LegCo Panel on Manpower

Employment-related arrangements
arising from termination of franchises


This paper explains how employment-related issues arising from termination of franchises for public services are normally handled, on the basis of past experience.

Protection of employees' rights and benefits

2. As a matter of policy, the Government seeks to ensure that employees whose contract of employment is terminated as a result of the termination of franchises or service licences will not be deprived of their statutory and contractual rights and benefits. In other words, if any termination of franchises, licences or service gives rise to retrenchment or lay-off of employees working with an out-going franchisee, licensee or service provider, the employer has to act in accordance with the Employment Ordinance. These include mainly the provision of termination benefits such as arrears of wages, wages in lieu of notice, end of year payment, annual leave pay, holiday pay, severance payment etc. to the displaced employees. In addition, the employer has to pay other benefits, if any, under the employment contract.

3. The Labour Department provides free advice and conciliation service to both employers and employees in case of enquiries, complaints and disputes regarding these rights and benefits, as well as the legal obligations.

4. In line with the "Guidelines on how to handle wage deductions and retrenchments" recently issued by the Labour Department, we also encourage the out-going franchisee, licensee or service provider, as the employer, to hold sincere and frank discussions with affected employees with a view to working out mutually acceptable arrangements in respect of non-statutory benefits such as vacation of staff quarters.

Provision of employment assistance and retraining services to retrenched employees

5. As with any other retrenched employees, we seek to provide employment service to help those who have lost their jobs as a result of termination of franchises or service licences to re-enter the labour market. The Labour Department provides a full range of free employment services at its 11 employment centres for these affected employees, including the Out-reaching Placement Service which provides on-the-spot registration and employment assistance for those retrenched workers. The Employees Retraining Board (ERB) also provides a series of retraining courses and related services through its network of 56 training bodies and 124 training centres for those affected employees who wish to acquire new and transferable skills before re-entering the labour market. ERB also operates a one-stop service team with a particular hotline for employees who wish to seek prompt advice and assistance in this respect.

Special Arrangements

6. Apart from ensuring the employers' compliance with labour laws and provision of appropriate employment services, the Government does not have any established rules or regulations on how employment-related matters arising from the termination or change of service licences or franchises in each individual case should be dealt with. In other words, each case is handled on its own merits.

7. Any special employment-related arrangements vary amongst different cases. The following are the practices of individual franchisees, licensees or service providers in some previous cases:

  1. Ex-gratia payments for affected employees

    Ex-gratia payments or compensation are offered by the out-going franchisee, licensee or service provider to affected employees, in addition to their statutory rights and benefits upon termination of employment.

  2. Priority of employment of displaced workers by the new franchisee, licensee or service provider

    The Government may impose a requirement on the new service providers to make a first offer of employment to the staff of the existing operator to ensure the continuity of essential public services and a smooth transition during the changeover.

    In the China Motor Bus case, for instance, the Government made it a condition in the tender document that if the Successful Tenderer was not the existing operator, it was required to make a first offer of employment to all employees of the existing operator whose work was directly related to the provision of a public bus service (including drivers, mechanics and traffic staff) in appropriate posts and on employment terms and conditions prevailing in the bus industry in Hong Kong.

    In the Hong Kong Yaumati Ferry case, the Government has made it a condition in the tender document that if the successful tenderer, other than the existing operator, requires recruitment of crew members and pier staff, he would be required to make a first offer of employment to all those employees of the existing operator undertaking the same job types on terms and conditions no less favourable than those prevailing in the ferry industry of Hong Kong.

Education and Manpower Bureau
November 1998