Latest update on the new round of Hong Kong’s Employment Support Scheme

On 7 April 2022, the Government provided further details on the new round of the Employment Support Scheme (ESS) which would be launched in response to the COVID-19 pandemic. This follows from the Government’s initial announcement of the ESS preliminary framework on 18 March 2022 and introduces a number of additional details after completing its consultation process with various industry stakeholders.

(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 2022 ESS 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. 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 2022 ESS will be structured.

The Finance Committee will be holding a special meeting on 12 April 2022 to approve the implementation of the proposed “final” 2022 ESS. There has been no update on when the application process will open but the Government has previously mentioned that it aimed to have this open in April 2022.

A brief summary of the key information on the 2022 ESS known to date, based on the discussion agenda of the Finance Committee, is set out below.

• Eligible employers: All employers who have been making Mandatory Provident Fund (MPF) contributions or have set up Occupational Retirement Schemes for their employees, except those on the Exclusion List (see table below).

• Wage subsidies provided: Wage subsidies will last for 3 months covering May to July 2022. There will be a 2-tier subsidy rate – a flat rate of HKD8,000 per month for each employee with monthly income of at least HKD8,000, and a flat rate of HKD4,000 per month for each employee with monthly income of at least HKD3,000 but less than HKD8,000. (The Government had previously suggested that eligible employees include only certain employees who earn less than HKD30,000 per month, but this has now been scrapped.)

• Eligible employees: Employees who have active MPF accounts (including part-time employees and those who are aged 65 and above).

• Headcounts of subsidised employees: These are subject to a cap of 1,000, or 100 for employers operating businesses which have been identified by the Government to be on the Restricted List (which it considers to not have been too adversely affected by the fifth wave of the pandemic, see table below).

In determining the headcounts eligible for wage subsidies, each employer can (i) rely on the information submitted in the prior ESS round (if applied); or (ii) choose to provide information from Q4 2021 to more accurately reflect their business needs (e.g. in case employers had undergone an expansion and hired more employees in 2021). Those choosing to use information from Q4 2021 to apply should expect a longer wait to receive the subsidy due to the time it takes to retrieve the records required to assess the number of eligible employees (which can be up to 4 weeks longer). Employers may apply for different number of headcounts of subsidised employees in each subsidy month.

• Required commitment / undertaking: Employers will be required to commit to employ no fewer employees than the headcount of subsidised employees. There will be post-payment checks to ensure compliance, and failure to deliver will result in clawback of subsidies and financial penalty. Employers will also be required to undertake to ensure that the salaries of subsidised employees should not be less than HKD4,000 or HKD8,000 per month, as the case may be. The Government has indicated that this aims to prevent re-distribution of subsidies to unjustly benefit senior management at the expense of operational staff. To prevent abuse, the Government will proactively identify abnormal staff turnover and/or salary adjustments for in-depth investigation.

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