Understanding MPF Proration Rules

The MPF PO REVLNT INCM proration rule is used to prorate relevant income for new hire/rehires. The proration rule calculation is:

Days of service since period hire date or rehire date / number of days in a period.

The MPF FM POST EEVOL1 formula prorates the employee voluntary contribution amount if the employee is a new hire.

If the employee's eighteenth birthday falls within the contribution period in which the thirty first day of employment falls, prorating of the minimum and maximum levels of relevant income for the employee's first mandatory contribution is required. The MPF PO 18TH BTHDAY proration rule prorates relevant income when the employee turns 18 years of age. The proration rule calculation is defined as follows:

Number of days contributed in a month / number of days in month.

If a period spans two months, for example October 15, 2007 − November 1, 2007, the relevant income is 10000 HKD and the employee's birthday falls on the 16th, then contribution is prorated as follows:

(16/31 x 10000 x 5%) + (14/30 x 10000 x 5%) = 508.06.

For example, suppose an employee is hired on February 1 and turns 18 on May 16, 2007, then the employee's relevant income for May 2007 is 10000 HKD. MPF for May is calculated as follows:

31st day of employment: March 3, 2007

18th birthday: May 16, 2007

Relevant income (May 16 - 31, 2007): 10000 HKD X 16/31 = 5161.29 HKD

Max relevant income level: 20000 HKD

Min relevant income level: 4000 HKD

Employee's mandatory contribution for May 2007: 5161.29 HKD X 5%

Employer's mandatory contribution for May 2007: 5161.29 HKD X 5%

Effective October 1 2004, the MPF guidelines were revised by the Hong Kong Government. The revised guidelines stipulate the new calculation of mandatory contributions for employees who attain the age of 65 on or after 1 October 2004. Mandatory contributions are required based on the relevant income earned by the employees up to the day before their 65th birthday regardless of when the income was actually paid to them.

If the employee's 65th birthday falls within the pay period, prorating of the minimum and maximum levels of relevant income for the employee's last mandatory contribution is required. The MPF PO 65TH BTHDAY proration rule prorates relevant income when the employee turns 65 years of age. The proration rule calculation is defined as follows:

Number of days contributed in a month / number of days in month.

Example 1: Relevant income earned up to the day before the 65th birthday is between the minimum and maximum levels of $5,000 and $20,000 per month:

Date of 65th birthday: 18 October 2004

Contribution period start date : 1 October 2004

Contribution period end date: 31 October 2004

Relevant income: $12,000 (for October 2004)

Amount of employer contribution: $323 ($12,000 x 17/31 x 5%)

Amount of employee contribution: $323 ($12,000 x 17/31 x 5%)

Example 2: Relevant income earned up to the day before the 65th birthday is above the maximum level of $20,000 per month:

Date of 65th birthday: 18 October 2004

Contribution period start date: 1 October 2004

Contribution period end date: 31 October 2004

Relevant income: $38,000 (for October 2004)

Amount of employer contribution: $1,000.00 ($20,000 x 5%)

Amount of employee contribution: $1,000.00 ($20,000 x 5%)