LegCo Panel on Public Service

Policy on Civil Service Pay Adjustments


At the Panel meeting on 27 May 1996, Members asked to be briefed on the policy governing pay adjustments, the mechanism in conducting pay trend surveys, and the findings of the recent survey.

Pay Policy

2. The objective of civil service pay policy is to offer sufficient remuneration to attract, retain, and motivate staff of a suitable calibre to provide the public with an effective and efficient service. Such remuneration should be regarded as fair both by civil servants and by the public which they serve. Within these parameters, broad comparability with the private sector is an important factor in setting civil service pay.

Pay Trend Survey

3. An important element in bringing the above into practice is the Pay Trend Survey conducted each year. This provides the basis for determining the size of civil service pay adjustment. Such a system of pay trend surveys has been in place since 1974. The survey is conducted by the independent Pay Survey Research Unit of the Standing Commission on Civil Service Salaries and Conditions of Service. Each year, data from about 75 Hong Kong companies are collected. The companies are identified based on the following criteria :

  1. The distribution of companies by major economic sectors should reflect closely the overall distribution of Hong Kong's economically active population.
  2. Individual companies should -
    1. be regarded as typical employers in their respective fields normally employing 100 employees or more;
    2. be generally known as steady and good employers conducting wage and salary administration on a rational and systematic basis;
    3. determine pay on the basis of factors and considerations applying to Hong Kong rather than factors applying in another country;
    4. if they form part of a group or consortium in Hong Kong, only be treated as separate companies where they have complete autonomy in setting and adjusting pay rates; and
    5. not use the government pay adjustment as the main factor in determining pay adjustments.

4. The pay trend survey covers the period from 2 April of the previous year to 1 April of the current year. It includes all full time employees who work 75% or more of the normal weekly working hours and whose basic salaries are equivalent to the three salary bands of the non-directorate staff in the civil service. Basic salary increases relating to changes in the cost of living, overall changes in market rates, general prosperity and company performance, merit payments and inscale increments are accounted for in the survey. Changes in payments additional to basic salary such as year end bonuses, whether permanent or temporary, are also included.

5. The survey produces three gross pay trend indicators, each representing the weighted average pay increases for all surveyed employees within each salary band. The information is then agreed by the Pay Trend Survey Committee comprising representatives from the Staff Sides, the Administration, the Standing Commission on Civil Service Salaries and Conditions of service, and the Standing Committee on Disciplined Services Salaries and Conditions of Service.

6. From the gross pay trend indicators, the payroll costs of civil service increments are deducted to produce net indicators which form the basis for a decision on the civil service pay adjustment. The payroll cost of increments is the actual increase in salary payments during the year due to increments awarded, as a percentage of total salary payments during the year. The payroll cost of increments rather than the weighted average of increments is used is in accordance with a recommendation of the 1988 Committee of Inquiry. This is largely a compromise solution having regard to the fact that merit pay and increments are conceptually different and that a large proportion of civil servants (53% as at 31.3.96) do not receive increments. The payroll cost of increments is equivalent to roughly half the value of the weighted average percentage value.

7. Apart from the findings of the Pay Trend Survey, other factors taken into account in considering the size of civil service pay adjustment include increases in the cost of living, the state of the economy, budgetary considerations, Staff Sides' pay claims, civil service morale and any other relevant factors.

Pay adjustments

8. In the last three years, the pay adjustment for the middle and upper bands have been strictly in accordance with the net pay trend indicators. For three years in a row, the adjustments for the lower band have also been brought up to those of the middle band. This is in accordance with a recommendation of the 1988 Committee of Inquiry that where the pay trend indicator for the lower band is below that that for the middle band, it should be brought up to the same level, unless there are overriding reasons for not doing so. This recommendation was made in the light of Government's policy that it should set an acceptable standard and be among the better paying employers in relation to the lowest paid. Moreover the lower band includes staff on Model Scale 1 some 88% (as at 31.3.96) of whom are no longer eligible for increments.

1996 pay adjustment

9. Turning to this year's pay adjustment, the pay trend indicators for 1995/96 are :

Gross PTI
Payroll cost of civil service increments

upper pay band




middle pay band




lower pay band




In line with the pay trend indicators, we have offered to the Staff Sides a pay adjustment of 7.68% for the upper band and 7.67% for the middle band. In line with our practice, we have offered a pay adjustment of 7.67% instead of 6.83% for the lower band (which is 0.84% above the net pay trend indicator).

Staff Sides' pay claim

10. The Staff Sides initially asked for an adjustment of 9%. Lately they revised their request to 7.93%, which is the CPI(A) movement in 1995/96. They have also asked that the adjustment for the middle and lower bands should not be lower than that for the upper band.

Present position

11. We shall consider the Staff Sides' views and aim to come to a decision by end June. We intend to submit an agenda item to the Finance Committee in early July to seek the necessary funds.

Civil Service Branch
June 1996

Last Updated on 21 Aug, 1998