Hong Kong Update: Employment Support Scheme - improvement measures and further clarifications on 12 May 2020

Employers and self-employed persons will be able to apply online starting from 25 May 2020.

1. Application timeline

Applications for the first tranche of the scheme will take place from May 25 to June 14. The wage subsidy is expected to be disbursed to the majority of employers in three to four weeks after submission of the application.

2. Improvement measures

The Chief Executive announced four improvement measures in respect of the ESS:

1. Extending the coverage of the ESS to employees aged 65 or above under the Mandatory Provident Fund (MPF) schemes. If employers have been making voluntary MPF contributions for these employees, employers may include these employees in the application;

2. Extending the coverage of the ESS to two MPF Industry Schemes (tailor-made for the construction industry and catering industry) which were previously excluded. Employers may apply for wage subsidies for "regular employees" (i.e. employees who are 18 - 64 years of age and have been employed for a continuous period of 60 days or more) if employers have made MPF contributions for them;

3. Relaxing the eligibility of self-employed persons (SEPs) that they should have made MPF contributions between 1 January 2019 and 31 March 2020. After the relaxation, SEPs who have set up an MPF account on or before 31 March 2020 and with that account remaining open as of the same date may apply for a one-off subsidy of HK$7,500; and

4. The amount of wage subsidies provided by the Government will be calculated based on 50% of the actual wages paid to each employee in the "specified month" at the choice of the employer, based on the situation of the enterprises, with a wage cap at HK$18,000 per month. After listening to the views of some of the sectors hard hit by the epidemic, the Government decided to allow employers to choose December 2019 as the "specified month". In other words, the "specified month" for the purpose of applying for the first tranche of wage subsidy can be any one month between December 2019 and March 2020, instead of between January and March 2020 as previously proposed.

Generally speaking, with the exception of ineligible employers (mainly organisations whose employees' salaries are not affected by the epidemic, for example, the HKSAR Government, statutory bodies, subvented organisations with employees' salaries subsidised by the Government), all employers who have been making MPF contributions for employees (including Master Trust Schemes and Industry Schemes) or who have set up MPF-exempted Occupational Retirement Schemes Ordinance (ORSO) schemes, may apply for ESS.

To further clarify the eligibility requirements and to prevent people from applying for wage subsidy by establishing a new company and opening MPF accounts, the MPF accounts of the relevant employers and employees applying for the wage subsidy should have been set up on or before 31 March 2020 (i.e. cannot be backdated to that date or any earlier dates). In other words, employers with MPF accounts set up on or after 1 April 2020 will not be eligible for the first tranche of wage subsidy.

3. Application procedures

Employers and SEPs applying for the ESS are required to authorise 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.

The Government will announce next week other detailed arrangements about the ESS including the online application procedures, monitoring mechanism and calculation of penalty.

A dedicated website on the ESS will commence operation by then.

4. Undertakings

Employers participating in the ESS must provide an undertaking not to make redundancies during the subsidy period, and to spend all the wage subsidies on paying wages to the employees. If an employer fails to comply with the undertaking, the Government will claw back the unspent balance of the wage subsidy or/and impose other penalty.

Question 13 in the Frequently asked questions prepared by the Government (here) clarifies this. Further details will be announced early next week.

5. Clarification on unpaid leave

The Secretary for Labour & Welfare Dr Law Chi-kwong also responded to a question on how the scheme can prevent employees from being forced to take no-paid leave as a result of the COVID-19 epidemic:

"We go back to the criteria that the employers receiving the subsidy have to comply with.

The rule is, firstly, they have to spend all the money on the salary of their staff. And secondly, the number of people who receive pay in June, July and August, cannot be less than the number of employees in March - no matter if they were paid or not paid at all in March.

So, the goal is to reduce the possibility that people are receiving no pay at all in June, July, and August."

Question 11 in the Frequently asked questions prepared by the Government (here) further clarifies whether an employer may apply for ESS in respect of an employee who is on no-pay leave.

The key point is that: "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."

6. Number of employees on payroll

In addition to the statement in Question 11 as above, a further clarification in relation to the number of employees on payroll requirement can be found in Question 13 in the Frequently asked questions prepared by the Government (here). It states that "if the number of employees on the payroll 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."

It is therefore clear that the focus is on the number of staff on payroll. If the number of people on the payroll (i.e. with pay) during the subsidy period is less than the number of people on the payroll (with or without pay) in March 2020, then the employer will be penalised - but this does not mean the employer is ineligible to receive the first tranche of the subsidy.

Further details announced on this early next week.

7. Reduction from wages

Question 15 in the Frequently asked questions prepared by the Government (here) clarifies that the ESS does not forbid employers from reducing wages during the subsidy period.

Sources:

• Government news (here)
• Press release (here)
• Press briefing (here)
• Powerpoint on new measures prepared by the Government (here)