What is the Employment Support Scheme?

Everywhere in the world, companies will sometimes face circumstances that necessitate the retrenchment of workers. Although this is an undesirable circumstance, it is often unavoidable. It is therefore the task of each government to ensure that as many companies as possible do not have to retrench any workers. In this way, the reduced unemployment rate will benefit the economy. This is the primary reason why the government of Hong Kong has introduced the Employment Support Scheme during the pandemic of Covid-19.

Purpose of introducing Employment Support Scheme

Hong Kong government’s main vehicle for maintaining a low unemployment rate is the introduction of an Employment Support Scheme (ESS). It was introduced in April 2020 and approved by Hong Kong’s Financial Committee of Legislative Counsel. The ESS provides Hong Kong’s employers with the necessary financial support towards salary reduction in the form of wage subsidies.

Below are four primary purposes of the ESS:

• Retention of employed workers
• Facilitation of economic recovery
• Relief of personal and corporate financial burdens
• Increase in businesses’ financial stability

The Details of the Employment Support Scheme (ESS)

According to the ESS, all eligible employers who have committed to eliminating redundancies and layoffs may receive wage subsidies from the government. These subsidies are to be used to pay their employees’ wages. Each of these wage subsidies is to be calculated on 50% of the salary of a specified month. Specified months are defined as months between January and March 2020. The employer is to select the month to be used for this purpose. The maximum subsidy per employee is HK$9,000.

Eligibility and payment criteria for ESS

• An employer must have either made contributions to the Mandatory Provident Fund (MPF) or set up Occupational Retirement Schemes for their employees.
• Provide an undertaking (a commitment) that they will not dismiss any worker during the subsidies period starting from the application time.
• Provide an undertaking that they will use the whole amount as employees’ wage subsidies.
• Given to regular employees of between ages 18 to 64 years to whom contributions for Industry and Master Trust Schemes have been made by the employer.
• Given to employees of 65 years and above covered by the Industry and Master Trust Schemes.
• Self-employed persons qualify for a one-off wage subsidy in each tranche period as long as their MPF account qualifies for the specified period.
• Anyone opening an MPF account as an employee or a Personal MPF account is not eligible for ESS.

If you are categorized as SEP by the MPF (you earn income from trade-in or production of goods or services, but you are not any one’s employee) or holders of more than one MPF account is eligible for a one-off subsidy in each tranche period.

However, this eligibility does not extend to employers who do so for government employees, employees of subverted organizations, and employees of statutory bodies. Approximately 1.5 million employees across Hong Kong are expected to be able to benefit from the ESS.

All ESS subsidy payments are to be made in two tranches. The first tranche is expected to be paid at some point during June 2020. These payments relate to salaries covering the period spanning June to August 2020. The second tranche of payments is expected to be made in September 2020. These payments are related to salaries from September to November 2020. The government is currently fine-tuning the details surrounding application and payment mechanisms.

The government of Hong Kong also understands that not everyone is sufficiently covered by the existing provident fund systems. Employees in industries such as passenger transport, construction, and catering are among those classified as such. For such employees, the government has formulated sector-specific schemes to fulfill their subsidy needs.

The application of the ESS requires proper documentation and procedures. To ensure a smoother application, engage with an experienced service provider like Paul Hype Page to assist you.

Violations and Loopholes

There are three methods by which the terms of the ESS may be violated by an employer. These include the following:

• Reduction in company headcount during the subsidy period when compared to that of March 2020
• Failure to completely use the subsidy to pay employees’ wages
• Involvement of fraud in relation to the company’s subsidy payments

Each of these violations are to be regarded as criminal offenses. They will cause the subsidies to be granted to the offending company to be adjusted accordingly. Further punishments will also be doled out as required by law.

There are also several loopholes inherent in the ESS. One way by which a company may take advantage of these loopholes is by making staff members who earn high salaries redundant and replacing them with employees who earn less in order to receive additional subsidy payment money. Some companies might also compel employees to take salary cuts or unpaid leave even if such is not necessary.

While it is not explicitly illegal to take advantages of these loopholes, doing so is highly discouraged. A company’s public reputation and consequently revenue and profitability will plummet if it chooses to do so. Members of the public may also report such instances to the government.

To prevent the violation of regulations and instead of taking advantages of the loopholes, consult with Paul Hype Page on how to fully utilise your ESS. Feel free to speak to us, if you require any assistance in applying the ESS for different sectors, catered to your needs.

Summary

It is important to note that the wage subsidies from the Employment Support Scheme (ESS) do not cover casual employees. To be better placed in receiving the subsidies, you should ensure that your Mandatory Provident Fund (MPF) accounts and that of your employees have been set up and backdated to reflect the specified month by the appropriate authorities. Be sure to specify a different month from that in the first tranche if you got the ESS subsidy.

To better utilize the ESS to meet specific needs, having a strong understanding of your company’s current financial status will be favorable. While planning for support schemes, it will be advantageous to seek professional services for in-depth assistance. At Paul Hype Page, we have the professional expertise to suit your needs.