The government introduced the implementation details for the first tranche of the wage subsidy for June, July and August 2020 under Employment Support Scheme (ESS) on 18 May 2020. Details of the second tranche of the subsidy for September, October and November 2020 will be announced later. Below are the major elements of the ESS and things which an employer should pay attention to before applying for the subsidy.
- Eligibility: Subject to certain exceptions (e.g. the government, statutory bodies or subvented organisations), all employers who have made MPF (Mandatory Provident Fund) contributions or have set up an ORSO scheme (occupational retirement scheme) are eligible to apply for the ESS. The relevant accounts must have been set up on or before 31 March 2020.
- Amount of monthly subsidy: Eligible employers 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 for the six-month period during which the subsidy is payable (June to November 2020).
For “regular employees” under the MPF scheme, meaning employees aged between 18 and 64 who have been employed in any industry for a continuous period of 60 days or more, 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$9,000 per month per employee.
For employees aged 65 or above who are members of an MPF scheme:
- If the employer has provided information on the basic salary of the employee when making MPF voluntary contributions, the amount of subsidy will be based on 50% of the basic salary actually paid to the relevant employee in the “specified month”, capped at HK$18,000. The subsidy is capped at HK$9,000 per month per employee.
- If the employer has not provided information on the basic salary of the employee when making MPF voluntary contributions, the amount of subsidy will be based on 10 times the employer’s voluntary contributions in the “specified month”, capped at HK$9,000 per month per employee.
Employers who have set up ORSO schemes can apply for wage subsidies in respect of employees who are members of these schemes and who are Hong Kong identity card holders. The amount of subsidy is based on 50% of the actual wages paid to each employee in a “specified month”, capped at HK$18,000. The subsidy is capped at HK$9,000 per month per employee.
Point to note – If an employer has implemented a salary reduction, redundancy or reduced working programme since December 2019, the employer can still elect to use December 2019 as the “specified month” to calculate the subsidy. This would maximise the subsidy to be received (if December has the largest number of employees and the largest payroll). In essence, an eligible employer can receive a subsidy in relation to employees who may not even be employed at the beginning of the subsidy period in June 2020. There is no upper limit on the amount of subsidies for each employer.
- Employer undertakings: Every employer applying for the ESS needs to undertake:-
- not to implement redundancies during the subsidy period. In respect of the first tranche of the subsidy, the number of employees on payroll (i.e., with pay) during the months of June to August 2020 cannot be less than the number of employees (paid or unpaid) in March 2020 (the first undertaking); and
- to use the subsidy to pay wages of the employees (the second undertaking).
Point to note – The government no longer refers in the first undertaking to “redundancies”; it has evolved into an undertaking looking at absolute number of employees. The government will police this undertaking by comparing the total number of paid employees as shown in the MPF record certificate (or other supporting documents for employers with ORSO schemes) during the subsidy period with the total number of employees in March 2020. For the second undertaking, employers may not use the subsidy for other purposes including to pay non-cash benefits to employees or donations, or make MPF or ORSO contributions, but provided the wages for employees for any month during the subsidy period is greater than the subsidy in that month then the employer will be treated as having spent the subsidy as wages.
- Consequences of breaching the first undertaking: If the headcount of employees with pay in any particular month during the subsidy period is less than the headcount in March 2020, the employer will need to repay an amount calculated by the following formula:
(the full ESS in that month x the proportionate shortfall in headcount) x a “specified percentage”
The “specified percentage” depends on the headcount in March 2020:
Headcount (with and without pay) in March 2020 Specified Percentage <10 10% 10 – 49 20% 50 – 99 40% 100 – 499 60% >500 80%
- Consequences of breaching the second undertaking: If an employer’s total wage bill in any month is less than the amount of ESS subsidy received for that month then the employer must repay the balance of the subsidy.
Point to note – The consequences of breaching the two undertakings are not punitive in any manner. Employers will be able to keep some of the subsidy notwithstanding a breach.
- Application method: Eligible employers may submit online applications via the ESS Online Portal from 7:00am on 25 May 2020 to 11:59pm on 14 June 2020. The subsidy will be disbursed within three to four weeks. Applications involving ORSO schemes may take longer to process. The government will pay the administration fees for the ESS.
Point to note – As the government will process the application by reference to MPF and ORSO schemes, the application form will require eligible employers to authorise the government to obtain information from the trustees of such schemes. Late applications will not be entertained.
- Monitoring: The government will verify the information submitted and conduct sample on-site checking during and after the vetting of applications. A list of employers who have received subsidies, the total number of employees benefited and the amount of subsidies will be made available to the public.
Point to note – Applicants must provide true, complete and accurate information, failing which they may be subject to criminal prosecution.
- The objective of the ESS is to provide financial support to employers to retain their employees. The subsidy is not for any individual employee, although the amount of subsidy is determined based on the headcount and wages paid in to the employees in a “specified month”.
- The ESS does not stop employers from reducing the salary of individual employees. Reduction of salary however generally requires the consent of the employees.
- The ESS also does not stop employers from redeploying employees to group companies. Each ESS applicant (i.e., a single company) however must comply with the two undertakings.
- Employers will need to repay a portion of the subsidy to the government if there is a shortfall in headcount during the subsidy period when compared to that in March 2020. Shortfall as a result of resignation or retirement is not an exception.
- The government will grant a one-off subsidy of HK$7,500 to SEPs (self-employed persons) who have set up MPF accounts on or before 31 March 2020 which have not been terminated as of 31 March 2020. If an SEP is at the same time an employer, he/she may apply for both subsidies for SEPs and for the company so long as he/she meets the eligibility requirements of the ESS.
- The government plans to exempt the wage subsidies under the ESS from taxation, no firm decision has been made yet.
- Employers may apply for the second tranche of the subsidy without applying for the first tranche.
A telephone hotline (1836-122), email enquiry address and physical help desks are being set up by the government to assist ESS applicants. You can also find more details of the ESS here: