COVID-19 – The “No Redundancy” Undertaking under the Employment Support Scheme in Hong Kong

On 8 April 2020, the Government announced an HK$80 billion Employment Support Scheme ("ESS") to help employers retain employees and avoid redundancies. As discussed in Mayer Brown’s Update “COVID-19 – Government Support for Employers in Hong Kong” from yesterday, one of the key terms upon which the Government will provide wage subsidy is that participating employers will have to undertake not to implement redundancy. Whilst the precise terms are not known at this stage, this Update sheds more light on how the Government envisions ESS operating, based on recent remarks made by the Government official.

The Secretary for Labour and Welfare, Dr Law Chi-kwong, has recently attended a radio programme to answer questions concerning the ESS, including what measures will be put in place to make sure employers will not lay off staff after receiving the wage subsidy. Some of the points in Dr. Law’s response which are worth noting include:

• The Government will focus on monitoring headcount of participating employers, as opposed to checking on each and every individual employee. In other words, employers will have to maintain the same headcount throughout a period of time (whether this is for the 6-month subsidized period, or for a longer period, is still unknown).
• If a reduction in headcount is detected, the subsidy will be clawed back and there will be some penalties. (The Government has not elaborated on exactly how they plan to monitor headcount of participating employers and what the penalties of breaching the undertaking may be.)

Dr. Law emphasized that the Government’s aim is to make the ESS simple and minimize the administrative costs, so that it can be launched as soon as possible to ensure employers will receive the subsidy in a timely manner. It does appear that there are unlikely to be overly stringent controls over the provision of wage subsidy under the ESS. That said, employers who wish to participate in the ESS must still examine carefully the terms of the undertaking when they become available.

Further alerts will be issued when more details concerning the ESS are announced by the Government.