LC Paper No. CB(2) 1466/98-99
(These minutes have been seen by the Administration)

Ref : CB2/PL/PS

LegCo Panel on Public Service

Minutes of Meeting held on Monday, 18 January 1999 at 10:45 am in Conference Room B of the Legislative Council Building

Members present:

Hon TAM Yiu-chung, JP (Chairman)
Hon Mrs Sophie LEUNG LAU Yau-fun, JP (Deputy Chairman)
Hon LEE Cheuk-yan
Hon LEE Kai-ming, JP
Hon CHEUNG Man-kwong
Hon CHAN Wing-chan
Hon CHAN Kwok-keung
Hon Howard YOUNG, JP
Hon Ambrose LAU Hon-chuen, JP

Member absent :

Hon Andrew WONG Wang-fat, JP

Public Officers attending:

Mr LAM Woon-kwong, JP
Secretary for the Civil Service

Ms Sandra LEE
Deputy Secretary (Civil Service)1

Deputy Secretary (Civil Service)2

Ms Anissa WONG
Deputy Secretary (Civil Service)3
Clerk in attendance:
Mr LAW Wing-lok
Chief Assistant Secretary (2)5
Staff in attendance:
Miss Mary SO
Senior Assistant Secretary (2)8
I. Confirmation of minutes
(LC Paper No. CB(2) 1087/98-99 issued under LC Paper No. CB(2) 1088/98-99 on 15 January 1999)

1. The minutes of the meeting held on 21 December 1998 were confirmed.

II. Date of next meeting and items for discussion
(LC Paper No. CB(2)1088/98-99(01))

2. As the date of the next meeting scheduled for 15 February 1999 fell on the eve of the Lunar New Year, coupled with the fact that the outstanding items for discussion set out in the paper were not of an urgent nature, members agreed to postpone the date of the next meeting to 15 March 1999.

3. Members further agreed to discuss the following three items at the next meeting to be held on 15 March 1999:

  1. Briefing by the Post Office on the staff situation since its establishment as trading fund department;

  2. Briefing by the Electrical and Mechanical Services Department on the staff situation since its establishment as trading fund departments; and

  3. Prevention of double housing benefits for civil servants and staff employed in Government-funded bodies.
4. Mr CHEUNG Man-kwong suggested to discuss the provision of overtime duty allowance in the civil service, after a court case involving a claim by a Correctional Services Department staff that work undertaken beyond his conditioned hours should be regarded as "stand-by" duty instead of "on-call" duty was completed. Members agreed.

5. Mr CHEUNG further suggested and members agreed to seek clarification from the Administration as to whether statutory organizations such as the Trade Development Council and the Housing Authority were required to comply with the Enhanced Productivity Programme (EPP).

III. Civil servants borrowing money from loan sharks
(LC Paper No. CB(2) 1088/98-99(02))

6. Deputy Secretary for the Civil Service(3) (Dep SCS(3)) briefed members on the position of reported cases on civil servants borrowing money from unauthorized sources. She said that the Administration attached great importance to upholding the high standards of conduct in the civil service. In order to safeguard the probity and service quality of the civil service, civil servants were expected to manage their personal finances sensibly and avoid getting into a position where debts might become unmanageable. To assist civil servants with short-term financial difficulties, departments might provide assistance by way of advance of salary or loans through departmental relief funds/departmental welfare funds in specified circumstances.

7. Dep SCS(3) further said that under the relevant Civil Service Regulations and Acceptance of Advantages (1992) Notice, civil servants were prohibited from borrowing money from unauthorized sources, unless with approval of their Heads of Department (HoDs). Those who contravened the regulations were liable to disciplinary punishment, and where circumstances of the cases warranted, they might be prosecuted under section 3 of the Prevention of Bribery Ordinance. For the 12-month period from October 1997 to September 1998, 40 civil servants were disciplined for obtaining unauthorized loans. Although the size of civil servants found to have borrowed money from unauthorized sources remained small, the Administration would continue to monitor the situation closely and remind officers of their responsibility to avoid getting into financial problems.

