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Hong Kong Employment Support Scheme: What you need to know

  • Asia
  • Hong Kong
  • Coronavirus - Workforce issues
  • State aid

22-05-2020

The HKSAR Government has on 18 May 2020 announced the final details for the first tranche of the Employment Support Scheme from June to August 2020. 

The main features of the finalised ESS are:

Eligibility: All employers who have made Mandatory Provident Fund (“MPF”) contributions or set up Occupational Retirement Schemes (“ORSO”) on or before 31 March 2020. Governmental and statutory bodies and employees exclusively providing service to the government are not eligible.

Amount of Subsidy: An employer may choose from any one month between December 2019 and March 2020 as its “specified month”. The employee numbers and actual wages paid in the specified month will be used to calculate the amount of subsidy. Employers will receive 50% of the actual wages paid to each employee in the specified month (up to HK$9,000 per employee) per month from June to August 2020.

Conditions for the subsidy:

  1. Employers receiving the first tranche of the ESS subsidy must undertake to use all subsidies to pay wages;
  2. The number of employees receiving wages between June to August 2020 cannot be smaller than the total number of employees (including those not receiving wages) in March 2020.

On the no redundancy undertaking previously reported, it appears to us that the government will only measure headcounts in assessing compliance.

Consequences of breaching these conditions:

  1. Clawback: if the subsidy received for a particular month has not been completely used to pay wages in that same month, the government will claw back the unspent balance of the subsidy.
  2. Penalty for failing to maintain headcount: If the number of employees receiving wages in any one month of the subsidy period is less than the number of employees in March 2020, the employer will have to pay a penalty to the government. The penalty is calculated by reference to total headcount as follows:

Subsidies received for a particular month ($) X Headcount reduction percentage (%) X Penalty percentage (%)

Headcount reduction percentage (%) = Total no. of paid and unpaid staff(as of March 2020) −
Total no. of paid staff in a particular month
Total no. of paid and unpaid staff (as of March 2020)
X 100%

The penalty percentage is determined by the employer’s total number of employees in March 2020:

Total number of employees in March 2020
(including those unpaid)

Penalty percentage
<10 10%
10-49 20%
50-99 40%
100-499 60%
>=500 80%

Monitoring Mechanism: The ESS is MPF-centric. It appears that the monitoring mechanism will be mainly based on the MPF contribution records.

Application process: The application shall be made by the employer online at https://ess.gov.hk between 25 May 2020 and 14 June 2020. The employer will be required to authorize the ESS processing agent (appointed by the government) to receive MPF records from the employer’s MPF trustees. Upon such authorization, the MPF trustee will provide a MPF record certificate to the ESS processing agent and the amount of subsidy will be calculated based on the data provided on the certificate. An employer only having MPF schemes will only be required to provide the following information in the online application:

  1. Business registration number or other registration number;
  2. Name of MPF Trustee;
  3. Name of MPF Scheme(s) and the Scheme Number;
  4. Bank account number and a copy of the bank statement.

The government expects that the ESS subsidy will be paid to the employers within 3 to 4 weeks in most cases while applications involving ORSO may take longer.

The application process is straightforward, and apart from some extreme scenarios, the amount of any clawback and penalty will not exceed the amount of the ESS subsidy received by an employer, even if there is a significant reduction in headcount. However, employers should also consider their reputational risk before applying for the ESS, in particular if they have headcount reduction plans. The government has also indicated that any abuse of the scheme may affect the employer’s eligibility for the second tranche of the ESS from September to November 2020.

Further details on the ESS may be found on the ESS website at ess.gov.hk or the ESS hotline at 1836-122.