Hong Kong: A Guide to Employment Support Scheme
What is Employment Support Scheme?
To tackle unemployment and loss of income caused by COVID-19, the Hong Kong Special Administrative Region Government (the "Government") introduced an $80 billion Employment Support Scheme ("ESS") as part of the second round anti-epidemic relief measures on 8 April 2020 with the aim to preserve employment.
The objective of the ESS is to provide time-limited financial support in the form of wage subsidies to "eligible employers" to retain employees.
The wage subsidies will be distributed in two tranches. The first tranche of subsidies will cover the period from June to August 2020, while the second tranche will cover the period from September to November 2020.
Am I eligible to apply for ESS?
The Government will provide wage subsidies to any "eligible employer" for a period of six months. An "eligible employer" is an employer who:
- has been making Mandatory Provident Fund ("MPF") mandatory contributions for "regular employees" (i.e. employees who are at least 18 but under 65 years of age and have been employed in any industry for a continuous period of 60 days or more)
- has been making MPF mandatory contributions for employees aged 65 or above
- has set up MPF-exempted Occupational Retirement Schemes ("ORSO") for his/her employees.
In order to be eligible for the first tranche, the relevant MPF or ORSO accounts should have been set up on or before 31 March 2020 (i.e. cannot be backdated to that date or any earlier dates). Those issued afterwards will not be eligible for application.
Generally speaking, employers whose wages are fully funded by the Government and are not affected by the epidemic are not eligible for ESS, for example, the Government, the Legislative Council, the Judiciary, the Liaison Office of the Central People’s Government, specified statutory bodies and specified public organisations, etc.
How to calculate the amount of wage subsidies?
For (i) "regular employees" aged between 18 and 64 and (ii) members of ORSO schemes
The amount of wage subsidies will be calculated based on 50 per cent of actual wages paid to each employee in the "specified month" (rather than the average over a few months). An employer can choose any one month from December 2019 to March 2020 as the "specified month". There is a wage cap of HK$18,000 per month. For example, if employees are paid HK$18,000 or above in that specific month, the employer will receive a maximum subsidy of HK$9,000 per month for each employee.
For employees aged 65 or above
If an employer has provided information on the basic salaries of employees when making MPF voluntary contributions, the amount of wage subsidies will be calculated based on 50 per cent of the basic salaries actually paid to the relevant employees in the “specified month”, with a wage cap at HK$18,000 per month for each employee. The maximum wage subsidy per employee is HK$9,000 per month.
If an employer has not provided information on the basic salaries of employees when making MPF voluntary contributions, the amount of wage subsidies will be calculated on the basis of 10 times of the amount of employers' voluntary contributions made in the "specified month", with a cap at HK$9,000 per month for each employee.
For "eligible employers" who have made MPF contributions for both "regular employees" and employees aged 65 or above, they must choose the same "specified month" for calculating subsidies.
What are my obligations under the ESS?
An "eligible employer" who participates in the ESS must provide an undertaking:-
- to spend all the wage subsidies on paying wages to the employees; and
- not to make redundancies during the Subsidy Period (i.e. June to August 2020) which means the number of employees on payroll in any one month of the Subsidy Period cannot be less than the number of employees (with or without pay) in March 2020.
(Collectively, the "Undertaking")
What happens if I fail to comply with the Undertakings?
Claw back
In relation to part (a) of the Undertaking, if an employer fails to use wage subsidies received for a particular month during the Subsidy Period to pay the wages of employees in the same month, the Government will claw back the unspent balance of the subsidies.
The claw back will be calculated using the following formula:
|
Claw Back |
Penalty
In relation to part (b) of the Undertaking, if the number of employees on payroll in any one month of the Subsidy Period is less than the number of employees (with or without pay) in March 2020, then the Government will impose a penalty on the employer.
