New round of Hong Kong’s Employment Support Scheme announced

On 18 March 2022, the Government announced at a press conference that a new round of the Employment Support Scheme (ESS) would be launched in response to the COVID-19 pandemic. As a brief reminder, the ESS was an employer scheme originally implemented to provide employers with the financial support needed to retain their employees who may have otherwise been made redundant. The financial support given was in the form of wage subsidies granted to eligible employers and disbursed in two tranches, with the first tranche used for employee wages during the period from June to August 2020 and the second tranche during the period from September to November 2020.

While this latest round of the ESS will still provide employers with financial wage subsidies, the Government has explained that the aims of the ESS this time around will be to help businesses rebuild as quickly as possible and encourage employers to increase their employment rates as opposed to merely keeping businesses afloat as was the case with the prior round. The Government will also be taking a more targeted approach to limit the number of employers who may be eligible to receive the subsidies. There will therefore be distinct differences in how the ESS will be structured in this latest round when compared with the prior round.

The specific details are still being worked through by the Government but the Government has mentioned that it aims to have the application process open in April 2022. A brief summary of the key ESS information announced to date is set out below.

What will be given?

Similar to the first and second tranches of the prior round, the wage subsidies will be provided for a period of 3 months from May to July 2022 and will first be dispersed to eligible employers who must then use them to pay the wages of eligible employees.

In order to encourage employers to increase their employment rates, eligible employers with higher numbers of eligible employees (subject to a certain cap) should expect to receive a larger grant to pay employee wages than employers with less eligible employees. More specifically, it has been mentioned that the monthly subsidy granted will be a fixed amount of HKD8,000 per eligible employee. Currently, eligible employees include only certain employees who earn less than HKD30,000 per month and will also include employees who are aged 65 and above even if such an employee is no longer enrolled in an MPF scheme.

The details of the cap referred to above are currently unfinalised. It has been mentioned, however, that the latest round of the ESS would be more focused on helping small and medium-sized enterprises and that in order to ensure that the Government’s wage subsidies are not disproportionately allocated to large businesses who generally have more employees, the Government is considering implementing a cap on the number of eligible employees which may be subsidized from a particular employer.

What can the wage subsidies be used for?

An important distinction between the current round of the ESS and the previous round is that the wage subsidies issued this round must be used specifically on the wages of those eligible employees. It was mentioned by the Chief Executive that there have been instances where employers in receipt of the wage subsidies from the last ESS round were using the subsidies to pay their more higher paid employees’ wages and not the wages of lower paid employees. The latest round of the ESS will ensure that employers will not be at liberty to allocate the wage subsidies as they see fit.

Who is eligible to apply?

In order to ensure the wage subsidies are dispersed to the areas most needed, the Government has indicated that employers’ eligibility will depend on whether their industry or business sector was adversely affected by the COVID-19 pandemic.

The Chief Executive noted that this would exclude businesses such as supermarket chains, pharmacy chains, property management companies, banks and financial institutions, delivery services and telecommunications firms. However, no further details on which industries will be eligible under the latest round have been announced.

Please contact Helen Colquhoun or Wendy Wong if you have any questions.