COVID-19: Legal update on the Employment Support Scheme

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 By Duncan Abate, Hong Tran and Jennifer Tam from law firm Mayer Brown

Following a month of consultation, the Hong Kong Government announced further details of the HK$80 billion Employment Support Scheme (ESS), including several enhancements and the application procedures, on 12 May 2020, having first unveiled the scheme to encourage job preservation in early April 2020.

Details are as follows:

• Eligibility: The government will provide a wage subsidy to eligible employers. An eligible employer is an employer who: 

• has been making MPF (Mandatory Provident Fund) mandatory contributions for employees aged between 18 and 64, 
• has been making MPF voluntary contributions in respect of employees aged 65 or above, or
• has set up an ORSO scheme (occupational retirement scheme) for its employees

but it does not include employers which are part of the Hong Kong Government or statutory bodies or subvented organisations.

• Duration: The subsidy will apply for 6 months from June to November 2020.
• Payment of the subsidy: The subsidy will be paid to an eligible employer in two tranches (portions). The first tranche will be for the period of June, July and August 2020, and will be paid within three to four weeks after the eligible employer applies. The second tranche will be for September, October and November 2020, and will be paid in September 2020. 
• Amount: Eligible employers applying for the first tranche of the subsidy can select any month between December 2019 and March 2020 as the ‘specified month’. The government will use the number of employees and their respective wages in the ‘specified month’ to determine the amount of subsidy payable. 

For employees aged between 18 and 64, the amount of the subsidy will be based on 50% of the actual wages of the employee in a ‘specified month’, capped at HK$18,000. The maximum amount of subsidy is therefore HK$9000 per month per employee.

Employees aged 65 or above are also eligible.

For eligible employers who have made MPF contributions for both employees aged between 18 and 64 and employees aged 65 or above, they must choose the same ‘specified month’ for calculating the subsidy. 

Details of the second tranche of the subsidy will be announced later.

• Undertakings: An eligible employer who applies for and receives the subsidy will be required to give two undertakings:
   
  • not to make any redundancies during the period of the subsidy, and
  • to spend all the subsidy received on paying wages to its employees. The employer may not use the subsidy for any other purpose including to pay non-cash benefits to employees.

The government will claw back the unspent balance of the subsidy if the employer fails to use all the subsidy received for a particular month to pay wages for that month.

Furthermore, 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 employees in March 2020, the employer will have to pay a penalty to the government, the details of which have not been announced. 

• Application for the first tranche of the subsidy: An eligible employer can apply online from 25 May 2020 to 14 June 2020 for payment of the first tranche.     

• Application arrangements for second tranche of the subsidy: Details to be announced.

• Administration fees for the ESS: The government will pay for the administration fees for the ESS, including for work to be undertaken by MPF or ORSO scheme trustees.

The government will also grant a one-off subsidy of HK$7500 to self-employed people who have set up MPF accounts on or before 31 March 2020 which have not been terminated as of 31 March 2020.

Finally, an eligible employer in the catering and construction industries may apply for a subsidy under the ESS in respect of ‘regular employees’, being employees who are 18 to 64 years of age, who have been employed for a continuous period of 60 days or more and whose employers have made MPF contributions for them, in addition to any relief measures under the industry-specific schemes. 

For the full version of this article refer to the Mayer Brown website