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

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

UPDATE 4: 19 May 2020 – Hong Kong Wage Subsidy Update 4 –Employment Support Scheme (ESS) Application details announced

The Hong Kong government issued a press release, Technical briefing on the Employment Support Scheme (ESS) and some FAQs on the ESS earlier this week.  These provide further details regarding the application process and conditions for employers to apply for wage subsidies and also announced some changes that extend the coverage of the ESS:

1. Eligible employers may submit the online application for the first tranche of the ESS from 25 May 2020 to 14 June 2020. The wage subsidy is expected to be disbursed within three to four weeks after submission of the application. The first tranche of the ESS will provide wage subsidies for three months from June to August 2020.
    
2. With the exception of various governmental and statutory bodies, all employers who make MPF contributions or who have set up ORSO schemes for their employees may apply for ESS provided that the relevant MPF/ORSO accounts have been set up on or before 31 March 2020 (backdating is not permitted).
    
3. Generally, eligible employers may apply for wage subsidies for the following employees provided an MPF/ORSO account was set up for the employee on or before 31 March 2020 and the employer has made MPF/ORSO contributions for them:
    
   1. “regular employees” (i.e. an employee who is 18 – 64 years of age and has been employed for a continuous period of 60 days or more); and
       
   2. employees aged 65 or above who remain enrolled in an MPF or ORSO scheme and for whom the employer has made voluntary MPF contributions. [Note: It is not clear from the announcements whether the voluntary contributions need to be ongoing].
       
4. The amount of wage subsidy will be calculated as 50% of the actual wages paid to each employee in the “specified month”, with a wage cap of HK$18,000 per month i.e. the maximum subsidy per employee per month is HK$9,000.
    
5. Employers can choose any month between December 2019 to March 2020 as the “specified month” for the purposes of calculating the number of paid employees and level of subsidy [Note: this was extended to December 2019 in the latest announcement].  
    
6. The subsidies will be calculated based on the number of employees (including employees who were in the job but may currently be on no-pay leave or half-pay leave) and their respective wages in the “specified month”.
    
7. Conditions of the first tranche include:-
    
   1. When making online applications, employers should also provide an undertaking not to make redundancies during the subsidy period and to spend all the wage subsidies on paying wages to the employees;
       
   2. For the employer who has received the first tranche of payment, if it fails to use all the wage subsidies received for a particular month during the three-month subsidy period (i.e. June to August 2020) to pay the wages of its employees in the same month, the Government will claw back the unspent balance of the subsidy.
       
   3. If the number of employees on the pay roll in any one month of the subsidy period is less than the number of paid or unpaid staff in March 2020, the employer will have to pay a penalty to the Government. 
   
   Applicants will be legally liable for making false statements. Further details on the penalty will be announced next week.

8. Self-employed persons (SEP) who have set up an active MPF account on or before 31 March 2020 and which account remained opened as of 31 March 2020 may apply for a one-off subsidy of HK$7,500.  If the SEP has more than one MPF account, he/ she may only apply once for a one-off lump-sum subsidy of HK$7,500 under the ESS. 
    
9. Arrangement of the second tranche of ESS will be announced in due course.  The second tranche of subsidies will be disbursed in September 2020. 
    
10. What is the Application process? This is still being finalized and the Government will announce next week the detailed arrangements about the ESS including online application procedures, monitoring mechanism and calculation of penalties.  Based on the information announced to date:
     
    1. Employers will be required to submit an online application for ESS through a dedicated website to be established by the Government [Note: the website is not yet in operation].
        
    2. As part of the online application, employers will be required to give an undertaking not to make redundancies during the subsidy period and to spend all the wage subsidies on paying wages to the employees.
        
    3. Employers and SEPS applying for the ESS will be required to authorize the ESS processing agent (appointed by the Government) to receive MPF record certificates directly from the MPF trustees, in order to confirm the information related to MPF contributions.  Employers are not required to submit such information at the time of application, and MPF trustees will not charge employers and SEPS any fees on the issue of the certificates. 
        
11. The FAQs on the ESS issued by the Hong Kong Government provide further details regarding the ESS.  As the answers to the following two questions may be of particular concern to many employers in HK, we reproduce them in their entirety here:
     
    1. “11. Can the employer apply for ESS in respect of an employee who is on no-pay leave?
       
       Employers may choose any one month from December 2019 to March 2020 as the “specified month”. The subsidies will be calculated based on the number of employees (including employees who were in the job but are currently on no-pay leave or half-pay leave) and their respective wages in the “specified month”.
       
       After the application has been approved, the number of paid employees (excluding employees on no-pay leave) in any one month of the subsidy period between June and August 2020 cannot be less than the total number of employees in March 2020 (which may include employees on no-pay leave), and the employer should spend all the wage subsidies for June, July and August on paying wages to their employees in June, July and August correspondingly. Therefore, employees hired by the employer (whether full-time or not) during the subsidy period will benefit.”
        
    2. “15. Are employers not allowed to reduce wages during the subsidy period under ESS?
       ESS does not forbid employers from reducing employees’ wages during the subsidy period, but we certainly expect that employers would refrain from reducing wages as far as possible. However, given that the business situation varies among employers, and some enterprises have been hard hit by the epidemic, we consider it necessary to allow flexibility to cater for their business operation. We hope that employers would refrain from reducing wages as far as possible, and would maintain their business operation on the one hand, retaining the jobs for employees on the other.” 

As noted above, further details in respect of the online application procedure, monitoring mechanism and calculation of penalty are expected to be announced by the Hong Kong government sometime next week.  

The press release, “Technical briefing on the ESS and FAQs from the Hong Kong government regarding the ESS” can be found here: https://www.info.gov.hk/gia/general/202005/12/P2020051200764.htm

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

Earlier announcements 

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.