Hong Kong Wage Subsidy Update 4 –Employment Support Scheme (ESS) Application details announced

UPDATE 5: 12 June 2020 – Hong Kong Wage Subsidy Update 5 – Reminder: Deadline to apply for 1st tranche of Employment Support Scheme (ESS) closes on Sunday, 14 June 2020 at 23:59 HKT

The Hong Kong Government has announced the application process for the first tranche of the Employment Support Scheme (ESS) which commences on 25 May 2020, along with the clawback and penalties that will apply if the ESS undertakings are breached. 

Details of the application process, clawback and penalties are set out below:

1. Applications for wage subsidies under the ESS can be submitted by eligible employers online via the ESS portal (www.ess.gov.hk) starting from 7:00am 25 May 2020 until 11:59pm 14 June 2020.   
    
2. As previously announced:
    
   1. Employers will be required to give undertakings not to implement redundancies during the subsidy period and to spend all the government wage subsidies on paying wages to their employees.  For the first tranche the employer will need to undertake that the number of employees on payroll (i.e. with pay) cannot be smaller than the number of employees (with or without pay) in March 2020.
       
   2. With the exception of various governmental and statutory bodies, all employers who have made MPF contributions or set up ORSO Schemes are eligible to apply for ESS provided the accounts have been set up before March 31, 2020 (ie no backdating to that date or any earlier dates).
       
   3. Employers can choose either December 2019, January, February or March 2020 as the “specified month”.
       
   4. The subsidy for June, July and August 2020 will be calculated on the basis of the wages paid in the “specified month”.
       
   5. The monthly subsidy for “regular employees” aged between 18 and 64 will be based on 50% of the actual wages paid to each “regular employee” in the “specified month” subject to wage cap of HK$18,000 per month (so a maximum subsidy per employee of HK$9,000 per month).
       
3. The Government has clarified the calculation of the wage subsidy for employees aged 65 or above:
    
   1. If employers have provided employees’ basic salaries when making MPF voluntary contributions, the wage subsidies will be calculated as usual, i.e. based on 50% of basic salaries actually paid in the “specified month” with the wage capped at HK$18,000 per month per employee being a max subsidy of HK$9,000
       
   2. If employers have not provided employees’ basic salaries when making MPF voluntary contributions, the subsidy will be calculated by multiplying the amount of employers’ voluntary contributions in the “specified month” by 10 times, with a cap at HK$9,000 per month per employee.
       
4. The list of employers who have received subsidies, the total number of employees benefited and the amount of subsidies received will be publicly announced.
    
5. Employees and members of the public may report employers whom they suspect have abused or violated the conditions of the ESS.

What information is required for the online application?

6. When making the online application, the employer will be required to authorise (i) the MPF trustees to provide the MPF record certificates directly to the ESS processing agent to facilitate processing and calculation of subsidy amount and (ii) the ESS processing agent to receive MPF records from the MPF trustees. Employers are not required to provide any information regarding its employees’ salaries or the number of employees they employ.
    
7. In addition to the undertakings to be given (see above), the following information is required for the online application from employers:
    
   1. Business Registration number or other registration number
       
   2. Name of the MPF Trustee or Name of MPF-exempted ORSO Scheme
       
   3. Name of the MPF Schemes (to include all MPF schemes participated from 1 December 2019 to 31 March 2020) and Scheme Registration/Participation Number, or MPF Exemption Number and ORSO Registration/Exemption Number
       
   4. Bank account number of the employer
       
   5. Upload a scanned copy of the bank statement
       
   6. For employers with MPF-exempted ORSO Schemes: Number of eligible employees in March 2020 and to use the designated form to provide information on eligible employees, including the wage of each employee in the “specified month”, and a scanned copy of the exemption certificate issued by MPFA
       
8. The following information is required for the online application for self-employed persons (SEP):
    
   1. Name of the MPF Trustee
       
   2. Name of all MPF Scheme and Scheme Registration/Participation Number
       
   3. Bank account number of the SEP
       
   4. Scanned copy of the bank statement.
       
9. Most wage subsidies and SEP lump sum subsidies will be disbursed within 3-4 weeks after application.  Applications involving ORSO schemes may require a longer processing time.
    
10. During and after submitting applications, the ESS processing agent will verify information submitted by employers and conduct on-site checking at selected employers’ organisation.

What are the consequences if the ESS undertakings are breached? 

1. Clawback:  If the employer fails to use all the wage subsidies received for a particular month during the subsidy period (June to Aug) to pay the wages of employees in the same month, the Government will claw back the unspent balance of the subsidy for the particular month.  This will be calculated based on subsidies received less total actual wages paid to employees.
    
2. Penalty:  If the number of employees on the payroll in any one month of the subsidy period is less than the number of staff (whether paid or unpaid) in March 2020, the employer will have to pay a penalty to the Government:
    
   1. The penalty of making redundancies in a particular month is calculated as Subsidies received x Headcount reduction percentage x Penalty percentage
       
   2. The Headcount reduction percentage is calculated as follows:
       
       
   3. The Penalty percentage applied depends on the number of staff employed by the employer as of March 2020:

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%

By way of example given by the Government:

• Employer X employs a total of 5 employees in March 2020.  It applies for the wage subsidy and it receives a total wage subsidy of HK$120,000 (i.e. a monthly subsidy of HK$40,000).
   
• By June 2020 Employer X employs only 3 employees but pays total wages of HK$60,000.  It will not face a clawback as the wages paid are higher than the subsidies but will be subject to a penalty for the reduced headcount calculated at HK$40,000 x 2/5 x 10% = HK$1,600.
   
• By July 2020 Employer X employs 5 employees but pays total wages of HK$30,000.  It will not have to pay a penalty but will be subject to a clawback calculated at HK$40,000 – HK$30,000 = HK$10,000.
   
• By August 2020, Employer X employs 7 employees and pays total wages of HK$70,000.  It will not be subject to either a clawback or penalty for August 2020.
   
• The total clawback and penalties for Employer X for June to August 2020 are HK$11,600.

The Secretary for Labour & Welfare Dr. Law Chi-Kwong has added that because there are two tranches of the subsidy, any penalty or clawback from the first tranche may be deducted in the second tranche, although for the second tranche the Government would have to go back to the employers to obtain repayment.

Full details of the latest ESS announcement from the Hong Kong Government can be found at: https://www.news.gov.hk/eng/2020/05/20200518/20200518_181706_214.html

To contact the Tanner De Witt Employment Practice, please reach out to Kim or Russell at:

Earlier announcements: 

14 May 2020 – Hong Kong Wage Subsidy Update 3 – HK Government releases further details on application process for Employment Support Scheme (ESS)

20 April 2020 – Hong Kong Wage Subsidy Update – Further details on Employment Support Scheme (ESS) provided in Finance Committee Discussion Paper

9 April 2020 – Wage subsidy and employment relief announced in second round of Anti-epidemic fund

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.