On 8 April 2020, the Hong Kong government announced a HKD 137.5 billion relief package to help the Hong Kong economy as a response to COVID-19. This package will also launch the Employment Support Scheme (“ESS”), which is estimated to cover 260,000 Hong Kong employers and over 1.5 million employees. While details were not initially released, the Hong Kong government provided greater clarity on this scheme on 18 May 2020 and how ESS will help employers retain their employees who would otherwise be made redundant.
1. How Does It Work?
The Hong Kong government will, through the Hong Kong employers, cover 50% of employees’ salaries for six months in two tranches. The subsidy for each Hong Kong employee will be capped at HKD 9,000.
The amount of subsidy an applicant can receive will be calculated in accordance with the employee’s monthly salary specified by the Hong Kong employer.
2. Duration of ESS
Tranche 1 will assist employers in paying their employees wages from June 2020 to August 2020.
Tranche 2 will assist employers in paying their employee wages from September 2020 to November 2020.
3. Required Undertakings of ESS
If a company is receiving support under ESS, they are required to adhere to the following undertakings or risk liable penalties.
- Applicants will not implement redundancy plans during the subsidy period
- Applicants must spend all the government wage subsidies on paying wages to their employees
4. Eligibility Requirements
- All Hong Kong employers who have made Mandatory Provident Fund (“MPF”) contributions, or have set up Occupational Retirement Schemes (“ORSO”), regardless of industries, are eligible to apply
- Hong Kong employers must have had their MPF or ORSO accounts set up on or before 31 March 2020
- Self-employed persons who have set up an active MPF account on or before 31 March 2020 are eligible to apply
The number of employees of a Hong Kong company that is on payroll cannot currently be smaller than the company’s number of employees (with or without pay) in March 2020
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5. Application Deadline and Subsidy Distribution Logistics
Hong Kong employers can apply for an ESS subsidy in either Tranche 1 or Tranche 2. At the time of writing, the details for Tranche 2’s application deadlines have yet to be released.
Tranche 1
- Employers can choose either December 2019, January, February or March 2020 as the “specified month”in which their subsidies would be calculated
- Subsidies for June, July and August 2020 will be calculated on the basis of the wages paid in the “specified month”
- Deadline: 7am, 25 May – 11:50pm, 14 June
- Wage subsidies for employers and self-employed persons will be disbursed within 3-4 weeks of an applications approval, ORSO schemes may require a longer processing time
Tranche 2
- At the time of writing, the details for Tranche 2’s application deadlines have yet to be released
6. How Subsidies Will Be Calculated
Employers with MPF Schemes
- “Regular Employees” aged between 18 and 64
- 50% of actual wages paid to each “regular employee” in the “specified month”
- Wages are capped at HKD 18,000 per month (maximum subsidy per employee is capped at HKD 9,000 per month)
- Employees aged 65 or above
- To the extent that a Hong Kong employer have provided their employees’ “basic salaries” when making MPF contributions, then wage subsidies will be calculated based on 50% of the basic salaries that were actually paid in the “specified month”
- Wage subsidies will be capped at HKD 18,000 per month (maximum subsidy per employee aged 65 or above is capped at HKD 9,000 per month)
- If a Hong Kong employer has not provided the “basic salaries” when making MPF contributions, then wage subsidies will be calculated by multiplying the amount of the employers’ voluntary contributions in the “specified month” by 10 times
- Wage subsidies will be capped accordingly at HKD 9,000 per month per employee aged 65 or above
Employers with MPF-exempted ORSO Schemes
- The amount of wage subsidies will be calculated based on 50% of the actual wages paid in the “specified month”, with a wage cap at HKD 18,000 per month (maximum subsidy per employee is capped at HKD 9,000 per month)
7. Application Method
When submitting an online application, MPF applicants shall authorize:
- The ESS processing agent to receive MPF records from the applicants MPF trustees; and
- The MPF trustee to provide the MPF records to the ESS processing agent
Once an applicant’s authorization regarding the above has been received, the MPF trustees will send their MPF record certificates to the ESS processing agent to facilitate the processing of the application, and calculation of the subsidy amount
8. Penalties
To the extent that a company fails to comply with the terms of ESS, they may be liable to various penalties.
Clawback
- If an employer fails to utilize all the ESS wage subsidies received for a particular month during the subsidy period to pay the employee wages in the same month, the Hong Kong government will claw back the unspent amount
- Clawback for a particular month (June / July / August 2020) = Subsidies received – Total actual wages paid to employees
Fines
- If the number of employees on a company’s 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 is liable to a penalty which is determined by the difference in paid staff
- Penalty for making redundancies in June / July / August 2020 = Subsidies received x Headcount reduction percentage x Penalty percentage
- Headcount reduction percentage = ((Total number of paid and unpaid staff (as of March 2020)) – (Total number of paid staff in June / July / August) / Total number of paid and unpaid staff (as of March 2020) x 100%
Penalty percentages are calculated as follows.
9. Auditing and Monitoring
Hong Kong employers who receive subsidies will need to comply with auditing and monitoring rules whereby ESS officials will ensure that Hong Kong employers have not abused or violated the conditions of ESS
During and after the application vetting process, the ESS Secretariat / processing agent will:
- Verify information submitted by Hong Kong employers
- Conduct on-site checking at selected Hong Kong employers’ organisations
- Disclose publicly the list of employers who have received subsidies, the total number of employees that have benefitted, and the amount of subsidies received
Conclusion
The FastLane Group is dedicated to helping SMEs in all aspects. Not only do we regularly provide updates / insights on the developments that affect the SME community, but we can also provide assistance on applying to ESS and other government support schemes such as the Distance Business Programme.
Please contact the FastLane Group for assistance in your
auditing, HR and company secretarial matters!