Hong Kong Employment Law Update

Government Starts to Enforce Clawback/Penalties for ESS First Tranche

On 7 October 2020, the Hong Kong Government published the list of the first batch of employers (19,200 in total) who received wage subsidies under the second tranche of the Employment Support Scheme (the Scheme). The list can be found on the Government’s dedicated website. The Government said it has also started notifying the third batch of employers (over 22,000) of their successful applications for the second tranche.

In doing so, the Government revealed that among the employers who received the second tranche of wage subsidies, about 15,400 (12%) had not fulfilled one or both of the undertakings given when applying for the first tranche. They either failed to fully use the subsidy amount received on paying wages to employees in June and/or July, and/or they could not maintain the number of paid employees in the respective months (i.e. the number was less than the total number of paid and unpaid employees in March 2020). Among these 15,400 employers, about 95% of them had less than their committed headcount of paid employees in June and/or July, and about 76% of them had a reduction in headcount involving one or two employees.

As a result, the Government has confirmed it will claw back the unspent amount and request the relevant employers to pay a penalty. The total amount involved is about HKD190m which is equivalent to 0.6% of the total amount of wage subsidies under the three batches of the second tranche. The amount will be deducted from the relevant employers' second tranche subsidies.

The announcement confirms that the Government is taking steps to monitor compliance with the undertakings given by applicants during the first tranche, and is imposing clawbacks and penalties even in cases where the breach is relatively minor e.g. one or two employees short of the committed headcount. Having said that, since the penalties are not punitive in nature and are calculated according to a predetermined formula based on the size of the employer and the relative reduction in headcount, the actual amount of the clawback and the penalty may be low in practice.

For details of the undertakings to be given by employers and the clawback/penalty mechanisms under the second tranche of the Scheme, please refer to our previous alert. In particular, if an employer receiving the second tranche of wage subsidies has made redundancies during the subsidy period and the Government considers that the magnitude of redundancies is substantial, and the employer fails to prove its intention to hire new employees to replace those being laid off or re-employ those who have been laid off, or there are no reasonable explanations provided for the redundancies made, the Government reserves the right to claw back the second tranche of wage subsidies disbursed to the employer in full or in part.

The Government has not yet provided further details as to what ‘substantial’ redundancies will be interpreted to mean or what type of assurances employers would need to provide in order to avoid or minimize any further penalties applying. Employers who are concerned about this should seek advice as soon as possible before the end of the subsidy period, so that any options for mitigating risk can be explored.

Statutory Maternity Leave to Increase to 14 Weeks From 11 December 2020

Further to our previous alert, the Employment (Amendment) Ordinance 2020 (Commencement) Notice was gazetted on 9 October 2020 and has appointed 11 December 2020 as the day when the Employment (Amendment) Ordinance 2020 (the Amendment Ordinance) will come into operation.

As a result, from 11 December 2020:

• Statutory maternity leave for eligible employees will increase from 10 weeks to 14 weeks.
• Statutory maternity leave pay for these four additional weeks will be maintained at four-fifths of the employee's average daily wages, but subject to a cap which is currently proposed to be HKD80,000 per employee.
• Eligible female employees who suffer a miscarriage at the 24th week of pregnancy or later will be entitled to statutory maternity leave if other conditions are satisfied.
• The period within which eligible male employees are entitled to take statutory paternity leave will be extended, from 10 weeks to 14 weeks after the actual date of delivery of the child.

For further details and the implications of the key changes brought by the Amendment Ordinance, please refer to our previous alert.

The key transitional arrangements are as follows:

• For female employees whose confinement occurs before 11 December 2020, their maternity leave entitlement will be kept at the current entitlement of 10 weeks. If confinement occurs on or after 11 December 2020, then the employee will be entitled to 14 weeks of maternity leave and additional maternity leave pay (if eligible), even if the notice of pregnancy is given before 11 December 2020.
• The period during which a male employee may take statutory paternity leave will follow the current statutory provisions if the child is born before 11 December 2020, i.e., in the period beginning four weeks before the expected date of delivery of the child and ending 10 weeks from the actual date of delivery of the child. If the child is born on or after 11 December 2020, the period during which statutory paternity leave may be taken will be extended to 14 weeks from the actual date of delivery of the child.