“Given the epidemic’s catastrophic impact on Hong Kong’s economy, the Government has to dig deep into its fiscal reserves accumulated over the years to help our businesses and people. With Hong Kong’s fundamental strengths and our people’s resilience, we are confident that our city can ride out this storm and Hong Kong can be relaunched” – Carrie Lam, Chief Executive of the Hong Kong SAR
In the midst of the 2019 Hong Kong protests the Government announced multiple funding packages to help deal with the negative economic impact. These packages totalled around HK$9 billion and aimed to help the tourism, retail and hospitality industries, as well as low income households and job seekers.
Now, we find ourselves amid the COVID-19 pandemic and those previous stimulation packages seem to be a mere drop in the ocean causing the Government to take further and unprecedented measures to ensure the economy can survive. On the 8 April 2020 they launched the second round of anti-pandemic funds with a total value of HK$137.5 billion (4.8% of Hong Kong’s GDP!) to ensure that some 1.5 million workers continue to get paid.
Part of these measures include introducing an HK$80 billion Employment Support Scheme (“ESS“).
What is the Employment Support Scheme?
The ESS will provide eligible employers with a wage subsidy to pay 50% of salaries for 6 months, with each employee’s monthly subsidy capped at HK$9,000. The subsidies will be based on the wages recorded for January, February or March 2020 (with the employer being entitled to choose which of the three months applies).
The Secretary for Labour, Dr Law Chi Kwong, stated in an interview that the scheme will operate in two tranches, the first covering June – August 2020 and the second running from September – November 2020. Applications for the first tranche will open in May 2020 with distributions being made soon afterwards.
What are the legal obligations under the ESS?
The goal of ESS is to ensure employees are not being laid off during these difficult times. Although the precise terms have not yet been clarified, Dr Law has shed some light on the legal obligations to be complied with if employers want to benefit from ESS. One of these is that the headcount of participating employers will have to remain the same throughout the subsidised period.
Although Dr. Law originally said “The number of employees on payroll in June to August cannot be smaller than the number of employees in March” this has since been clarified to “Employers joining the scheme have to provide an undertaking not to implement redundancies during the subsidy period…“. This would indicate that redundancies that take place prior to June 2020 would not make an employer illegible for ESS.
While this clarification provides some welcome guidance, a number of questions remain unanswered. What happens if an employee resigns of their own choosing in July? Would this be a reduction in headcount? Does it make any difference if the employer cannot quickly fulfil or chooses to withhold trying to fill the vacancy? The same applies to employees that are dismissed for gross misconduct or “cause”.
Review and Enforcement of ESS
The Government will be introducing a review system. If an employer is found to have received the subsidy and still laid-off employees, they will be punished, and the subsidy withdrawn.
It seems the cost and significant manpower required to implement an extensive review system will be difficult to achieve. Therefore, monitoring will likely fall on employees reporting their employers’ (or indeed former employers) offenses’ themselves and, save in circumstance of clear fraud, the penalties for breach will be relatively minor. Dr Law used the example of sacking staff but hiring friends or relatives in their place as being an act of fraud.
How does the ESS differ from other emergency schemes?
The measures brought in are unlike any measures brought in during the 2003 SARS outbreak, in that they are focused on employee retention. Dr Law explained that this is because the responses from businesses has been different. During SARS many businesses closed down altogether, whereas with the current crisis many businesses are remaining open and putting their employees on unpaid leave or reducing hours. Furthermore, they differ from other international measures as they focus on keeping employees working rather than supporting those who have lost their jobs.
Is ESS available to workers on commission and the self-employed?
Concern was expressed in certain areas, such as insurance agents, who have questioned whether these measures will apply to employees who mainly rely on commissions. In response to this, Dr Law has stated that these employees will be included in the scheme as long as these businesses have complied with the obligatory MPF schemes. Dr. Law’s further clarification that subsidies will be based on January, February or March 2020’s record wages should further alleviate such concerns.
The Government will also grant a one-off subsidy of up to HK$7,500 for self-employed people who have contributed to MPF.
How do I know if I am eligible for ESS?
You will be an eligible employer if you have been making MPF contributions for employees (except for Government employees and employees of statutory bodies and subvented organisations).
Too little too late?
ESS should be a relief for many employers who have struggled over the past months. However, there are questions over whether these measures are too little too late. Social welfare lawmaker Shiu Ka Chun has acknowledged that these measures are helpful but said that officials have been too slow to act, adding that many employees have already been laid off or asked to take unpaid leave.
The Government plans to invest $6 billion in the public and private sectors with the aim of creating 30,000 jobs in the coming two years. This investment is “for people of different skill sets and academic qualifications, benefitting professionals and technicians, fresh graduates, middle level and grassroot workers”.
HK$800 million of the fund will go towards a scheme aiming to let workers learn new skills or let businesses apply more technology. Included in this are the following:
- “LAWTECH fund”: $40 million so assist SME law firms/ barristers’ chambers to procure/ upgrade their information technology systems and train staff to support the development of remote hearings.
- “COVID-19 Online Dispute Resolution Scheme”: $70 million towards providing Online Dispute Resolution services for disputes related to or arising from COVID-19.
- “Encouraging the deployment of 5G”: $60 million to subsidise the public and private sectors 50% of project costs for projects deploying 5G technologies, subject to a cap of $500,000 for each project.
- “Distance Business Programme”: $500 million towards supporting enterprises to continue business with technology adoption and related training.
- “Training Subsidies for the Construction Sector”: $30 million towards training subsidies to some 600 consulting firms through the Construction Industry Council.
- “Matching Grants for Skills Upgrading”: $100 million towards matching grants for training programmes for staff in the public and private sectors.
Other measures included in the overall fund
The remainder of the fund is made up by the following measures:
- The Chief Executive, the director of her office and principal officials will have a 10% pay cut for the coming 12 months.
- SME Financing Guarantee Scheme to be enhanced.
- HK$21 billion to go towards an additional 16 types of support for businesses including tutorial schools and the travel industry.
- Government rental concessions from April – September 2020 to increase from 50% to 75%.
- 20% lower MTR fares from July 1, 2020 for 6 months.
- HK$2 billion to go to airlines and other aviation operators.
Enrolling in one of the schemes – should I be wary of the legal implications?
As touched upon with the ESS, in its own words, the Government seems unwilling to implement overly stringent controls and, therefore, how the schemes (in particular ESS) will impact and indeed benefit employees in real life remains to be seen. However, once published, it is important that employers carefully examine the terms and conditions under which they must abide by if they wish to enrol. For now, the advice is simple, stay informed, plan and seek advice where appropriate.
More details on the Government announcement can be found on the Hong Kong SAR coronavirus link.
Our team at Hugill & Ip has extensive experience in dealing with Employment matters – so if you need further advice on these subjects, get in touch with us to find out how we can help.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.