Everywhere in the world, companies will sometimes face circumstances which necessitate 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.
One of the Hong Kong government’s main vehicles for maintaining a low unemployment rate is the Employment Support Scheme (ESS). The ESS is a relatively recent scheme. It was introduced in April 2020 and is approved by Hong Kong’s Financial Committee of Legislative Counsel. The ESS provides Hong Kong’s employers with the necessary financial support which will allow them to pay their staff’s wages and maintain their employment.
There are four primary purposes of the ESS. These are the retention of employed workers, the facilitation of economic recovery, the relief of personal and corporate financial burdens, and the increase of businesses’ financial stability.
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 an in-depth assistance. At Paul Hype Page, we have the professional expertise to suit your needs.
Details of the 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.
To become eligible for the ESS, an employer must have either made contributions to the Mandatory Provident Fund or set up Occupational Retirement Schemes for their employees. However, this eligibility does not extend to employers who do so for government employees, employees of subvented 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 of 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.
Application of the ESS requires the proper documentation and procedures. To ensure a smoother application, engage with an experienced service provider like Paul Hype Page to assist you.
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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.