April 23, 2020
Coronavirus Stimulus and Relief Alert
Coronavirus Stimulus and Relief Alert
Author(s): William Tong
We discuss Hong Kong's support program to subsidize employers who undertake to not make their employees redundant as a result of the coronavirus (COVID-19) outbreak and economic crisis.
The Hong Kong Government has enacted a program to subsidize employers who undertake to not make their employees redundant as a result of the coronavirus (COVID-19) outbreak and economic crisis. This support program is similar to the efforts rolled out in the United States and by governments around the world. The Hong Kong Government has announced the second round of the Anti-epidemic Fund and a series of relief measures, under which an HK$80 billion Employment Support Scheme would be implemented to provide wage subsidies to eligible employers who have been making mandatory provident fund contributions or have set up Occupational Retirement Schemes for employees in Hong Kong.
In response to the unprecedented challenge on Hong Kong’s economy caused by COVID-19, the Hong Kong Government has announced the second round of the Anti-epidemic Fund established under the Financial Secretary Incorporation Ordinance (Cap. 1015 of the Laws of Hong Kong) and a series of relief measures worth HK$137.5 billion on 8 April 2020, which funding application was approved by the Legislative Council (LegCo) Finance Committee on 18 April 2020. Together with the first round of relief measures under the Anti-epidemic Fund worth HK$30 billion approved by the LegCo Finance Committee on 21 February 2020 and the relief measures in the 2020–21 Budget costing HK$120 billion announced on 26 February 2020, the Hong Kong Government has committed a total of HK$287.5 billion, accounting for about 10 per cent of Hong Kong’s annual Gross Domestic Product.
This round of relief measures includes, among others, an HK$81 billion Employment Support Scheme (ESS), in which the Hong Kong Government provides wage subsidies to eligible employers to retain their employees in return for employers undertaking not to implement redundancy. All employers who have been making mandatory provident fund (MPF) contributions or have set up Occupational Retirement Schemes (ORS) for their employees, except those on the exclusion list, will be eligible to take part in the ESS.
The ESS should benefit local employers, as well as international corporations who have been making MPF contributions or have set up ORS for their employees in Hong Kong.
All employers making MPF contributions or have set up ORS for their employees will be eligible for the ESS, except those on the exclusion list, including the Hong Kong Government, statutory bodies such as Hospital Authority, Housing Authority, Hong Kong Monetary Authority, Urban Renewal Authority, MTR Corporation Limited, Airport Authority, Hong Kong Housing Society, West Kowloon Cultural District Authority, etc. as well as subvented staff in government funded organizations. Staff employed by outsourced service contractors to work for Hong Kong Government contracts will also be excluded. 1.5 million employees are expected to benefit.
All employers shall provide an undertaking not to make their employees redundant during the subsidy period, and to spend 100% of the subsidy on paying wages for their employees.
The wage subsidy to be provided by the Hong Kong Government is calculated based on 50% of salary at a “specified month” (capped at a salary of HK$18,000) for a period of six months. Effectively, that means an employer could receive a maximum subsidy of HK$9,000 per employee per month. Employers may choose any one month from January to March 2020 to be its “specified month” taking into account their own circumstances.
The ESS will also cover self-employed persons who have made MPF contributions in the past 15 months from 1 January 2019 to 31 March 2020. Eligible self-employed persons will be granted a one-off lump-sum subsidy of HK$7,500.
Payment is expected to be made to employers in two tranches, with the aim of making the first payout within June 2020 to help employers pay the wages for June to August 2020. The second payout is expected to be made in September 2020 to facilitate payment of wages for September to November 2020.
In determining whether an employer has made any employee redundant, the number of employees of an employer in March 2020 will be compared to its number of employees in June, July, and August 2020. By joining the ESS, all employers undertake to maintain the same headcount in the relevant periods. If an employer made any employee redundant after March 2020, the employer should rehire the same number of employees.
Applications for the first tranche will start before the end of May 2020. Application dates for the second tranche will be announced by the Hong Kong Government in due course.
Should there be any reduction in the number of employees on the payroll within the MPF and the ORS framework, the ESS subsidy of such employer will be adjusted with claw back and other penalty. In serious circumstances, the Hong Kong Government reserves its right to claw back all of its wage subsidies disbursed to such employer. The employer or its representatives may have also committed a criminal offence in Hong Kong if fraud is involved in the ESS application.
In view of each employer’s undertakings to the Hong Kong Government, the claw back and penalty, an employer who intends to apply for the ESS is encouraged to consult Hong Kong solicitors well-versed in these areas before making the ESS application.
Once a decision is made to apply for the ESS, an employer should devise and prepare appropriate procedures and legal documents for the performance of its obligations and undertakings to the Hong Kong Government under the ESS.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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