Govt raises bar on MPF contributions

People earning less than HK$6,500 a month are being set free from making monthly contributions to the Mandatory Provident Fund (MPF). The Legislative Council passed an amendment Thursday, raising the income ceiling for MPF contributions from HK$5,000 a month, effective November 1.

The amendment offers relief to more than 180,000 employees and self-employed workers. In all, 337,300 people will escape the requirement of monthly contributions to MPF, said Secretary for Financial Services and the Treasury Chan Ka-keung.

The need for the amendment was foreseen by lawmakers prior to the implementation of the Minimum Wage Ordinance, which became law on May 1.

The new system works this way, employees paid for an 8.5-hour work day, 26 days a month, will earn at last HK$6,188. If the amendment raising the MPF contribution ceiling were not put into effect, those employees gaining the benefit of the minimum wage would see their pay increases offset, because now they would be required to make MPF contributions.

Legislators generally welcomed the amendment.

Lee Cheuk-yan, lawmaker and also General Secretary for the Hong Kong Confederation of Trade Unions, had previously remarked that the amendment was "half good news." Thursday he commented the higher threshold could benefit those who "cannot even guarantee their daily livelihood – not to mention provident savings".

Lawmaker Cheung Yu-yan also commented that further amendments are needed.

"Considering that many of the new beneficiaries of the minimum wage work more than 8.5 hours per day, their monthly salaries have reached more than HK$8,000, the line of HK$6,500 has to be re-deliberated," Cheung said.

Many suggested that the government hammer out a better mechanism to enable quicker amendments on the threshold and ceiling for contributions, so that it remains synchronized with changes to the minimum wage.

"The government should examine the current reviewing mechanism of the ordinance, which could lag behind if the minimum wage is increased," said lawmaker Wong Kwok-hing, adding that although the minimum wage has been implemented, some beneficiaries will lose a few hundred dollars on the MPF before the amendment takes effect this November.

Chan responded that it is proper that there be review and adjustment 18 months after the implementation of the minimum wage, when the overall influence of the minimum wage becomes clearer.