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Social Insurance in Hong Kong

The Hong Kong social insurance system’s primary objective is to address the fundamental and specific needs of community members requiring financial or material assistance. Without this government-backed social security support, individuals facing circumstances such as single parenthood or temporary unemployment could experience severe hardship. This objective is achieved through a non-contributory social security system overseen by the Department of Social Welfare.


Mandatory Provident Fund (MPF)

The MPF is a retirement scheme under which employers must comply with all MPF-related legal obligations, including enrolling all qualifying employees in MPF schemes, making contributions, and maintaining accurate records.

Employees Exempt from MPF Contributions

Exempt Employees

Employees and self-employed persons under the age of 18 or over 65

Domestic employees providing services in the employer’s residence

Self-employed hawkers

Individuals covered by statutory pension or provident fund schemes

Members of occupational retirement schemes with MPF exemption

Persons employed under Section 11 of the Immigration Ordinance for less than 13 months or covered by an overseas retirement scheme

Employees of the European Union Office of the European Commission in Hong Kong

Employees entitled to MPF contributions but earning less than HK$7,100 (US$908.44) per month are not required to make personal contributions; however, the employer must still contribute a minimum of five percent of the employee’s salary each month.

Contribution Rates

Monthly Relevant Income

Employer Contribution

Employee Contribution

Less than HK$7,100

Relevant income x 5%

No contributions required

HK$7,100 to HK$30,000

Relevant income x 5%

Relevant income x 5%

More than HK$30,000

HK$1,500 (US$191.91)

HK$1,500 (US$191.91)

Relevant income refers to all monetary payments by an employer to an employee, including wages, salary, leave pay, fees, commissions, bonuses, gratuities, perquisites, or allowances, excluding severance payments or long service payments.

Tax Deductions

  • Employees can claim a tax deduction for mandatory MPF contributions, up to a maximum of HK$18,000 (US$2,303).

  • For voluntary contributions, employees can claim tax deductions if they are members of MPF-exempted ORSO schemes, subject to a maximum deduction amount of HK$60,000 (US$7,676) for the year of assessment 2022/23 onwards.

  • Employers can claim tax deductions for their mandatory and voluntary contributions, up to 15 percent of the employee’s total remuneration.

The Hong Kong Budget Plan proposes to increase the tax deduction for voluntary contributions made by employers to the MPF for employees aged 65 or above from 100 percent to 200 percent.

MPF Contributions for Foreign Employees

Foreign employees and their employers are exempt from paying MPF contributions for the first 13 months of employment. After this period, employers must enroll them in the MPF scheme within 60 days unless the employee meets other MPF exemption conditions.

Foreign employees may also be exempt from MPF contributions if they have an employment visa and are already participating in another provident fund or pension scheme. Employees conducting Hong Kong-based business but based overseas are also eligible for MPF contributions.

Employee’s Compensation Insurance (EC)

Under the Employee’s Compensation Ordinance, employers in Hong Kong must hold an employee’s compensation insurance policy to cover liability for “injury by accident” or “death” arising during work, regardless of the employment contract length or working hours.

Number of Employees

Amount of Insurance Cover per Event

Not more than 200

Not less than HK$100 million (US$12,794,708)

More than 200

Not less than HK$200 million (US$25,589,424)

The minimum insurance cover is not the maximum liability the employer must bear. Employers should assess potential risks and consult insurers for advice on appropriate insurance amounts. Employers cannot deduct the cost of this insurance from employees' earnings.


Other Payroll Obligations

Unlike most countries, employers in Hong Kong are not required to withhold salary tax. Employees must pay their taxes themselves. Employers have two primary administrative requirements:

Keeping Payroll Records

Employers need to maintain accurate records of the following information concerning their employees:

Required Payroll Records

Personal details

Nature of employment: full-time or part-time

Position

Amount of cash remuneration, non-cash remuneration, and other fringe benefits

Contributions to the MPF or its equivalent

Amendments to the terms of the employment contract

Period of employment

Reporting Remuneration Paid to Employees

The IRD issues the Employer’s Return to companies annually. Employers must complete and lodge it within one month of receipt, even if no employees are hired, or the business has not commenced or ceased.

Employment Condition

Tax Form to Complete

Statutory Period for Notification

Notes

Commencement of employment

IR56E

Within 3 months

Both IR56E & IR56B are required for the commencement year

Still employed as of March 31

IR56B

Within 1 month

Must be submitted annually together with a BIR56A

Cessation of employment

IR56F

Not later than 1 month before cessation

IR56B for the cessation year is not required

Departure from Hong Kong

IR56G

Not later than 1 month before departure and withhold money from tax clearance

IR56B for the cessation year is not required

Employers must ensure compliance with these statutory obligations to avoid legal penalties and ensure smooth operations within Hong Kong’s regulatory framework.



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