Jessie is a human resources executive in a medium-sized enterprise of about 20 employees. She is also responsible for handling MPF arrangements for her colleagues. Recently she discovered the company was undergoing some financial hardship.
In the past, Jessie made MPF contributions for her colleagues one day following the designated pay day for the relevant contribution period. Pay day was the first of the month so she sent the MPF contributions on the second. However, she learnt that her company would not have sufficient funds to cover all employee MPF contributions in early April and her boss asked her to delay the contributions for three weeks, effectively scheduling the payment for 23 April.
Jessie explained to her boss that it is a legal requirement for employers to make contributions on or before the contribution day, which is the 10th day after the last day of the relevant contribution period.
Her boss responded by explaining that according to the current 30-day settlement period as prescribed in the law, he could make contributions whenever he liked within 30 days after the first of the month. Jessie had no choice but to follow his instruction.
In order to streamline the MPF contributions process so as to enhance the efficiency and effectiveness of the existing mechanism for recovering default contributions, on 9 January 2008 the Legislative Council passed the legislative amendment on the removal of the 30-day settlement period covered in the Mandatory Provident Fund Schemes (Amendment) Bill 2007.
Before this amendment, if an employer failed to pay the mandatory contributions for staff within 10 days, the trustee (MPF provider) issued a polite reminder to the employer requesting settlement of the outstanding contribution by the end of the 30-day settlement period.
Since it was legally acceptable not to pay, unscrupulous employers could take advantage of the 30-day settlement period to delay payment and only settle the outstanding mandatory contributions at the end of the settlement period.
The enactment of the amendment will plug the relevant loophole. Now, if an employer fails to pay mandatory contributions by the contribution date, MPF providers will no longer need to issue a reminder urging employers to settle the outstanding contributions. Instead, providers will report the default contribution to the Mandatory Provident Fund Schemes Authority (MPFA). Upon receipt of the report, the MPFA will issue a payment notice for outstanding mandatory provident fund contributions and surcharge to the defaulting employer or take legal action to recover the arrears.
An employer commits an offence by failing to pay MPF contributions on time. In addition to the surcharge for late payment, the employer may be subject to a penalty of HK$5,000 or 10 per cent of the amount of default contributions (whichever is greater). Defaulting employers may also be prosecuted. An offender is liable to a maximum penalty of six months' imprisonment and a fine of HK$100,000 on first conviction.
Self-employed persons (SEPs) should also note the amendment. SEPs must make mandatory contributions by the contribution date regardless of whether contributions are made monthly or yearly. An SEP who fails to pay contributions on time commits an offence.
Apart from the surcharge, an SEP may also be subject to a penalty of HK$5,000 or 10 per cent of the amount of default contributions (whichever is greater). Defaulting SEPs may also be prosecuted. An offender is liable to a maximum penalty of six months' imprisonment and a fine of HK$50,000 on first conviction.
|Q&A on removal of the 30-day settlement period|
|Q1 ||What are the major changes regarding the "30-day settlement period" after passage of the Mandatory Provident Fund Schemes (Amendment) Bill 2007? |
|A1 ||After the enactment of the amendment to remove the 30-day settlement period, employers and SEPs must make contributions on the contribution day, which is the 10th day after the last day of the relevant contribution period, failing which they commit an offence. |
|Q2 ||Did Jessie's employer commit an offence when Jessie followed instructions to delay mandatory contributions for three weeks? If so, what are the potential penalties? |
|A2 ||After enactment of the removal of the 30-day settlement period, Jessie's company has committed an offence. Regarding penalties, apart from a surcharge, the company may be subject to a penalty of HK$5,000 or 10 per cent of the amount of default contributions (whichever is greater). It may also face prosecution. The company is liable to a maximum penalty of six months' imprisonment and a fine of HK$100,000 if this is its first conviction. |
|Q3 ||What should an employee do to ensure an employer has made contributions? |
|A3 ||Employees should check their accounts through MPF providers' hotlines, websites and customer service centres to ensure their employers have made the contributions. The MPFA has also set up an MPF contribution enquiry hotline to help scheme members obtain contribution information for the past three months. Scheme members should contact their employers or report discrepancies using the MPFA hotline if contributions are missing or incorrect. |