8. Mr CHEUNG Man-cheung expressed concern about the situation of indebtedness in the Police Force. He said that out of a total of some 33,000 Police officers, there were about 12,000 applications for loans through the Police Credit Union annually. According to the latest half-yearly surveys conducted by the Force management covering the period from January to June 1998, the number of Police officers with unmanageable debts had increased from 82 to 107 over the same period of 1997. Overspending and gambling accounted for about 52% of the Police officers with unmanageable debts and about 18% became indebted due to repayment of debt incurred by family members. 16% of indebted cases were related to investment and business failures. According to press reports, indebtedness was the major reason for Police officers committing suicide. Mr CHEUNG further pointed out that the Deputy Commissioner of Police had recently admitted in a radio programme that the number of Police officers with unmanageable debts was underestimated, as some of them were reluctant to disclose such information to the Force management. Mr CHEUNG asked whether the Administration viewed this situation as serious and, if so, what action would the Administration take to tackle the problem of indebtedness.

9. Dep SCS(3) responded that the Commissioner of Police (CP) took a very serious view of the problem of indebtedness in the Police Force. To tackle the problem, the Force management had developed a comprehensive strategy for preventing, identifying and dealing with the indebtedness of Police officers. A Healthy Lifestyle Campaign was launched in 1997 to educate Police officers on how to avoid indulging in gambling. Surveys on the indebtedness of Police officers had been conducted at six-monthly interval since 1994. Whilst Police officers were required to be prudent and temperate in their financial affairs, assistance would be rendered to those who had fallen into debts because of financial mismanagement or unforeseen circumstances by way of providing them with loans from the Police Welfare Fund or advance of salary. Referring to the latest surveys on the indebtedness of Police officers, Dep SCS(3) pointed out that 105 out of the 107 cases involved borrowing money from authorized sources. Although the number of 107 cases was not of a high figure, she assured members that the Force management would continue to devote substantial efforts and resources to maintaining a clean and honest Police Force.

10. Mr CHEUNG remarked that the survey findings did not accurately reflect the gravity of the problem. He said that some Police officers had privately admitted to him that gambling and overspending were quite rampant among Police officers. He was of the view that the Police Force should adopt a more proactive approach by encouraging the indebted Police officers to come forward with their financial problems and by providing them with loans to settle their debts in full. He also asked the Civil Service Bureau (CSB) to raise this with CP and report back to the Panel in due course.

11. Dep SCS(3) responded that under the existing arrangements, Police officers who had fallen into financial difficulties could apply for advance of salary or welfare loans. Nevertheless, she would convey Mr CHEUNG's suggestion to CP for consideration. She further said that, in order to ensure the service quality of the Police Force would not be undermined, Police officers found or suspected to have serious financial difficulties would be closely supervised in their work. Action would also be taken to deploy these officers to undertake duties which were not prone to corruption.

12. Mr CHAN Wing-chan opined that more should be done to educate and counsel Police officers on the pitfalls of overspending habits and gambling in order to deter them from obtaining unauthorized loans. Dep SCS(3) concurred with Mr CHAN and cited the Healthy Lifestyle Campaign launched in 1997 as an example to show that the Force management attached importance to educating Police officers about the benefits of adopting a healthy lifestyle.

13. The Chairman hoped that in addition to taking disciplinary action where appropriate, the Administration should also step up educational and counselling work to remind civil servants to avoid incurring debts beyond their capability of repayment.

IV. Declaration of investments by civil servants
(LC Paper No. CB(2) 1088/98-99(03))

14. Referring to the paper, Dep SCS(3) briefed members on the latest position on the implementation of the revised declaration system. She said that, in addition to the 25 key posts of the Hong Kong Special Administrative Region Government (HKSAR) which had been designated as Tier I posts, a total of 2,874 posts had been designated as Tier II posts by bureaux/departments on the basis of high risk of exposure to potential conflict of interest situations. Officers in Tiers I and II posts were required to declare their investments in and outside Hong Kong. Officers in Tier I posts were required to report any single investment transaction equivalent to or exceeding HK$200,000 within seven days of the transaction between the annual declarations. In the case of officers in Tier II posts, they were required to report any single investment transaction equivalent to or exceeding HK$200,000 or 3 months' salary, whichever was the less, within seven days of the transaction between the biennial declarations.

