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Purpose
The Task Force established upon the Administration's invitation to review the civil service pay policy and system would like to solicit views from all quarters on the findings of a five-country study. Views are also invited on some related questions the Task Force is asking in its interim report published on 25 April 2002.
Background
2. On 4 January 2002, a Task Force comprising members drawn from the three advisory bodies on civil service pay and conditions of service (see note) was set up to conduct a comprehensive review of the pay policy and system for the civil service. The central issue involved is the extent to which Hong Kong's current civil service pay policy and system are still in keeping with today's circumstances.
3. The review is in two phases, with Phase One being an analytical study on recent developments and best practices in pay administration in other countries. The Task Force will consider whether any useful reference can be drawn from the analytical study to facilitate a more detailed review in the second phase.
4. The Task Force decided to appoint an outside consultant to provide input on civil service pay structure and reform in a few selected countries. PwC Consulting was appointed after a competitive tendering process to carry out an analytical study on the latest developments in civil service pay administration in Australia, Canada, New Zealand, Singapore and the United Kingdom. The study looked at features and issues which might be relevant to Hong Kong, having regard to the history and development of the civil service pay policy and system here.
5. In particular, the consultant was asked to cover the following areas in its study
(a) the pay policies, pay system and pay structure commonly adopted;
(b) the experience of replacing fixed pay scales with pay ranges;
(c) the pay adjustment system and mechanism;
(d) the experience of introducing performance-based rewards to better motivate staff; and
(e) the experience on simplification and decentralisation of pay administration.
The Consultant's Findings and Observations
6. PwC Consulting submitted its interim report to the Task Force in mid-April 2002.
7. At Appendix A is the consultant's findings and observations, summarised in a brief, tabular guide form for easy reference.
8. The Task Force would like to repeat here the consultant's concerns that in producing such a short summary, they inevitably had to make some very broad generalisations and simplifications of the detailed arrangements in each country. As such, it should be read with some caution. To avoid possible misunderstanding or misinterpretation, the consultant suggested that readers should look at the fuller details on each country, as set out in the country summaries annexed to their report (at http://www.info.gov.hk/jsscs ).
Development of the Hong Kong Civil Service Pay Policy
9. While the consultant was conducting its study, the Task Force revisited the development of the civil service pay policy and system in Hong Kong, in the light of the five areas mentioned above. The Task Force considered that this would provide them with a solid basis for comparison with the latest developments in the five countries which the consultant has been asked to look into.
10. A summary of the development of the Hong Kong civil service pay system over the last 50 or so years can be found in the Task Force's interim report. A brief version in the form of a chronological list is in Appendix B of this paper for easy reference.
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The Task Force's Observations
11. Having studied the consultant's interim findings, the Task Force noted that inevitably, differences and variations exist to cater for the needs of individual countries. Even the definition of 'civil service' varies from one country to another. Nonetheless, the consultant has been able to identify some common themes and lessons.
12. The Task Force noted in particular the consultant's observation that pay and grading reform cannot and should not be implemented in isolation from the broader civil service reform agenda. A long term view needs to be taken and gaining buy-in and commitment to change from key stakeholders is critical.
13. Similarly, it was also noted that a major investment of resources is necessary to build the capacity and commitment required to implement major pay reforms. Making significant changes to pay and grading arrangements, within the context of wider reform, inevitably involves pain as well as gain.
14. It is not possible to go into details regarding the consultant's findings and observations in this consultation paper. The community is invited to read the consultant's report in its original form as attached to the Task Force's own interim report (at http://www.info.gov.hk/jsscs ).
15. After going carefully through the consultant's findings, the Task Force has decided that at this point in time, it would like to maintain an open mind.
16. However, having seen the development in the five countries studied, there seems to be a case that while the present pay system, among other things, has provided Hong Kong with a stable, clean and efficient civil service, some serious thinking is needed to ensure that the pay system is appropriate under the current socio-economic circumstances in Hong Kong. It has to be a system that can meet changing expectations from all quarters as well as challenges in the future.
17. From what the Task Force could perceive, the community would like to see a thorough re-thinking of the basic principles of the existing pay system. Piecemeal review on specific areas may no longer suffice.
18. To prepare itself for the final report, the Task Force would like to seek views from all quarters on the following questions, grouped under the five specific areas of study.
19. On Pay Policies, Pay System and Pay Structure
(a) Should there be a major overhaul of the civil service pay policy and system, should more emphasis be put on performance-pay, clean wage policy (i.e. paying 'all cash' wages in lieu of allowances, housing and medical benefits, etc)?
