Experience of Replacing Fixed Pay Scales with Pay Ranges

61.  All five of the comparator countries have replaced fixed pay scales (with automatic time-based increments) for their senior civil servants with more flexible pay ranges.  The countries that have substantially delegated pay management responsibilities – the UK, Australia and New Zealand – have also extended the use of flexible pay ranges to most or all of their Civil Service. 

62.  The detailed way in which these pay ranges operate vary between countries, and between different Departments and Agencies in those countries with more delegated arrangements.  However, the typical features include the following:

· Pay ranges which specify a minimum and maximum salary for each range, with each pay range attached to a particular rank or band

· Progression through the range is normally based on performance (i.e. no automatic increment)

· There may be complete flexibility to move through the range or certain guidelines (e.g. fixed pay points with staff receiving 0, 1, 2 or even 3 pay points depending on performance)

· Pay ranges tend to be much wider and overlap more than traditional fixed pay scales

· The broad equivalents of the Hong Kong Disciplined Services have generally been more resistant to the introduction of pay ranges. Performance-based approaches appear to be particularly counter cultural to these organisations where there is a more conservative culture, an older staff profile, and more emphasis on rank and hierarchy in day-to-day working.

63.  Experience of implementing flexible pay ranges has been mixed.  The Governments and senior officials in our survey countries generally believe that the introduction of pay ranges to the Civil Service has been successful, particularly in enabling a fairer system of reward (i.e. based on merit not just time served) and encouraging a more performance-oriented culture.  But there has been, and continues to be, resistance to this approach from Trade Unions and staff who see the use of pay ranges as potentially divisive and counter cultural.  A particular issue that has arisen in some countries has been an inability to adequately fund such schemes (the UK is a good example of this issue) and this has directly impacted their credibility and effectiveness.

64.  The experience internationally is also that the effectiveness and perceived fairness of flexible pay ranges depends critically on a comprehensive approach to performance measurement and management.  Specifically, emerging good practice in the countries we surveyed includes:

· Establishing clear linkages between overall Government objectives, Departmental/Agency objectives and targets, and individual objectives and targets

· Requiring civil servants to prepare and agree with their supervisor a personal performance plan or contract, against which their subsequent performance will be assessed

·          Placing considerable emphasis on developing robust and comprehensive performance measures, recognising that many aspects of public sector performance are difficult to measure in practice 

· Developing more sophisticated staff appraisal techniques 

　

· Ensuring that processes are in place to handle poor as well as good performance.

Implications for Hong Kong

65.  Given that all of our survey countries have established more flexible pay ranges, at least for their senior staff, and the perception in the countries concerned that, properly implemented, these changes can help to improve accountability and performance, we believe that there would be merit in examining further whether flexible pay ranges should be introduced to the Hong Kong Civil Service.  In doing so, some of the key questions to be addressed will include the following:

· Should pay ranges be limited to senior staff only?

· Should the pay ranges be designed centrally or left to Bureaux and Departments to design themselves?

· How flexible should any pay ranges be (e.g. should a system of pay points be retained)?

· What changes would be required to the Government’s performance measurement and staff appraisal systems to support the introduction of flexible pay ranges?

· What are the funding implications?