For discussion FCR(95-96)103
on 5 January 1996

ITEM FOR FINANCE COMMITTEE

HEAD 28 - CIVIL AVIATION DEPARTMENT
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.

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PROBLEM
PROPOSAL
JUSTIFICATION
FINANCIAL IMPLICATIONS
BACKGROUND INFORMATION
Airport Management Division of Civil Aviation Department Computation of Pension Benefits

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PROBLEM

We need to make suitable arrangements 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.

PROPOSAL

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 (DCA) proposes to create a new commitment of $19.2 million under Head 28 Civil Aviation Department Subhead 700 General other non-recurrent.

JUSTIFICATION

3. Under the Airport Authority Ordinance, the Airport Authority (AA) will be responsible for the management and operation of the new airport at Chek Lap Kok. CAD will only retain its regulatory role, including licensing the aerodrome to be operated by the AA and the provision of air traffic control and other technical services. Therefore, when the new airport commences operation and Kai Tak Airport closes permanently, all AMD staff will become redundant. In accordance with usual practice, we will give them the options of retirement on abolition-of-office terms or redeployment in the civil service. Officers who choose to be retired compulsorily on abolition-of-office terms will be eligible for enhanced pension benefits under the Pensions Ordinance (Chapter 89) or the Pension Benefits Ordinance (Chapter 99), as appropriate. In addition, we propose to grant to them an ex-gratia award amounting to six times an officer’s final month salary in his salary in his substantive rank for loss of non-job related benefits. We have made similar ex-gratia awards to retired officers in other redundancy exercises, for example, in the disestablishment of the Music Office.

FINANCIAL IMPLICATIONS

4. Assuming that all 133 permanent and pensionable staff of AMD will stay as civil servants until Kai Tak Airport closure and accept the offer to retire on abolition-of-office terms and that they all choose to make the maximum percentage commutation of their pension into a gratuity, we estimate the cost to Government, at 1995 pay levels to be as follows -

5. As regards paragraph 4(a)(i) and 4(b), the amounts of payments are prescribed under the relevant pensions legislation. As regards paragraph 4(a)(ii), we propose the creation of a new commitment for the purpose. Details of the calculations are at the Enclosure. As the new airport is expected to open for commercial operation in April 1998, we will make the non-recurrent payments in 1998-99 and the annually recurrent payments from April 1998 onwards.

6. If Members approve this proposal, we will include sufficient provision in future Estimates for the purpose.

BACKGROUND INFORMATION

7. The CAD has a team of over 150 staff specialised in airport management. They comprise mainly airport managers, airfield supervisors, airport reception and information officers and foremen. Some 133 of the staff are employed on permanent and pensionable terms. When Kai Tak closes, these staff will become redundant and hence eligible for commuted pension gratuity payments.

8. As the AMD staff have acquired invaluable experience in running a busy modern international airport, it is natural that the AA would like to invite them to work for the new airport. In order to ensure that there will not be an exodus of AMD staff for the AA before the closure of Kai Tak Airport and thus affecting its operation, DCA has made arrangements with the AA. Under the arrangements, the AA will offer employment to all permanent and pensionable AMD staff who will be allowed to opt within a period of twelve months whether to join the AA. Those who decide not to join the AA could apply for other jobs in Government if they want to remain in the civil service or opt to retire on abolition-of-office terms when Kai Tak Airport closes. For the staff who have opted to join the AA, they will cease to be civil servants. They will be employed by the AA but seconded back to work for the CAD at Kai Tak Airport. They will be paid by the AA but the Government will reimburse the AA for the staff costs. The AA remuneration package will not exceed the total staff costs incurred by Government in filling the same posts by CAD staff.

9. The integration arrangements will help to ensure the continued efficient operation of Kai Tak until its closure, enable a core of local experienced staff to be assimilated into the AA at an early date to familiarise them with the AA’s management structure and culture, safeguard against counter-productive competition for a limited pool of experienced airport management staff between CAD and AA, allow flexibility in deployment by enabling cross postings between AMD and AA staff, and provide AMD staff with the opportunity to continue their career in airport management.

10. The Secretary for Economic Services briefed the LegCo Economic Services Panel on the integration arrangements on 11 December 1995. Some Members expressed support for the broad principles and objectives of the integration arrangements. Others sought clarification from the Administration on a number of points regarding the package. In response, the Administration confirmed that there were a number of precedent cases whereby posts were abolished by Government and staff were offered abolition-of-office terms. Examples included the disestablishment of the Music Office and the privatisation of government operated abattoirs. Questions were also raised on why it was not considered appropriate for AMD staff to be given the option to work for the AA but remain on civil service terms after the closure of Kai Tak. The Administration and the AA management advised that the option had been carefully considered but rejected. It was felt that a mixed staffing situation with employees doing similar jobs being remunerated on different terms and conditions within the AA organisational structure would be divisive and not conducive to the early establishment of a strong, fully integrated airport management team for Chek Lap Kok. Furthermore, it would create administrative and management complexities. The AA management also confirmed that a comprehensive matching exercise had been conducted on the comparative job responsibilities between AMD and AA posts. The AA management advised that, other than in a few exceptional cases, offers of employment made to AMD staff would be broadly comparable to their existing Government package, in overall terms, and would be consistent with the AA remuneration structure.

11. The Administration also has advised the AMD staff through the CAD Departmental Consultative Committee of the work being undertaken by the Administration to design arrangements under which AMD staff might move across to the AA. CAD and the AA had conducted several briefing sessions to advise staff affected of the details of the integration arrangements in early December 1995. There has been no adverse response from staff.

Economic Services Branch
December 1995

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Enclosure to FCR(95-96)103

Airport Management Division of Civil Aviation Department Computation of Pension Benefits

1 Number of staff eligible for retirement under the abolition-of-office terms -

2 Retirement benefits -

2.1 133 officers on New Pension Scheme.

2.2 Formula for calculating annual pension is -

* 1/675 for New Pension Scheme

2.3 Formula for commuted pension gratuity under New Pension Scheme is -

* maximum percentage

3 Additional retirement benefits due to abolition of office -

3.1 New Pension Scheme

An additional pension is granted to an officer who retires from service on abolition of office if he has completed qualifying service of not less than two years. The rate for the additional pension is -

10/675 of an officer’s highest pensionable emoluments for each completed three-year period of his pensionable service

4 Total amounts payable under paragraphs 2 and 3 above -

4.1	Commuted pension gratuity (50%)	$ million
	(a) normal retirement benefits	78.0
	(b) additional benefits due to abolition of office	18.4
	Total	96.4
4.2	Reduced annual pension	$ million
	(a) normal retirement benefits	5.6
	(b) additional benefits due to abolition of office	1.3
	Total	6.9

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