Following the release of the latest Pay Trend Survey findings, the review of civil servants' pay has provoked hot debate in Hong Kong. The government's decision to cut civil servants' salaries by 1.58 to 4.42 percent implies that the across-the-board 4.75 percent cut proposed in this year's Budget won't be realized. In other words, the government's wish to cut its payroll expenses by HK$6 billion annually will fall far short of its target.

We all know that many civil servants are paid far more than their counterparts in private firms. We also know that if the budget deficit persists, the government will most likely resort to putting the burden on the shoulders of the public and businesses by raising taxes and charges, which will ultimately diminish the competitiveness of local businesses. That is why both the business community and the general public expect the government to cut its payroll.

Over the past 20 years, the Pay Trend Survey has been used as a barometer for the government to adjust civil servants' wages. As I have long criticized, the survey has a number of shortcomings that affect its accuracy. Its biggest flaw is that while it synchronizes pay rises of the civil service with those of the private sector when the economy is in good shape, it fails to suggest action if the private sector cuts pay when times are bad.

This is why I find the latest findings of the survey unacceptable. Last year, for example, many SMEs and even larger firms were forced to cut their headcount and payroll to ease their economic difficulties. The latest findings of the Pay Trend Survey, on the other hand, show less than a 1 per cent cut in wages for middle and lower ranking staff and a 3.39 per cent cut for senior staff. I find this unbelievable.

This sampling cannot really reflect the local employment situation since the lion's share of the survey's target respondents are highly profitable large corporations. Only a few respondents are SMEs, despite the fact that SMEs employ more than 60 per cent of the local workforce. The survey also fails to take into account the fact that many companies laid off employees, increased workers' duties and substituted some employees with lower paid ones. Therefore, these holes in the survey need to be patched up as soon as possible.

The government's Review of Civil Service Pay Policy and System Taskforce recently unveiled phase-one of its study which looks at the structures and reforms of civil service pay in Australia, Canada, New Zealand, Singapore and the U.K.

Among the key points that we can follow is that civil service pay reform in these five countries has been shaped more on the basis of financial affordability rather than pay comparison between civil servants and the public.

I think we should follow this example if we want to avoid further misunderstandings arising from the Pay Trend Survey. As the existing pay increment mechanism is centralized, the government should also take into account the performance-linked policy these countries have adopted to boost civil servants' productivity.

Compared to the five countries, our system is clearly out-dated. Although an overhaul of the system will take time, I recommend that the government set its priorities towards achieving this goal. The first step should be to scrutinize the pay adjustment mechanism to keep civil service pay in line with those of private firms.

In the meantime, I insist that the government cut civil servants' wages, even though the existing mechanism shows only a modest cut. In response to the survey's findings, some civil service organizations have made a counter-proposal to the government to freeze their payroll, rather than adhering to the prevailing mechanism, otherwise they will go on strike or even sue the government. I feel that such "selfish" threats are unacceptable to the business community and citizens.

I support the government's intention to incorporate provisions for "salary cuts" in the overall civil service "pay adjustment" policy by means of legislation to avoid unnecessary legal action in the future. I think this is a long-term solution to solve related disputes. But ultimately civil servants should be rational and understand the current circumstances as well as social expectations to avoid exacerbating the problem and dragging down the whole community.