The application window for the ESS opens today. This is the first time that we have had a chance to see the undertakings that are a key part of the application requirements. 

The application take place online at https://application.ess.gov.hk/en/apply

As part of the application process an applicant must confirm as follows….

“5. I undertake and warrant that I must not “make redundancies” during the subsidy period (i.e. the number of employees on the payroll in any one month of the subsidy period must not be less than the number of paid and unpaid staff in March 2020); and must spend all the wage subsidies on paying wages to employees in the relevant months during the subsidy period. I understand that if I am found to have breached the above undertakings, the Government reserves the right to claw back all or part of the wage subsidies and/or impose other penalties.”

For some weeks we have been wondering how the government was intending to reconcile its contradictory comments about:-

  1. requiring employers to undertake not to introduce any redundancy scheme (where a redundancy scheme is an arrangement by which terminations are triggered by an employer to reduce its workforce), and
  2. suggesting that it will monitor compliance with this undertaking simply by comparing headcount in March 2020 against headcount through the subsidy period (i.e. ignoring the fact that headcount can vary for numerous reasons – including resignations by employees or terminations for reasons unrelated to redundancy). 

We now know that the government does not intend to reconcile this inconsistency. Instead it has simply expanded the required undertaking to cover both the requirement not to make redundancies and the requirement to retain headcount!

A breach of either of these undertakings may result in a clawback of part of the wage subsidy (which we were aware of), but also certain, unspecified, “other penalties”.