According to the Government, pursuant to the 2022 Employment Support Scheme (ESS), 77,000 employers have had their wage subsidies for May 2022 approved, representing total funding of approximately HK$5.2 billion. As a brief reminder, the ESS is a support scheme first implemented in 2020 to provide employers with the financial support needed to retain their employees. The financial support given was in the form of wage subsidies disbursed in 2 tranches, with the first tranche used for employee wages during the period from June to August 2020, and the second tranche used for the period from September to November 2020. Like the ESS implemented in 2020, the 2022 ESS will also provide successful employer applicants with wage subsidies, but the focus of the scheme is to help businesses rebuild as quickly as possible and to encourage employers to increase their employment rates (as opposed to merely keeping businesses afloat).
The Government expects successful applicants to fully comply with all applicable terms and conditions. Most importantly, these include requirement for employers to ensure that throughout the subsidised period, they maintain in employment no fewer employees than their chosen subsidised headcounts for each respective category (i.e. “full subsidy headcount”, “half subsidy headcount” and “elderly subsidy headcount”) which they have notified the Government (Headcount Undertaking). Failing to ensure compliance with the Headcount Undertaking may result in the Government’s claw back of the subsidy provided with respect to any shortfall in headcounts as well as payment of a financial penalty equivalent to 10% of the clawed back amount. These rights are expressly stated to be exercisable whenever the Government considers that an employer has engaged in conduct which violates the objective of retaining employment or is contrary to public interest.
Permissible changes in employee headcount
In order to allow headcount changes necessitated by changes in business needs, employers are given 2 chances to adjust their chosen subsidised headcounts for wage subsidies in the months of June and July 2022. The period for employers to adjust their chosen subsidy headcounts for June 2022 ended on 10 June 2022, and the period for employers to adjust their chosen subsidy headcounts for July 2022 will open from 1 to 11 July 2022. Pursuant to this mechanism, employers will be permitted to increase or decrease their employee headcounts to reflect their new chosen subsidy headcounts without penalty.
Unless the subsidised headcounts are adjusted in accordance with the aforementioned mechanism, any resignation or cessation of employment during the subsidised period will result in a claw back of subsidy and/or penalty imposed by the Government unless a new employee is hired and one of the following applies:
- the former employee’s final payment during the relevant Mandatory Provident Fund (MPF) contribution month is at least equal to the subsidy amount provided with respect to the former employee and the entire subsidy amount is paid to the former employee; or
- the relevant income of the new employee for the relevant MPF contribution month is at least equal to the subsidy amount provided with respect to the former employee (such that the new employee will be eligible to receive the entire subsidy amount).
In addition, in respect of any new employees hired during the subsidised period, employers must ensure the following:
- MPF employee accounts are opened and contributions are made in the subsidy month in which they are hired. In other words, employers should not wait until the expiry of the statutory enrolment period of 60 days before enrolling these employees into the relevant MPF scheme; and
- MPF employee accounts for employees aged 65 or above are opened in the subsidy month in which they are hired, and their monthly wages are reported to the employer’s MPF trustee.
Audit and monitoring mechanism
The key approach which will be adopted by the Government to ensure employers’ compliance with the Headcount Undertaking is to review the relevant MPF records and (i) assess whether an employer has met its chosen subsidised headcounts for each MPF contribution month; and (ii) determine whether the number of employees who are receiving the respective monthly subsidy amount corresponds to the chosen subsidised headcounts. It is therefore important for employers to ensure the following:
- MPF records are up to date, as any missing employee will not be included in the employer’s chosen subsidised headcounts;
- MPF contributions for each subsidy month are made by the relevant deadline (i.e. 10 June, 11 July and 10 August 2022 for contributions for May, June and July 2022 respectively); and
- (if applicable) MPF contributions are made for casual employees (including casual employees who are paid daily) in the relevant subsidy month.
The Government will also rely on public monitoring. The Government will publicise the information of each employer who has applied for and received wage subsidies under the 2022 ESS, such that any concerned stakeholders may report any cases of non-compliance to the Government. Particulars of the first successful batch of employers who have received the wage subsidies for May 2022 are available on the ESS website (please refer to https://www.ess.gov.hk/en/granted_companies.html). The publicised information includes each relevant employer’s name, core business, wage subsidy amount and committed employee headcount.
Given that compliance with the Headcount Undertaking will be actively monitored and the Government has the discretion to claw back subsidy amounts and/or penalise non-compliant employers, employers who have received subsidies under the 2022 ESS should take steps to ensure that they are aware of the circumstances which may trigger non-compliance. Such employers should also take the steps summarised above to ensure continued compliance with the Headcount Undertaking during the subsidised period.
Written by Jason Lo, Associate, and Wendy Wong, Of Counsel, both in the Employment practice at DLA Piper Hong Kong