Smart Alert COVID-19 | Hong Kong | The Employment Support Scheme: a welcome relief for Hong Kong’s employers now open for application

25 may 2020

The Employment Support Scheme: a welcome relief for Hong Kong’s employers now open for application

As part of a string of measures to back local businesses during the COVID-19 pandemic, the Hong Kong Government has launched the Employment Support Scheme (ESS).  The ESS provides wage subsidies to employers to assist them in keeping their existing employees on the payroll. Applications for the first tranche of subsidies are now open until 14 June 2020.

The subsidies

The total amount of subsidies set aside by the Government for the EES is HKD 81 billion.  These funds will be doled out to eligible employers over a period of six months, split into two tranches of three months: the first running from June to August and the second from September to November 2020.

For each employee, employers can receive a subsidy equal to 50% of the actual wages of that employee in any one month from December 2019 to March 2020, which the employer may select itself (the “specified month”), subject to a wage cap of HKD 18,000. In other words, the maximum monthly subsidy will not exceed HKD 9,000 per employee.

For employees whose wages are fully funded by the Government, no EES subsidies will be available.

Eligibility

All employers, regardless of their industry, who have made Mandatory Provident Fund (MPF) contributions or set up an Occupational Retirement Schemes Ordinance (ORSO) scheme are eligible under the ESS.  The only exceptions are the Hong Kong Government, statutory bodies and other entities on a public exclusion list.

To be eligible for the first tranche of subsidies, employers must have opened the relevant MPF accounts or set up the ORSO schemes on or before 31 March 2020.  Self-employed persons may apply for a one-off subsidy of HKD 7,500 on condition that they have set up an MPF account, which remains open, no later than 31 March 2020.

Application procedure

Employers can submit an application for the first tranche online via the ESS Online Portal (www.ess.gov.hk) between 25 May 2020 and 14 June 2020. Most employers should receive the first tranche subsidies within three to four weeks after filing their application. Applications involving ORSO schemes may take longer to process.

The deadlines for the second tranche applications will be announced at a later date with the subsidies to be paid out in September 2020.

Information and documents required

The information and documents required to apply depend on whether the employer is participating in an MPF or OSCO scheme.

Each applicant employer must provide:

• its Business Registration Number or other registration number;
• the number of eligible employees (i.e. employees whose wages are not fully funded by the Government) in March 2020; and
• its bank account number and a bank statement copy of such account.

Employers with an MPF scheme must in addition provide:

• the name of the MPF Trustee; and
• the name of the MPF Scheme and Scheme Registration / Participation Number.

Employers with MPF schemes do not need to declare the salary or the number of employees they employ. Instead, they are required to authorise the ESS processing agent to receive MPF records from their MPF trustees.

Employers with ORSO schemes must further provide:

• the name of the MPF-exempted ORSO scheme, the MPF Exemption Number and the ORSO Registration / Exemption Number;
• a scanned copy of the exemption certificate issued by the Mandatory Provident Fund Schemes Authority; and
• the number of eligible employees (i.e. employees whose wages are not fully funded by the Government) in March 2020, including the wage of each employee in the “specified month”.

Employers’ obligations

Employers applying under the ESS must first of all undertake not to reduce its number of employees during the subsidy period. For the first tranche of subsidies, this means that the number of employees on its payroll in any one month of the subsidy period (from June to August 2020) may not drop below the number of employees (paid or unpaid) in March 2020.  Secondly, they must spend all the subsidies on wage payments to their employees.

Penalties and clawback

Employers who fail to honour their undertaking not to reduce their payroll during any month of the subsidy period will have to pay a monetary penalty.  The penalty is calculated using a penalty percentage that varies depending on the number of employees of the employer.  The percentage ranges from 10% (for employers with fewer than 10 employees in March 2020) up to a maximum of 80% (for employers with 500 employees or more in March 2020).

If an employer has not used all ESS subsidies received in a particular month during the subsidy period to pay its employees’ wages in the corresponding month, the Government may claw back any amount of the subsidy not paid to employees.

Government monitoring and public disclosure

The ESS Secretariat and/or its central processing agent PwC will verify the information and documentation submitted by applicants and may carry out on-site inspections of selected employers.

The Government will publish the list of employers who have received subsidies together with the details of the number of subsidised employees and amount of received subsidies.

Conclusion

The ESS offers all Hong Kong employers much needed wage cost relief during the economic crisis that has resulted from the pandemic.  Employers impacted by the COVID-19 pandemic should carefully review the terms and obligations of the ESS to decide whether to take advantage of the scheme in order to be better able to weather this difficult time and recover more quickly once the crisis is overcome.