23 August 2020 • 8 minute read

Details of the second tranche of Hong Kong’s Employment Support Scheme released

Following on from our previous alert, on 18 August 2020 the Hong Kong government announced details surrounding the second tranche of the Employment Support Scheme (the “Scheme”). Applications for the second tranche will be open from 31 August to 13 September 2020.

The government’s dedicated website has been updated and now includes an expanded set of FAQs in relation to the second tranche.

While the majority of the rules surrounding the second tranche remain largely the same as the first tranche, there are new penalties for employers who have fallen foul of a number of nebulous terms – either during the period of the first tranche or will do so in the period of the second tranche – including making “substantial redundancies”, violating the "objective of retaining employment” or otherwise acting “contrary to public interest”.

Who is eligible?

The eligibility requirement for the second tranche is the same as that of the first tranche. However, self-employed persons (SEPs) who have received wage subsidies in the first tranche are not eligible to apply in the second tranche.

How much can be claimed?

The method of calculating the wage subsidy has not changed. Employers are eligible to claim up to 50% of the employees’ actual wages in the “specified month”, with a maximum wage subsidy of HKD9,000 per employee per month, for September, October and November 2020.

For employers who applied for the first tranche, they may choose another month between December 2019 and March 2020 as the “specified month” for the purposes of calculating the second tranche of wage subsidies i.e. they do not need to use the same month they specified for the first tranche. However, if they select a different month, they will need to upload further documents in accordance with the instructions provided in the online application form.

In addition, a greater number of employees aged 65 or above who have MPF accounts will be eligible to benefit from the Scheme, with potential wage subsidy of HKD5,000 for each such employee per month.

How can applications be made?

Employers and SEPs can submit their applications online via the same government website from 7am on 31 August to 11:59pm on 13 September.

Employers who applied for the first tranche of wage subsidies must submit a new application for the second tranche, regardless of the result of the first application.

For employers who received subsidies in the first tranche:

They should apply in the designated application webpage with the application number and password they received when applying for the first tranche. The application webpage will automatically display this information.
If the employer chooses the same specified month as that of the first tranche, they do not need to input the MPF scheme related information or upload the documents again.
If the employer chooses a specified month which is different from that used in the first tranche, they should follow the instructions in the online application form to upload documents and/or update their information where necessary (e.g. providing additional MPF account information).

For employers who will be applying to the Scheme for the first time or who did not receive wage subsidies in the first tranche:

They are required to complete online application forms and upload the necessary supporting documents during the application period of the second tranche, and submit their application forms online using the application webpage.
The information and documents required to be submitted will be broadly similar to those under the first tranche, details of which can be found in our previous alert.

What are the undertakings that need to be given?

There is no change to the undertakings that must be given by employers in order to benefit from the Scheme. In particular, employers must give an undertaking that:

The respective number of paid employees (excluding those on no-pay leave) in each of September, October and November 2020 should not be less than the total number of paid and unpaid employees in March 2020 (in each case, based on MPF records).
They will spend all the wage subsidies received for a given month in September, October or November 2020 on paying wages to the employees for the same month.

However, the government has introduced additional undertakings for employers in the property management and retail supermarket sectors:

Major property management companies must undertake to give back at least 80% of the their wage subsidies to the owners/owners’ associations by e.g. offering time-limited waiver or reduction in management fees or depositing the relevant sum to the management accounts for future use.
The two major chain supermarkets, i.e. ParknShop and Wellcome, must undertake to provide cash coupons/additional discounts to customers and non-government organisations during the wage subsidy period (September to November 2020).

What are the penalties?

The calculation method of the “claw back” and the penalty for the second tranche is the same as that of the first tranche, details of which can be found in our previous alert.

However, additional penalties have been introduced in the second tranche for certain employers as follows:

For employers who have received subsidies under the first tranche and apply to participate in the second tranche, the government may reject the employer’s application for the second tranche if the Secretariat considers that:
- the magnitude of redundancies made by the employer during the subsidy period of the first tranche (i.e. from June to August 2020) was substantial, and the employer fails to prove its intention to employ persons to replace those being laid off and/or re-employ those who have been laid off, or there is no reasonable explanation provided for the redundancies made by it; or
- the employer has, during the subsidy period of the first tranche (i.e. from June to August 2020), engaged in conduct which directly or indirectly violates the objective of retaining employment under the Scheme, or is contrary to public interest. In this case, the government may also require the employer to return any subsidies received (in full or in part) within a specified period.
For all employers who receive subsidies under the second tranche, the government may:
- claw back the second tranche of wage subsidies disbursed if the Secretariat considers that the magnitude of redundancies made by the employer during the subsidy period of the second tranche (i.e. from September to November 2020) was substantial, and the employer concerned fails to prove its intention to employ persons to replace those being laid off and/or re-employ those who have been laid off, or there is no reasonable explanation provided for the redundancies made by it; or
- require an employer to return the second tranche of wage subsidies received (in full or in part) within a specified period if the Secretariat considers that the employer has, during the subsidy period of the second tranche (i.e. from September to November 2020), engaged in conduct which directly or indirectly violates the objective of retaining employment under the Scheme, or is contrary to public interest.

At this stage, it is unclear how the government intends to assess the question of the “magnitude of redundancies” or what will be considered “substantial” in this context. Even less clear is what conduct would amount to a “violation of the objective of retaining employment” or acting “contrary to public interest”. These terms are likely intentionally broad and designed to give the government flexibility in determining whether an employer should be able to benefit from the Scheme. However, as with the first tranche, employers should take some comfort from the fact that as with the first tranche, these new measures do not appear to be punitive in nature but rather will only result in an application being rejected or the employer having to pay back the subsidies received.

When will it be paid?

It is expected that most eligible employers who have provided accurate and complete information will receive wage subsidies in three to four weeks after submission of their application.

If an employer has violated either of the undertakings given for the first tranche, they will be required to return to the government the unspent balance of wage subsidies and/or pay a penalty. The relevant amount will be deducted from the subsidies of the second tranche to be disbursed to these employers (if their applications are approved).

Please contact Helen Colquhoun or David Smail if you have any questions or would like advice on limiting the risk of any penalties applying and/or how the Scheme may impact on other cost cutting measures such as unpaid leave, reduced salaries and planned redundancies.