediately vested. This may bring a potentially higher net employer cost and, according to Tower’s Watson, the need for HR to review the Occupational Retirement Schemes Ordinance (ORSO) vesting scale. Changes in the maximum RI may also increase the MPF preservation amount for ORSO members.
Looking longer-term, the higher MPF levels may lead to lower long-service and severance payments and bring higher tax relief for contributing members. In any event, with the changes afoot, it is a prudent time for HR to review plan documentation, internal processes and systems related to their MPF scheme(s).
Paul Arkwright
Publisher
