The second round of anti-epidemic relief fund of HK137.5 billion received approval by the Finance Committee of the Legislative Council of Hong Kong on 18 April 2020. This includes a HK$80 billion Employment Support Scheme (the "Scheme") which will provide time-limited financial support to employers in exchange for undertaking to retain employees.
This article outlines the content and operation of the Scheme. Our previous article on the overview of the second round of relief fund can be viewed here.
In receiving the payment of wage subsidy, employers must give two formal undertakings to the government and the actual wording of the undertakings is yet to be released:
The emphasis of the Scheme is on headcount rather than identities of the employees. The Secretary for Labour and Welfare Law Chi-kwong (the "Secretary for Labour and Welfare") emphasised in the Finance Committee meeting that the maintenance of headcount is an undertaking to be taken for June, July and August. It is not a condition for application – the condition is met if employers have made MPF contributions or set up ORSO for the relevant employees. Therefore, if an employer had 30 employees in March but only 20 in June due to redundancy, it must further hire 10 employees in June to fulfil the undertaking.
An employer shall pay the entire subsidy to its employees. The subsidy amount shall be determined based on the payroll of a specified month between January and March 2020, whereas the number of subsidised employees will be the number of employees in March 2020. In other words, the number of employees on the payroll in the subsidy period must not be lower than that in March.
The above calculations will be for June to August. For the second subsidy payment covering September to November, the specified months for calculation of subsidy amount will be further determined.
If there is any reduction in headcount during the subsidy period compared to March or if the subsidy is not wholly used to pay employees' wages, the subsidy will be adjusted with claw back in whole or in part and the employer may be subject to penalties. If fraud is involved, this may amount to a criminal offence.
The Secretary for Labour and Welfare acknowledged loopholes to the Scheme – employers might make redundant higher cost staff and replace them with the same number of lower cost employees in order to pocket the extra subsidy. Further, employees may continue to be pressured to take unpaid leave or have a salary cut despite the subsidy. The government will not monitor the circumstances to each application but will disclose information of the companies under the Scheme (including name, subsidy amount and number of employees) for monitoring by public.
As the details of the Scheme are being worked out, we summarise the Secretary for Labour and Welfare's answers to questions regarding the operation of the Scheme:
This depends. If there were 100 employees in March, 100 employees must be paid in June. If employees are only taking a few days or half a month of unpaid leave, the government will not monitor that. The requirement is that employees must be paid salary, whether that is 50% pay or reduced salary.
The subsidy must be wholly used to pay wages. The government has the right to claw back the subsidy if it is spent unreasonably. If a company saves and uses the subsidy for business expansion, it is hiring more staff. In this case, the money is spent on employees and does not deviate from the purpose of the Scheme.
Yes. However, it is not difficult to hire given the current economic environment.
If an employer is hiring less people, that is redundancy. The requirement is that an employer cannot reduce the number of employees. The employer needs to come up with solutions to retain employees or hire new staff.
For advice on employment-related issues in light of COVID-19 and the relief measures as implemented, please contact your usual Clyde & Co contact.