The Employment Support Scheme (ESS) was introduced in Hong Kong on 18 May 2020 as part of the second round of the government’s $30 billion Anti-Epidemic Fund. The fund has 3 objectives during the coronavirus crisis:
- To help businesses stay afloat
- To help employees stay in employment
- To relieve the financial burden on both individuals and businesses
In pursuit of those objectives, the ESS provides employers with time-limited financial support, in the form of a wage subsidy, to help them keep employees on their payroll that would otherwise have been made redundant. In order to access ESS financial support, employers should understand how the scheme will work for their business, and how to apply.
Before they can be granted their ESS subsidy, employers will first have to make the following commitments:
- To not make any employees redundant during the period in which they are receiving their ESS subsidy.
- To spend the entirety of the ESS funds that they receive on employee wages.
Mandatory Provident Fund Employers:
Broadly, the ESS is open to all employers in Hong Kong that participate in the Mandatory Provident Fund (MPF). ESS subsidies are for:
- Regular employees for whom employers are making MPF contributions to Master Trust Schemes and Industry Schemes. In this context, ‘regular’ means employees between 18 and 65 years old that have been employed for at least 60 days.
- Employees over 65 years old under Master Trust Schemes and Industry Schemes.
Employers cannot receive ESS subsidies for casual employees under Master Trust Schemes and Industry Schemes. Casual employees are those employees aged between 18 and 65 years old that are employed in construction or catering for fixed periods lasting less than 60 days or on a day-to-day basis.
MPF accounts: Eligible employers must have set up MPF accounts on or prior to 31 March 2020 in order to receive their ESS subsidies. Employers and employees with MPF accounts set up after that date will not be eligible for this round of ESS funding.
Occupational Retirement Schemes Ordinance (ORSO) Scheme Employers:
Employers that have set up MPF-exempted ORSO schemes may apply for ESS subsidies for employees who are members of those schemes. Like the MPF schemes, employees must have become members of their ORSO schemes prior to 31 March 2020.
According to the Hong Kong government’s exclusion list, the following employers are not eligible for ESS subsidies:
- The Liaison Office of the Central People’s Government in the Hong Kong Special Administrative Region (HKSAR), the Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the HKSAR, and the Hong Kong Garrison of the Chinese People’s Liberation Army.
- The HKSAR Government, Legislative Council, or Judiciary.
- Offices of foreign government and international organisations.
- Certain statutory bodies and corporations.
- Certain public organisations, government-owned companies or subvented organisations.
The following employers, not on the exclusion list, are also ineligible for ESS subsidies:
- Licence holders that have submitted separate applications to the Catering Business (Social Distancing) Subsidy Scheme relating to licensed premises that are covered by the relevant business registration certificate.
- Employees who have wages that are fully funded by the government as part of government-funded organisations.
- Employees engaged by outsourced government contractors or consultants for the purposes of fulfilling the contracts.
Self Employed Eligibility
ESS subsidies are open to the self-employed as long as they set up their MPF account on or prior to 31 March 2020. Self-employed persons with more than one MPF account may only apply for a single lump-sum subsidy of $7,500.
Ineligibility: The following self-employed workers are not eligible for ESS subsidies:
- Freelance providers of school bus services that have separately applied for the School Bus Service Providers Subsidy Scheme implemented by the Education Bureau. This includes school bus drivers, school private light bus drivers, and escorts (sometimes referred to as ‘nannies’).
- Freelance coach tour drivers that have applied separately for the Tour Service Coach Drivers (Mainly Serving Tourists) Support Scheme implemented by the Tourism Commission.
Calculating the Wage Subsidy
The ESS subsidy will be provided for 6 months, and released in two tranches. The first will run from June to August 2020, while the second will run from September to November 2020.
ESS calculations will differ depending on the type of employer claiming the subsidy:
In the first tranche of ESS subsidies, employers that are participating in the MPF should nominate a ‘specified month’ from between December 2019 and March 2020. Their ESS calculation will factor in their number of employees and wage bill during that specified month.
Specific ESS calculations for different categories of employer are as follows:
Regular employees (aged between 18 and 64): ESS subsidies will be calculated at 50% of actual wages paid during the specified month. The subsidy will have a wage cap of $18,000 per month, and a monthly cap of $9,000 per employee.
Employees aged 65 and over: Employers may or may not have provided basic salary information when making voluntary MPF contributions for employees aged 65 and over.
- If employers have provided salary information, ESS subsidies will be calculated in the same way as regular employees. That means wages will be paid at 50% of basic salary during the specified month, with a monthly wage cap of $18,000, and $9,000 per month per employee.
- If employers have not provided salary information for their MPF employees aged 65 and over, ESS subsidies will be calculated by multiplying the amount of voluntary contributions in the specified month by 10, with the subsidy capped at $9,000 per month per employee.
To avoid double benefit payments, employers that operate local ferry services or Green minibuses may not apply for Transport Department wage subsidies if they have already applied for ESS subsidies.
Like employers participating in the MPF, employers that have set up MPF-exempted ORSO schemes should establish a specified month between December 2019 and March 2020 that will be used to calculate their subsidy during the first ESS tranche.
The wage subsidy will be calculated based on 50% of all wages paid in that specified month, with the same wage cap of $18.000 per month, and $9,000 per employee per month.
Every self-employed worker that is eligible for the ESS will be given a one-off lump sum of $7,500.
Employers with a labour force partially made up of government-funded employees can apply for ESS subsidies - as long as those employers have received notification letters from the relevant government departments. The subsidy is open to employers that have made MPF-contributions, and those that have set up MPF-exempted ORSO schemes.
The ESS subsidy will be calculated using the actual wages and the number of eligible employees working for the employer.
The ESS application period for employers that participate in the MPF and those that have set up MPF-exempted ORSO schemes runs from 25 May to 14 June 2020. Applications are made online and employers should receive their subsidy around 3 to 4 weeks after submission for the payment of wages from June to August 2020. It should be noted that applications from employers with ORSO schemes may take longer to process.
Applications for the second tranche of ESS subsidies will take place separately. The second tranche of subsidies will be disbursed in September 2020.
Applying for the ESS
Employers should apply for their ESS subsidy through the Hong Kong government’s online portal. The portal contains application instructions for employees participating in the MPF or those with ORSO schemes, and for self-employed workers.
For more information on support for employers in Hong Kong during the coronavirus crisis, contact activpayroll today.