Employment Support Scheme is for companies of all sizes

June 08, 2020 08:33
Photo: Reuters

Struck by the double whammy of the Covid-19 outbreak and continuing social unrest, Hong Kong’s unemployment rate has climbed to 5.2% between February and April, the highest in over a decade, and the rising trend is set to continue in the months ahead.

In bid to mitigate the Covid-19 economic fallout, the Hong Kong government launched the “Anti-epidemic Fund” to "support enterprises” and “safeguard jobs". At the heart of the fund is the HK$80 billion Employment Support Scheme (ESS) which will provide wage subsidies to eligible employers for six months. The government will pay up to 50 per cent of employees' salaries for six months, capped at HK$9,000 a month.

However, the ESS has stirred public debate, with concerns raised over whether it is fair for companies to apply for the scheme regardless of their size. Economically speaking, I believe companies of all sizes, profit-making or not, should apply for the ESS.

The main purpose of the ESS is to reduce the chances of businesses going down and to support business sustainability. Recent news reports revealed that many companies have begun looking into liquidation procedures, which reflects the serious challenges facing them. The government’s initiative to support employers in the form of cash subsidies is a win-win solution for the government, employers and employees.

While the ESS covers different types of businesses, many large organizations including the Hong Kong Jockey Club, MTRC, HSBC, Hang Seng Bank, CLP and Link REIT have expressed no intention to apply to the scheme. These organizations chose not to apply to the scheme, partly due to their robust balance sheets, and partly due to social expectations. Many people expect big corporations to leave the resources to those who are more in need, while labelling those that apply to the scheme as thick-skinned and taking advantage of the situation.

However, these criticisms not only create social pressure for large firms but are, in fact, also quite unfair and not in the overall interests of our society.

The coronavirus pandemic has struck a heavy blow to businesses globally. However, given the unprecedented nature of the crisis, the negative impact of the pandemic does not necessarily reflect the quality of a company or consumer preferences. As different sectors face the same operational difficulties wrought by Covid-19, it is only sensible for the government to stand with firms of all sizes and provide relief measures.
Indeed, there are firms that have managed to weather the storm and turned the crisis into opportunities – they have demonstrated their outstanding capability and effective operations. However, if companies that manage to post a profit amid the coronavirus downturn are barred from applying to the ESS, would that not be punishment for those that have fared well against the odds? Moreover, that will rob profit-making businesses of the chance to make use of the government subsidies to recruit more staff and stimulate economic activity.

Equally, if a large firm faces operational difficulties because of the coronavirus outbreak, the subsidies can help avoid layoff of thousands of employees. In face of continuing economic instability, there is no guarantee about a firm’s sustainability and long-term development.

Understandably, some voices in the community question the specifics of the scheme, chiefly that support to enterprises may not necessarily "safeguard jobs" as the government claims. They argue that companies who receive subsidies may fail to guarantee no layoffs and no pay cuts. To prevent that scenario, I call for successful applications to the ESS to come with certain terms and conditions. Companies who apply for subsidies under the scheme have to pledge that they will not sack employees and that all subsidies shall be used towards staff salaries.

As for companies that are making a profit, they can decide whether to use the subsidies to raise wages, maintain strength, or recruit more staff based on their own circumstances. I believe that companies and employees share the same interests, and the best way to protect employees’ interest in the current circumstances is to keep a business afloat. We should also recognize that the scheme does not conflict with but, in fact, complement existing labor protection and family welfare policies.

I hope the public will have an open mind and accept that companies of all sizes merit the government’s ESS. Should large corporations decide to lay off staff, the impact will certainly far exceed that of job cuts by SMEs. After all, no one would like to see the unemployment rate return to – or even surpass – the 8.5% recorded during the SARS crisis in 2003.

In short, providing wage subsidies to SMEs as well as large corporations will provide job security to workers, which will bolster both business and consumer confidence. This concrete boost is vital if Hong Kong is to make a fast and sustained economic recovery.

-- Contact us at [email protected]

Director of the Business, Economic and Public Policy Research Centre, Hong Kong Shue Yan University