Hong Kong Employment Support Scheme

The Hong Kong government has established a subsidy scheme for employers. This will grant up to HK$54,000 (equivalent to just under US$7,000) for each employee registered in the local provident fund scheme (known as MPF, also including MPF-exempt ORSO schemes).

Awards are to be used only for subsidising employee pay over the six months consisting of two three-month periods, of June to August and September to November (2020). Applications for the first tranche, equivalent to a maximum of HK$9,000 per employee for each of the three months in the first period, can be made from 25 May until 14 June; the online link for doing so appears here.

The information to be provided on application includes MPF scheme details but is otherwise limited and there is nothing proposed in terms of qualitative analysis of eligibility. The money will be paid directly into an employer’s bank account, details of which must be provided when the application is made. The expectation is that grants may be applied for if, during the period of the scheme, the employer does not intend to reduce employee headcount from the number of employees on the books (for MPF purposes) as at a reference month. For the first tranche, the reference month is March 2020; it is not yet established whether the reference point for the second will be March or a later month.

The applicant may elect – in nominating a basis on which the amount to be paid to it will be calculated – any of the four months in the period December 2019 to March 2020 inclusive, by referencing its record of MPF contributions for that month. The scheme requires an employer to undertake not to effect redundancies. Should headcount reduce during any relevant period (June to August, or September to November), then there will be a penalty applied. The formula for this varies depending on the number of employees the employer has; there is a sliding scale. Details appear in the footnote below¹ but, for example, an employer which has 100 employees as at the reference month – March 2020 – and has received a monthly subsidy of HK$900,000 that, for whatever reason, suffers a headcount reduction so that during August it only has 85 employees (ie a 15% reduction), will need to pay a penalty of HK$81,000 for that month. (In theory at least, it could also be required to repay all or part of the subsidy). If the reduction occurs earlier, for example in June (or May or April), the penalty will apply for each of June, July and August.

The rules are simplistic and do not make any distinction for cases where the drop in headcount is for reasons outside the control of the employer (such as resignation or even death), nor do they address cases where any notice of redundancy has been given before 31 March 2020. If an employee who departs during June is replaced in time for the new employee to be registered in the MPF scheme in that month then no difference in headcount numbers will occur. The employer cost of taking on employees is not relevant; the scheme appears to be focusing purely on the number of employees over the relevant period, as shown by MPF records. Due to the subsidy cap (of HK$9,000 per employee per month), a business which has a certain number of highly paid senior employees but no lower paid workers can expect to receive the same payment as a business which has the same headcount but hires only lower paid employees.

A list of recipients under the scheme will be published. A number of employers, including some large and high-profile organisations, have publicly stated that they will not be participating.

¹ The formula published for calculating the penalty is as follows: Subsidies received in the relevant month x headcount reduction percentage x penalty percentage

Headcount reduction percentage = (total number of employees in March - number of paid employees in June / July / August) / total number of employees in March x 100%

Penalty percentage is calculated as: subsidies received in respect of the relevant month (eg HK$900,000) x headcount reduction percentage (eg 15%) x penalty percentage (eg 60%) per the below:

Total number of employees in March 2020
<10 employees then penalty percentage is 10%
10 - 49 employees then penalty percentage is 20%
50 - 99 employees then penalty percentage is 40%
100 - 499 employees then penalty percentage is 60%
500 or above employees then penalty percentage is 80%