(b) Should senior civil servants be subject to a pay policy which is different from that of the middle-ranking and junior ranks, placing more risk/award factors on the former?
(c) Should the disciplined services' pay be treated differently from the rest of the civil service?
(d) Should we continue to conduct regular pay level, pay structure and pay trend surveys to ensure that civil service pay remains comparable with that of the private sector?
(e) Or should Government's affordability to pay be an over-riding consideration in pay adjustments?
(f) What features of the existing pay policy and system should be retained to ensure stability and morale of the civil service?
20. On Replacing Fixed Pay Scales with Pay Ranges
(a) Would the introduction of flexible pay ranges bring benefits in terms of better rewarding performance and enhancing a performance-oriented culture in the Hong Kong context?
(b) Would flexibility in pay progression lead to potential divisiveness among civil servants?
(c) Should flexible pay ranges be applied to the entire civil service, or only to senior civil servants, who typically have heavier management responsibilities?
(d) Should flexible pay ranges apply both to civilian grades and the disciplined services?
(e) Would changes be required to the existing performance measurement and appraisal systems to support the introduction of flexible pay ranges?
(f) Would a performance management system directly linked to pay be the most effective way of nurturing a performance culture?
21. On Pay Adjustment System and Mechanism
(a) Should the principle of broad comparability with the private sector continue to be adhered to?
(b) Is the existing pay adjustment system still regarded as fair by both civil servants and the public which they serve? Would another mechanism serve this purpose just as well, or better?
(c) Is there a need for changing or introducing more flexibility in the existing adjustment mechanism?
(d) Should fiscal constraints be an over-riding factor in determining pay adjustments?
(e) Depending on whether, and to what extent, pay administration should be decentralised to departments, what would be the right balance for Hong Kong in terms of central control/guidance versus autonomy/flexibility for individual departments?
22. On Introducing Performance-based Rewards
(a) Do we see the merit for Hong Kong to incorporate elements of performance pay in civil service salaries?
(b) Apart from pay ranges which already have performance- related elements, do we need to consider other forms of performance-based rewards?
(c) Should team-based performance rewards be used and, if so, to which group (senior, middle, lower or all levels) should they apply and on what basis?
(d) Should individual performance rewards be introduced and, if so, to which group (senior, middle, lower or all levels) should they apply and on what basis?
(e) Some improvements to the staff appraisal system have been introduced in recent years. What further changes are needed to support the introduction of performance-related pay?
23. On Simplification and Decentralisation of Pay Administration
(a) Should consideration be given to introducing decentralisation of civil service pay administration for a city like Hong Kong?
(b) If decentralisation of civil service pay administration is to be introduced, how much pay and grading responsibility should be devolved to departments?
(c) Should some or all of the current general/common grades staff be departmentalised to facilitate department-based management?
(d) If civil service pay administration is to be decentralised, there may be a rather long transition period. How can the standard of service and staff morale be maintained during that period?
(e) In terms of simplification, is there scope to amalgamate existing grades within broader occupational categories? Is there scope for having flatter organisations with wider span of management control and fewer rank layers?
(f) Should a formal job evaluation system be introduced and, if so, should this be operated centrally or at department level?
24. The questions being asked above are extracted from the Task Force's interim report. It is not possible to repeat here all the relevant factors which gave rise to the questions being asked. The factors are depicted in the interim report and readers may wish to take them into consideration when responding to our questions.
25. Having considered all views expressed during the consultation period, the Task Force will produce its final report in July 2002. Thereafter, the three advisory bodies on civil service pay and conditions of service will make recommendations to the Administration in the second half of 2002 on the conduct of the second-phase review.
Public Consultation
26. We welcome views from all quarters of the community on the Task Force's interim report and on the questions raised in this consultation paper (paragraphs 19-23 above).
27. Please forward your views and comments to us on or before 25 May 2002 at
Joint Secretariat for the Advisory Bodies on
Civil Service and Judicial Salaries and Conditions of Service
Room 701, 7th Floor
Tower Two, Lippo Centre
89 Queensway
Hong Kong
Fax : 2877 0750
E-mail : jsscs@jsscs.gov.hk
Task Force on the Review of Civil
Service Pay Policy and System
April 2002
The three bodies are
(a) Standing Commission on Civil Service Salaries and Conditions of Service;
(b) Standing Committee on Disciplined Services Salaries and Conditions of Service; and
(c) Standing Committee on Directorate Salaries and Conditions of Service.