HKGCC agrees with the objective of the Government’s proposals, namely to improve health and safety at work. However, we do not agree that it will be achieved by its proposals to:
(a) increase the level of penalties under the legislation by such significant amounts; and
(b) double the period within which a summons may be issued, from six months to one year.
We believe that the Government’s objective can be achieved more effectively by different means, as explained below.
Effectiveness of the current approach
The Government’s existing “three-pronged approach” to tackling health and safety at work consists of:
- inspection and enforcement of the existing rules
- publicity and promotion
- education and training
The brief itself recognizes that this approach is working: the accident rate per 1,000 workers dropped by more than 75% between 2000 and 2020.
With this success, a serious question is whether there is any need for more stringent regulatory intervention in the form of the substantially increased penalties that the Government is proposing.
Changing the approach in this way would substantially increase the costs of doing business in Hong Kong, particularly for SMEs, at a challenging economic time when they can least afford it.
At the same time, the brief has produced no evidence to suggest that increasing costs in this way would produce any benefit, let alone a benefit that would outweigh the extra costs for businesses.
Costs of the proposals
One of the Government’s proposals is to increase the maximum level of financial penalty for an indictable offence by 20 times its existing level, to HK$10 million. Although it is unlikely that a court would ever impose the maximum level, businesses will have to make provision for the possibility of very substantially higher fines, thereby increasing their costs, which may ultimately have to be passed onto consumers in the form of higher prices.
At the same time, such increased risks may deter new entry by businesses, particularly in high-risk industries such as construction, potentially damaging Hong Kong’s international competitiveness.
Alleged benefits of higher penalties
The brief asserts that such increased penalty levels are necessary to reduce industrial accidents. The theory is that by dramatically increasing the maximum penalty levels, businesses will be driven into complying with the rules more than they are currently doing. But the brief does not produce any evidence for this theory.
However, the Government does produce evidence that its existing three-pronged approach, with a strong emphasis on education and training, is producing remarkably positive results.
Logic would suggest that the best way forward is to continue this approach, rather than dramatically increasing maximum penalty levels. In other words, the focus should be on prevention, rather than punishment.
Assessing the amount of penalty
The Government proposes that the courts be required to take into account the convicted company’s turnover (or “financial capacity”) in assessing the appropriate level of penalty. However, it is not entirely clear whether the relevance of turnover in this respect is just about financial capacity, or whether it is also about ensuring compliance.
In our view, the only objective of taking turnover into account should be to act as a safety mechanism, to ensure that the business in question is not driven into bankruptcy as a result of the fine imposed, which would be counter-productive to competition and the economy.
Doubling the period for issuing summonses
The rationale for the Government’s proposal for doubling the permitted period for the authorities to issue a summons, from six months to one year, is not clear from the brief. We can see clear downsides in doing so. Notably, victims (if alive) or their families wish to see a resolution to their case as soon as possible, as do the businesses that are accused of contraventions.
If the reason is lack of resources, we suggest that the appropriate solution is to devote more public resources to ensuring that the current six-month deadline can be met.
Although the Chamber supports the Government’s policy objective of improving health and safety at work, we do not believe this can be achieved by significantly raising penalties, and doubling the period for summons.
Existing measures have contributed substantially to a reduction in workplace accidents. Unless there are valid reasons to believe these are no longer effective, there is no justification for the introduction of harsher penalties. These would, however, have a chilling effect on businesses, which are already beset by extremely challenging operating conditions.