15. Dep SCS(3) further said that bureaux/departments were also advised to draw up supplementary investment guidelines in the light of their operational requirements. So far, 20 bureaux/departments had prepared/issued supplementary investment guidelines covering some 43,000 posts at various levels in the civil service, and some other departments had advised that the additional guidelines were under preparation.

16. Mr Howard YOUNG enquired whether there was some degree of commonality in the contents of the declaration forms, given that the duties performed by civil servants in one department differed from those performed by civil servants in another department.

17. In reply, Dep SCS(3) said that civil servants holding Tiers I and II posts were required to declare their investments in accordance with a prescribed set of requirements pertaining to their respective Tiers. As regards the additional investment guidelines issued by bureaux and departments for compliance by their staff, they were made in light of their specific operational requirements. She cited as an example the additional investment guidelines issued by the two Municipal Services departments requiring health inspectors to declare every investment transaction in food and restaurant businesses, irrespective of the amount involved. Other departments such as the Trade Department, the Transport Department and the Lands Department had also issued additional investment guidelines requiring their staff to declare every investment transaction relating to their official duties, irrespective of the amount involved.

18. Mr CHEUNG Man-kwong said that although civil servants were required under the new Civil Service Regulation (CSR) 462(4) to report any investment made or any business activity undertaken with members of public or private bodies, including LegCo, Municipal Councils or District Boards with which they had official dealings, the new Regulation did not cover investments made with members of Mainland political organizations such as the National People's Congress (NPC) and the National Committee of the Chinese People's Political Consultative Conference (CPPCC). In his view, this did not address the recommendation made by the former LegCo Select Committee's Inquiry Report on the departure of Mr LEUNG Ming-yin from the Government that guideline should be drawn up for the proper conduct of civil servants in handling private investments with other political figures in Hong Kong or elsewhere for the avoidance of doubt and uncertainty. Mr CHEUNG further enquired whether such omission was an oversight.

19. Dep SCS(3) explained that CSR 462(4) was worded in general terms to cover all types of private or public bodies, including Mainland political organizations. The LegCo, Municipal Councils and District Boards were mentioned in the Regulation because they were the organizations with which officers were most likely to have official dealings.

20. Mr CHEUNG suggested that the NPC and the CPPCC should be mentioned in CSR 462(4) for the sake of clarity. Dep SCS(3) responded that the Administration would consider Mr CHEUNG's suggestion in its next review.

21. Mr CHEUNG further said that civil servants should be required to report to their Bureau Secretaries or HoDs before making any investment transactions to avoid conflict of interest situations. Dep SCS(3) responded that under the revised declaration system, officers in designated posts were required to report any single investment transaction equivalent to or exceeding HK$200,000 or 3 months' salary, whichever was the less, in addition to reporting investments at pre-determined cycles. Moreover, if there was or might be a conflict of interest between the officer's investments and official duties, Bureau Secretaries/HoDs would consider requiring the officer to divest himself/herself of any or some of the investments, refrain from acquiring or disposing of the investments or place the investments in a blind trust.

V. Employment of non-civil service contract staff
(LC Paper No. CB(2) 924/98-99 issued on 21 December 1998)

22. Deputy Secretary for the Civil Service(1) (Dep SCS(1)) briefed members on the Administration's proposal to introduce the non-civil service contract terms for HoDs or Heads of Grades (HoGs) to employ non-civil service contract staff at non-directorate equivalent level set out in the paper. She said that the proposal was the result of the review on the temporary appointment system in the civil service. The proposal would provide HoDs and HoGs with greater autonomy in employing and deploying staff so that they could be more responsive to the demand on their services. For instance, departments were no longer required to seek the agreement of CSB to employ temporary staff for fixed-terms project of two to three years on each and every occasion. The proposal would also provide departments with the necessary tools to take forward initiatives to achieve productivity gains under the EPP.

