For discussion FCR(95-96)116
on 2 February 1996


Subhead 700 General other non-recurrent

Members are invited to approve a new commitment of $19.2 million under Head 28 Civil Aviation Department Subhead 700 General other non-recurrent for ex-gratia payments to staff in the Airport Management Division of the Civil Aviation Department whose posts will be abolished upon the closure of Kai Tak Airport in April 1998.


We need to make suitable arrangement for staff in the Airport Management Division (AMD) of the Civil Aviation Department (CAD) whose posts will be abolished upon the closure of Kai Tak Airport in April 1998.


2. Upon the closure of Kai Tak Airport, we will offer compulsory retirement on abolition-of-office terms to the 133 permanent and pensionable staff of the AMD. In addition to the statutory pension payments, we propose to pay the staff concerned an ex-gratia payment amounting to six times an officer’s final monthly salary in his substantive rank. To enable payments to be made, the Director of Civil Aviation proposes to create a new commitment of $19.2 million under Head 28 Civil Aviation Department Subhead 700 General other non-recurrent. This is a resubmission to Members.


3. The justification for the present proposal is set out in FCR(95-96)103, which was considered by Members at the Finance Committee meeting on 5 January 1996. A copy of the paper is at Enclosure 1.

4. At the Finance Committee meeting on 5 January 1996, Members raised a number of questions regarding the Administration’s submission seeking support for the grant of an ex-gratia payment of six months’ salary for permanent and pensionable staff in the AMD of CAD upon abolition of their posts on the closure of Kai Tak Airport.

5. The Administration has since briefed Members of the Public Service Panel on 22 January 1996 further to elaborate on the integration arrangements for AMD staff to join the Airport Authority (AA), the policy considerations and reasons why we consider it appropriate to offer these staff standard abolition of office terms. The briefing paper issued to Panel Members is at Enclosure 2.

Information sought by the Public Service Panel

6. At the Public Service Panel meeting on 22 January 1996, we told Members that it was standard government policy to grant affected staff ex-gratia payment equivalent to six months’ salary upon abolition of office. However, some Members had difficulty in accepting the appropriateness of granting AMD staff ex-gratia payment when all of them would be offered employment by the AA on terms which are broadly comparable to their existing Government package. Members questioned if the staff concerned would face any real financial or material loss due to the future change of employment warranting an ex-gratia payment. Members felt it would be useful to set out any material differences in the package of the AA from that of the civil service, which demonstrated such a loss to the staff concerned. We undertook to provide further information for Members’ consideration.

AA terms of remuneration

7. The AA operates on prudent commercial principles and has established its terms of employment by following private sector practice. Its staff structure and administration of salary and benefits are different from those of the Government. Therefore, in developing individual offers to AMD staff concerned, the AA’s objective has been to provide packages that are reasonable, in line with the AA terms of employment and broadly matching the existing packages enjoyed by AMD staff as civil servants. In response to Members’ views, the Administration would like to make the following general points -

    - the term “broadly comparable” does not mean that the AA will match, item by item, the benefits to which AMD staff, as civil servants, are currently entitled; there will be no tailoring of benefits to accommodate AMD staff, who will be subject to the AA’s standard terms and conditions;

    - the AA’s offers will be broadly comparable to the AMD staff member’s current package; no account will be taken of any increase/improvements in either salary or benefits to which AMD staff might reasonably expect to be entitled were they to stay in the civil service (e.g. eligibility for non-departmental quarters upon promotion to the appropriate rank). This will be considered a loss of potential entitlements by staff affected;

    - as the AA follows a market driven approach in respect of its salaries and benefits packages, the benefits enjoyed by staff may vary should market conditions change.

8. More specifically, there are certain differences which the change of employment to the AA will entail -

  1. Salary structure and administration

    The structure and administration of the AA’s salaries and benefits are different from the civil service. For example, the AA pay range has no pre-determined incremental steps and progression within the range and salary increase is based on the employee’s performance. In the civil service, employees can expect to receive a salary increase each year (in April) reflecting pay trend movement in the private sector; and on average, about half of them would receive a pre-determined increment (of about 3.5% to 4.5%) for each completed year of service at a given rank in accordance with the relevant pay scale. On joining the AA, staff will be eligible for one salary review each year, based on the “pay for performance” philosophy. There is no guarantee that the employee’s salary will progress in the same manner as it would have in the civil service. In the past four years, for example, the average salary increase of AA staff has been somewhat less than that of the civil servants. A further point is that quite a number of AMD employees will join the AA on salaries close to the AA salary range maximum upon their acceptance of offer and their salary progression in that post will therefore be limited.

  2. Benefits structure

    The AA’s benefits structure is entirely different from that of the Government. In line with private sector practice, certain AA benefits such as housing and overseas education allowances are only available to staff of a certain seniority, whereas in the civil service, such benefits are available either to all staff (e.g. overseas school passages) or based on length of service. As a result, some individuals will lose their entitlement to these benefits on joining the AA. Also, leave entitlement in the AA is less generous than civil service provisions - a maximum of 33 days per annum compared to up to 41 days for local officers.

  3. Other aspects

    There are also other issues, such as job security and management culture. The AA follows private sector practice and is much more flexible in the hiring and firing of its employees. The change to AA should not be perceived as a continuation of the Government’s recognised relatively stable nature of employment. In addition, AMD staff, who have become accustomed to working in an established Government environment, will have to adapt to the AA’s philosophy and culture in order to achieve progress in their careers in the AA.

9. In conclusion, like all other civil servants compulsorily retired from Government due to abolition of office, AMD staff are likely to suffer a lesser degree of stabiliy in their new job and in adapting to the new working environment when they join the AA. The securing of an offer of employment in the AA is part of a package necessary for ensuring continued operation of Kai Tak and the smooth transition to the new airport. This should not be seen as an extraordinary bonus to the AMD staff. They should not be deprived of the ex-gratia payment which is normally offered to staff displaced under similar circumstances of abolition of office.


10. We submitted this item to Members on 5 January 1996. The Committee voted on the proposal with 14 Members for, 28 against, and one abstained. Members raised concern over the appropriateness of granting AMD staff ex-gratia payment when we have secured for them continued employment with the AA upon the closure of Kai Tak Airport. We have addressed these issues in paragraphs 7 to 9 above.

Economic Services Branch
January 1996

Last Updated on 2 December 1998