Ah-Ming has been employed by ABC Electrical Engineering Company as a junior technician since 15 July 2002. He earns $4,200 per month and he is paid twice a month. Under the MPF system, Ah-Ming needed to contribute five percent per month of his relevant income ($4,200 x 5% = $210) to an MPF Scheme up until 1 February 2003.
With the MPF amendments taking effect on 1 February 2003, the minimum relevant income level at which an employee begins to contribute to the MPF Scheme has been adjusted from $4,000 to $5,000.
(Now revised: With the MPF amendments taking effect on 1 November 2011, the minimum relevant income level has been adjusted from $5,000 to $6,500 per month / $78,000 per year.)
Meanwhile, Ah-Ming will also be moving to a new job at BCC Electronics Company as a technician on 15 March 2003. In his new job he will get a raise of $800 to $5,000, paid on the last calendar day of each month.
How do the new MPF contribution arrangements affect Ah-Ming, his present employer and his future employer?
New MPF contribution arrangements
Under the new legislation,
1) Employees' monthly minimum relevant income level is adjusted from $4,000 to $5,000, while the maximum relevant income level ($20,000) remains unchanged. This means that employees earning below $5,000 need not contribute but their employers will continue to contribute five percent of their income. The maximum mandatory contribution level remains capped at $1,000 for both employees and employers.
2) Instead of having to make contributions more than once a month, employers of employees with payment periods more frequent than monthly can lump the contributions together and remit the sum to the trustees within the first 10 days of the following month.
3) Employees with monthly or more frequent payment periods are not required to contribute for the first incomplete payment period immediately following the first 30 days of employment. Employers' contributions will continue to be counted from the first day of employment.
- While the minimum relevant income level has been changed to $5,000 each month, Ah-Ming, who is earning $4,200 a month, no longer has to make contributions after 1 February 2003.
- From 1 February 2003 onwards, Ah-Ming's present employer still needs to contribute five percent of Ah-Ming's income. He can make contributions for Ah-Ming's two payment periods in February in one go, and pay to the trustees within the first 10 days of the next calendar month.
- When Ah-Ming leaves ABC Electrical Engineering Company in March, his present employer can arrange for Ah Ming's last MPF payment to be paid to the trustees together with those of the other employees. He may notify the trustees of Ah-Ming's actual departure date in the remittance statement attached, clearly stating the income and respective amount of contribution for the employee.
- Ah-Ming will be employed on 15 March 2003 and his payment period will end on the last day of each month. The 30-day contribution holiday is from 15 March to 13 April. Under the new law, Ah-Ming is not required to contribute for the first incomplete payment period following that 30-day contribution holiday (i.e. from 14 to 30 April 2003), meaning that he will start contributing five percent of his relevant income ($5,000 x 5% = $250) from 1 May 2003 onwards. Meanwhile, his new employer needs to make MPF contributions from 15 March 2003, the first day of Ah-Ming's employment.
|Q & A about the new MPF law|
|Q1 ||How is the MPF contribution for the payroll month of January to February 2003 calculated, if an employee earns $4,500 per month and his salary is paid on the fifteenth of each month?|
|A1 ||For any contribution period starting from 1 February 2003, calculation would be based on $5,000. For any contribution period that straddles 1 February 2003, no proportional calculation is applied. In this case, the employee still has to contribute for the January to February period. |
|Q2 ||A temporary worker in a construction company is paid a weekly salary of $1,000. How is the MPF contribution calculated under the new law?|
|A2 ||Under the new legislation, the contribution is calculated based on the daily maximum and minimum levels of relevant income ($650 and $160). Based on the new calculation method, the minimum level of income in this case is $1,120 ($160 x 7 days). Since the worker's salary is lower than the minimum income level, he does not have to contribute but his employer still has to contribute five percent of his income for that week. |