Social insurance

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.

Contributing Advisor

Alberto Vettoretti

Managing Partner

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) as employer's social insurance obligations

The mandatory contribution rate for employers and employees is five percent of the employee’s relevant income to the MPF, subject to the minimum and maximum income levels. Both employer and employee can make voluntary contributions in addition to mandatory contributions.

Mandatory Provident Fund (MPF) is a retirement scheme under which an employer must comply with all MPF-related legal obligations under the law.

These include enrolling all qualifying employees in MPF schemes and making MPF contributions for them, and records keeping and notifications.

Employees exempt from the Mandatory Provident Fund (MPF) Scheme

The following types of employees are exempt from MPF contributions, as stipulated in Schedule 1 of the Mandatory Provident Fund Schemes Ordinance:  

• Employees and self-employed persons under the age of 18 or over the age of 65;
• Domestic employees (employees whose employment contract is wholly or substantially for the provision of domestic services in the residential premises of the employer;)
• Self-employed hawkers
• People covered by statutory pension or provident fund schemes, such as civil servants and subsidized or grant school teachers
• Members of occupational retirement schemes which have been granted MPF exemption certificates
• Persons who enter Hong Kong under Section 11 of the Immigration Ordinance for employment:
  • For not more than 13 months; or  
  • Are members of a retirement scheme outside of Hong Kong and
  • Employees of the European Union Office of the European Commission in Hong Kong.

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

The current minimum and maximum relevant income levels for a monthly-paid employee are HK$7,100 (US$908.44) and HK$30,000 (US$3,838), respectively. Please note that the figures may vary yearly according to government policy.

“Relevant income” refers to all monetary payments paid or payable by an employer to an employee, including wages, salary, leave pay, fees, commissions, bonuses, gratuities, perquisites, or allowances, but excluding severance payments or long service payments under the Employment Ordinance (Cap. 57).

An employee can claim a tax deduction for the employee’s mandatory contributions to an MPF scheme, subject to the maximum amount of HK$18,000 (US$2,303).

For the voluntary contributions, an employee can only claim tax deductions when satisfying specific requirements, such as the employee has to be a member of MPF-exempted ORSO schemes (introduced later), subject to the 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 employees' mandatory and voluntary contributions to the extent that they do not exceed 15 percent of the employee’s total remunerations.

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.

Besides MPF, another pension scheme under the Occupational Retirement Schemes Ordinance (ORSO) operates voluntarily. However, if an employer offers both the ORSO scheme and MPF scheme, it must provide a one-time option to existing members and new eligible staff (if applicable) to choose between the two schemes.

MPF contributions for foreign employees

Foreign employees and their employers are exempt from paying MPF contributions for the first 13 months of their employment. After this date, employers must enroll them in the MPF scheme within 60 days of the end of the 13-month exemption limit unless the employee is qualified to meet the other MPF exemption conditions.

Employees who are employed in a Hong Kong company and conduct Hong Kong-based business but are based overseas are also eligible for MPF contributions.

Abolition of MPF offsetting arrangement

The Hong Kong government announced in April 2023 that the abolition of the MPF offsetting arrangement would take effect on May 1, 2025 (referred to as the “Transition Date”).

After the abolition of the MPF offsetting arrangement, employers will categorize the offsetting of severance payment and long service payment for employees into two main categories based on their employment days.

The Transition Date serves as the dividing line:

• Employees whose employment commenced before the transition date: For employees who are already in employment before the transition date, their severance payment and long service payment will be divided into pre-transition portion (i.e. for the employment period before the transition date) and post-transition portion (i.e. for the employment period starting from the transition date). Employers can continue to use the accrued benefits derived from their MPF contributions (irrespective of whether the contributions are made before, on or after the transition date, and irrespective of whether the contributions are mandatory or voluntary) to offset the pre-transition portion (but not the post-transition portion) of severance payment and long service payment.
• Employee whose employment commenced on or after the transition date: For employees whose employment commenced on or after the Transition Date, employer mandatory contributions cannot be used to offset their severance payment or long service payment. However, the accrued benefits (vested portion) derived from employer voluntary contributions and gratuities based on employees’ years of service can continue to be used for offsetting both pre- and post-transition portions of severance payment or long service payment.

This change aims to enhance employee protection and ensure fair treatment during employment termination. Employers should be aware of these adjustments and comply accordingly.

Employee’s Compensation Insurance (EC)

Under the Employee’s Compensation Ordinance, employers in Hong Kong are obliged to hold an employee’s compensation insurance policy to cover their liability to compensate employees for “injury by accident” or “death” arising during the normal course of their work, irrespective of the length of the employment contract or working hours, full-time, or part-time employment.

The amount of the liability that must be insured is determined by reference to the total number of the employer’s employees:

The minimum amount of insurance cover is not the maximum liability the party concerned must bear. The employer should, therefore, carefully assess the possible risk and consult insurers for professional advice on whether an insurance policy for an amount more than the minimum should be taken out. An employer shall not make any deduction from an employee's earnings to defray the cost of insuring against their liability to pay compensation.

Other payroll obligations

Unlike most countries, the employer is not required to withhold salary tax in Hong Kong. Instead, individuals need to pay their taxes themselves.

As such, only two administrative requirements apply to employers in Hong Kong.

• Keeping payroll records and;
• Reporting remuneration paid to an employee.