23. Dep SCS(1) further said that non-civil service staff would not be remunerated on the civil service pay and condition package, and their level of pay would not be more than the minimum salary of comparable civil service ranks. To ensure a degree of check and balance in the temporary appointment system, the employment of non-civil service staff would be authorized by directorate officers in departments and would be overseen by officers at an appropriate level of seniority.

24. Mr LEE Cheuk-yan expressed concern that the introduction of the non-civil service contract terms would affect the morale of frontline junior staff. He said that some government departments and publicly-funded bodies had already adopted the pattern of employing temporary staff to perform non-skill jobs such as cleaning and security work which were not of a short-term or project-based nature. He was of the view that these people had been exploited by such an appointment system, as they were not remunerated on the civil service pay and condition package, even though the work they performed was long-term in nature. He further said that he had received complaints from staff employed on short-term basis that some government departments failed to pay them wages within the seven days' time period stipulated in section 23 of the Employment Ordinance.

25. In response, Dep SCS(1) said that she could not envisage a situation where the Government failed to pay wages to its staff in breach of the Employment Ordinance. Nevertheless, she agreed to look into the matter. As regards the hiring of temporary staff for work of a long-term or permanent nature, Dep SCS(1) explained that this was mainly due to the fact that those temporary staff who had performed well were often taken on to undertake another short-term job. Given that these staff were employed to meet service or operational need that was short-term or project-based in nature lasting several months to as long as two years in some cases, it was not cost effective to appoint them on permanent terms of service.

26. Mr LEE requested the Administration to provide a comparison of the number of temporary staff employed by government departments prior to and after the introduction of the new non-civil service contract terms. In response, Dep SCS(1) said that there was no available figure on the number of temporary staff employed by government departments since the implementation of the proposal on 1 January 1999. Nevertheless, she would consider how to obtain the information requested by Mr LEE.

27. Mr LEE enquired whether the Administration would consult the Panel before allowing certain government departments to contract out some of their services to the private sector. In reply, Dep SCS(1) said that the Government's policy was to give more autonomy to departments to employ and deploy staff so that they could be more responsive to the demand on their services and be more efficient in the use of resources. She assured members that full consultation would be conducted at the Departmental Consultative Committees in the event that a large scale contracting out exercise was contemplated.

28. Noting that the duration of employment of temporary staff at non-directorate equivalent level had now been increased from not more than 12 months to up to three years, Mr CHAN Wing-chan enquired whether this indicated that there would be a growing trend of recruiting temporary staff in order to save cost. In reply, Dep SCS(1) reiterated that the intention behind the introduction of the new arrangement was to provide HoDs and HoGs with greater flexibility to make non-civil service appointments to meet their short-term service and operational needs in a most cost effective way. She cited the example of departments employing contract staff on computerization projects which were of a short-term or project-based nature.

29. Mr Howard YOUNG enquired whether the provision of end-of-contract gratuity was intended to compensate for the lack of pension offered to contract staff, and if so, how the anticipated implementation of the Mandatory Provident Fund (MPF) Scheme would impact the gratuity of contract staff.

30. In reply, Dep SCS(1) said that the end-of-contract gratuity included the pension element. She further said that as stipulated by the MPF Schemes Ordinance, the Government, as an employer, would be required to make contributions in respect of staff members who were employed for not less than 60 days and between the age of 18 and 64. The Ordinance also provided that an employer's statutory contribution was 5% of the employee's monthly income or $1,000, whichever was the less. In offering appointment to contract staff with gratuity-bearing terms or upon renewal of agreement in respect of serving contract staff, the Government would include a clause in the agreement specifying that the gratuity payable for the period of service starting from the commencement of the MPF Scheme would be the sum which, when added to the Government's contributions, would equal to 25% of the total basic salary drawn during that period. For those contract staff who would be serving the remainder of their current agreements, there would be no adjustments to the end-of-contract gratuity.