Penalty will be calculated using the following formula:
|
Penalty |
"Headcount Reduction percentage" is calculated as follows:
|
Headcount Reduction % |
"Penalty percentage" is calculated according to the following table:
|
Total no. of paid and unpaid staff (as of March 2020) |
Penalty Percentage |
| <10 | 10% |
| 10-49 | 20% |
| 50-99 | 40% |
| 100-499 | 60% |
| ≥ 500 | 80% |
Criminal liability
Any person who makes a false statement, misinterprets or conceals the facts, or furnishes false documents in an attempt to deceive the Government and/or its appointed agencies could be found guilty of a criminal offence and subject to prosecution.
What happens if employees are dismissed during the Subsidy Period but not by reason of redundancy, for example an employee resigns voluntarily or a fixed employment contract expires?
The employer will likely be in breach of its Undertaking. In the circumstances, the employer would have failed to use all the subsidies received to pay the wages of employees. The Government will therefore claw back the unspent balance of the subsidies. In addition, the employer will also have to pay a penalty to the Government as the number of employees on the payroll in any one month of the Subsidy Period will be less than the number of staff it had in March 2020.
In essence, the Government will focus on monitoring headcount of participating employers as opposed to the employment status/identity of the employees. In order to avoid penalty and/or clawback, the employer must re-hire individuals to fill the vacancies to maintain the total number of employees as it had in March 2020.
What happens if I hire more employees during the Subsidy Period?
If the number of employees on the payroll in any one month of the Subsidy Period is more than the number of staff the employer had in March 2020, the employer will not be entitled to additional subsidy due to an increase in headcount during the Subsidy Period.
When and where can I apply?
"Eligible employers" may submit online applications for the first tranche of subsidies through the ESS portal (https://www.ess.gov.hk/en/) from 7:00 a.m., 25 May 2020 to 11:59 a.m., 14 June 2020.
What are the documents required for online applications?
For private sector employers participating in MPF schemes, the following information is required for the online application:
- Business Registration Number (or other registration numbers);
- Name of the MPF trustee;
- Name of the MPF scheme(s) participated from 1 December 2019 to 31 March 2020, and the scheme registration/ participation number; and
- Bank account number of the employer and a scanned copy of the bank statement.
For private sector employers who have set up MPF-exempted ORSO schemes, the following information is required for the online application:
- Business registration number (or other registration numbers);
- Name of the MPF-exempted ORSO scheme, its MPF exemption number and the ORSO registration/ exemption number;
- Bank account number of the employer and a scanned copy of the bank statement; and
- A scanned copy of the exemption certificate issued by the MPF Authority.
Employers do not have to declare the number of employees employed or their salaries in the application form. They only have to provide consent for the government's central processing agent (i.e. Pricewaterhouse Coopers Advisory Services Limited) to obtain their MPF records directly from their MPF trustees, which allows the agent, among others, to process and vet the employers' application, calculate the subsidy, claw back and penalty amount, as well as to conduct pre- and post- application verification work.
When can I expect to receive the wage subsidies?
The payment for first tranche is expected to be made within 3 to 4 weeks after the employer submits an application but no later than end of June. For applications involving ORSO schemes, a longer processing time may be required. The second tranche of subsidies will be disbursed in September 2020.
What if I am self-employed?
Subject to certain exceptions, self-employed persons who have a MPF account set up on or before 31 March 2020 and with that account remaining opened as of the day are eligible for a one-off lump-sum subsidy of $7,500 under the ESS.
Are the application procedures for second tranche same as the ones for first tranche?
The Government has not yet decided on the eligibility and rules for second tranche, and will announce the application details in due course. The Secretary for Labour and Welfare, Dr. Law Chi-kwong stated that the rules for second tranche may be modified depending on the effectiveness and result of the first phrase.
Dr. Law Chi-kwong also suggested that there is a high probability that, if people cannot comply with their commitments they have made during the first tranche application, they may be disqualified from applying for the second tranche.
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Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice. Please contact [email protected] if you have any questions about the article.