Policy Statement & Submission

6 June 2007


Ms Denise Yue Chung-yee, GBS, JP
Secretary for the Civil Service
Civil Service Bureau
Hong Kong Special Administrative Region
10/F, West Wing, Central Government Offices
Ice House Street, Central
Hong Kong


Dear

Civil Service Compensation Surveys

Thank you for your kind wishes, and for your letter on recent Civil Service compensation surveys conducted on behalf of the government. This is a matter which is of grave concern to our members and what I set out in the ensuing paragraphs reflects the views of the Chamber, following discussion at the General Committee of the Chamber.

The Chamber believes public sector employees should be compensated in line with their private sector counterparts, neither overpaid nor underpaid. We believe this is important for matters of fairness, for maintaining the good moral standard and honest government which we appreciated and have now. At the same time, the Chamber takes a special interest in public sector reform, and we consider developments this year to be useful in achieving the ultimate goal of bringing the overall cost of government back under control.

We believe professional managerial practices can go a long way towards reducing the cost of employment. The first step is to know where we stand. The results of the three surveys were released in rapid succession. We note there are inconsistency between the Pay Level Survey and the Starting Salaries Survey. Either all civil servants are paid within 5% of their private sector equivalents, or they are not. Secondly, the lack of consideration of benefits – most particularly the retirement packages offered in the public sector, and the cash alternatives available in the private sector – defines the "compensation" cannot be compared in ways that provide useful outcomes. Thirdly, comparing the theoretical nominal mean in the public sector with an actual average in the private sector may undervalue civil service cash compensation.

What could be detrimental to Hong Kong competitiveness and what we cannot support is the excessively large pay increases arising out of the Pay Trend Survey. First and most important, there is no comparable private sector survey indicating pay increases to the order of the 4.6-5.0%. cited in the survey. Second, such a large public sector increase will undoubtedly trigger demands for similar pay hikes in the private sector. It will undoubtedly create difficulties for companies competing for talent with the government and contradicting the principle of the government following the market. Finally, the inclusion of SMEs in this survey, but not in the Pay Level or Starting Salaries surveys is inconsistent.

We hope that the survey results will be considered not in isolation but will be put in the context of how the government would invigorate the broader context of the public sector reform programme. We have not seen any acknowledgment that the agreed upon need to modernise civil service structures and administration remains a policy priority. This needs to be addressed. We need to undertake a structural reform programme that reduces the number of layers in the civil service while decentralizing meaningful managerial decision-making. Performance-based pay, and the risk that such pay may not be forthcoming to poor performers, needs to be part of the civil service management culture. And, most important of all, the private sector should be the first choice, the default setting for implementation solutions.

Professional human resource management practices are rapidly moving away from annual pay increases, and toward a pay-for-performance model. While we would not object to periodic adjustment — up or down — based on cost-of-living considerations, increases in basic salaries should be determined by merit, not longevity. These are the well-tested means the private sector has used to reduce or control the cost of doing business, and we believe these techniques — in combination with continued efforts to reduce overall headcount — are the right ways of ensuring that Hong Kong can afford the fine quality and professional service our government offers today.





Lily Chiang
Chairman