31. In reply to Mr YOUNG's further enquiry as to why there was no scientific formula to calculate the gratuity payment, Dep SCS(1) said that the determination of the level of gratuity payment was not based on a scientific formula. The gratuity payment arrangement had developed over time and incorporated various factors such as the market demand for the job in question.

32. The Chairman asked why the end-of-contract gratuity varied between 10% to 25% of the basic salary. In reply, Dep SCS(1) said that under the new non-civil service contract terms, the end-of-contract gratuity would be 10% and 15% of basic salary for non-skill and skill work jobs respectively. She further said that the higher rate of 25% of basic salary was the maximum level of gratuity payable before the introduction of the new non-civil service contract terms.

33. Mr CHAN Kwok-keung enquired whether long service payment would be made to a group of temporary staff who had been employed by the Urban Services Department for more than 10 years and had recently been appointed to permanent posts in the Department. In response, Dep SCS(1) said that she would look into the matter.

34. Mr LEE Kai-ming enquired whether there was any mechanism put in place to supervise the employment of non-civil service staff at the departmental level.

35. In reply, Dep SCS(1) said that the paper set out the guidelines which HoDs/HoGs had to follow in the employment of non-civil service staff. Apart from these guidelines, other employment terms and benefits would follow the provisions of the Employment Ordinance and the Employees' Compensation Ordinance. When in doubt, HoDs/HoGs or their delegated staff at directorate level should seek the advice of CSB. If the problems involved complex legal issues, legal advice could also be sought. There was therefore adequate check and balance in the system to prevent any abuse of power. She further said that prior to the implementation of the proposal, CSB representatives had visited departments to explain the details of the proposal to the departmental management and staff representatives. Visits had also been made to departments following the implementation of the proposal to see if departments encountered any difficulty in employing non-civil service contract staff.

36. In reply to Mr LEE's further enquiry, Dep SCS(1) said that there were adequate channels for staff to lodge complaints if they felt that they had not been fairly treated as a result of the implementation of the new non-civil service contract terms.

37. Mr LEE Cheuk-yan opined that the Government as a good employer should offer employment terms for non-civil service staff better than those prescribed in the labour legislation. Dep SCS(1) replied that it should be left to the HoDs/HoGs to determine the employment package offered to such staff within the prescribed guidelines and in accordance with the provisions of the relevant labour legislation.

VI. Review of the civil service system

38. Secretary for the Civil Service (SCS) said that a review of the civil service system would be undertaken in response to the public's demand for the civil service to improve its productivity and reduce the disparity between the civil service pay package and that of the private sector. At the Council meeting on 14 January 1999, the Chief Executive announced that the review would focus on four areas, namely, linking pay with performance; simplifying disciplinary procedures; overhauling the 150-year old pension scheme; and building a new management culture. A consultation document on the civil service review was being drawn up by CSB and was expected to be ready within the next few months. After the completion of the consultation exercise on the document, detailed proposals would be introduced in phases within 12 to 18 months' time for consultation with the Staff Side.

39. Mr CHEUNG Man-kwong enquired whether the system of linking pay with performance would also apply to senior civil servants and whether public opinions on the performance of government departments and government officials would be taken into account in assessing the performance of senior civil servants.

40. In reply, SCS said that the system of linking pay with performance would apply equally to senior civil servants. He further said that fundamental changes had been made on how the performance of senior civil servants was assessed. In the past, senior civil servants were assessed by how effective they had used the resources to achieve their performance targets. Now, their performance was assessed by how much output they could deliver in terms of the resources given. He also expressed reservations about the suggestion of taking public opinions into account in the assessment of the performance of senior civil servants. He pointed out that the public had a tendency of putting the blame on the Policy Secretary concerned for introducing an unpopular policy, even though the policy was formulated at the central government level and public views had been sought before implementation.

41. Mr Howard YOUNG asked whether the Government would adopt the practice used by private firms whereby staff performance would be measured by results in key areas.

42. In reply, SCS said that various changes had been made to the staff appraisal system. He pointed out that appraising officers often tended to be lenient in assessing the performance of their subordinates. To address this, one of the focal points of the civil service reform was to build a new management culture to change this kind of attitude.

43. Mr LEE Cheuk-yan expressed concern that the overall salary level in Hong Kong would be further adjusted downward if the Government followed the trend in the private sector and lowered the salary level of civil servants. He further said that if the system of linking pay with performance was introduced, job security of civil servants would be undermined, as HoDs and HoGs would be given more authority to dismiss staff. This would in turn promote cronyism in the civil service.

44. SCS responded that the Government would continue to uphold the principles of fairness, openness and transparency in its human resource management. He stressed that there was a need to simplify the existing disciplinary procedures which were cumbersome and time consuming. He assured Mr LEE that the Government's aim was not to dismiss staff on a large scale in order to replace them with less expensive new recruits. Rather, the Government considered it necessary to provide a set of procedures which would enable HoDs to deal with disciplinary matters in a fair, effective and expeditious manner.

45. SCS further said that the proposal of linking pay with performance was not initiated by the Government. In fact, it was raised by the Standing Commission on Civil Service Salaries and Conditions of Service on several occasions. The benefit of the proposal was to provide impetus for civil servants to strive to perform better in their work. As regards the overall review of civil service salaries, it was timely for the Administration to conduct another review of starting salaries in the civil service, particularly in view of the current downturn in the economy.

46. Mr LEE Kai-ming enquired whether the review of the civil service would focus on certain areas in the civil service system where weaknesses had been identified.

47. In reply, SCS said that although Hong Kong civil service was consistently ranked as one of the best in the world and in the region, it was important that reviews of the civil service system be undertaken on an on-going basis in order to ensure that the civil service would remain forward-looking so as to meet the challenges of the 21st century.

48. Mr LEE further enquired whether in reviewing the civil service system, the Government would adhere to Article 100 of the Basic Law which stipulated that the pay and benefits of civil servants should not be less favourable than before the establishment of the HKSAR. SCS replied in the affirmative and said that Article 100 of the Basic Law did not preclude the introduction of measures to improve the civil service system.

49. The Chairman asked whether the Government had drawn on overseas experience in devising the blueprint for the review of the civil service. In reply, SCS said that no systematic study on overseas practices had been undertaken. He further said that some countries adopted a bonus system whereby the whole civil service or an individual staff would be awarded bonuses if they excelled in their work. Under the system in Hong Kong, civil servants who had not reached the maximum salary point of their ranks were given an increment annually subject to satisfactory performance. The original intention of this system was to encourage staff to strive to perform better even though they were not promoted to a higher rank. However, such a system had the negative effect of fostering a sense of complacency in some civil servants. The Government would address this issue in its review of the civil service system.

50. Mr LEE Cheuk-yan enquired whether consideration would be given to providing better level of retirement protection than those prescribed in the MPF Scheme. SCS replied that the MPF Scheme would not be applicable to permanent and pensionable staff. He further said that the Government was considering a retirement scheme whereby staff would not have to wait until they reached a specified age to receive the pension.

51. Mr CHEUNG Man-kwong expressed concern that the review of the civil service system might result in civil servants doing the same job but were remunerated on different pay packages. SCS noted Mr CHEUNG's concern.

52. The Chairman said that the Administration should brief the Panel periodically on the progress of the review. SCS agreed.

VII. Privatization of services provided by the Housing Department - Its impact on staff concerned
(A letter from the Alliance of Housing Department Staff Unions issued vide LC Paper No. CB(2) 977/98-99 on 6 January 1999)

53. Members noted the above letter from the Housing Department Staff Unions requesting the Panel to investigate into the matter of the Assistant Director of Housing refuting the press reports which mentioned the offering of generous compensation by the Housing Department (HD) to staff affected by privatization of services provided by HD. In view of the lack of sufficient evidence presented in the letter, members decided not to follow-up on the matter.

54. The Clerk informed members that as advised by the Administration, the consultancy report on privatization of services provided by HD would be completed before the Lunar New Year. HD would issue the consultancy report to the relevant parties and consult the staff concerned.

55. The meeting ended at 12:50 pm.

Legislative Council Secretariat
12 March 1999