Dear Colleagues,

2005 Civil Service Pay Adjustment and Other Issues

Further to my letter of 3 December 2004, I am writing to confirm the Government's decision that the second phase pay adjustments specified in the Public Officers Pay Adjustments (2004/2005) Ordinance (Cap. 580) should continue to be implemented with effect from 1 January 2005.  In this letter, I shall also address two issues on which the Court of Appeal's recent decision in respect of the Public Officers Pay Adjustment Ordinance (Cap. 574) has a bearing, namely the review of fringe benefit type of civil service allowances and the ongoing exercise to develop an improved civil service pay adjustment mechanism.

Civil service pay adjustments

As you know, on 29 November 2004, the Court of Appeal, by a majority, declared section 10 of the Public Officers Pay Adjustment Ordinance (Cap. 574) to be unconstitutional.  On 10 December 2004, the Court of Appeal granted the Government leave to appeal to the Court of Final Appeal against that decision and the two applicants in the case before the Court of Appeal have consented to the implementation of the order being stayed pending the decision of the Court of Final Appeal.

The decision to implement the pay adjustments with effect from 1 January 2005 is without prejudice to the decision of the Court of Final Appeal in relation to the Public Officers Pay Adjustment Ordinance (Cap. 574) and to the final disposal of the separate proceedings in relation to the Public Officers Pay Adjustments (2004/2005) Ordinance (Cap. 580).  In the event that the Court of Final Appeal declares one or both Ordinances to be unconstitutional insofar as any public officer or class of public officer is concerned, then, subject to necessary funding approval, any arrears of pay due at the date of that judgment will be paid to each officer concerned.

Review on fringe benefit type of civil service allowances

The Civil Service Bureau (CSB) has undertaken a comprehensive review of all fringe benefit type of civil service allowances in two phases.  In June this year, we issued a note setting out our change proposals under the phase one review concerning certain passage and related allowances as well as housing-related allowances and benefits for staff consultation.  The intention was to deal with those change proposals that would likely have a more extensive impact within the civil service (e.g. change proposals concerning education allowances and housing allowances) under the phase two review.

Taking account of the consultation feedback and our policy objectives for the allowance review, we have refined the proposed change measures under phase one of the review.  In parallel, we have examined the possible scope for change in respect of the remaining allowances covered by the phase two review.  We have planned to present the full set of change proposals arising from the allowance review for staff consultation within this year before making a decision on the proposed measures for implementation.

Although neither of the Pay Adjustment Ordinances relates directly to the allowance review, we consider it prudent to await the outcome of the appeal to the Court of Final Appeal before we further consult staff on the proposed change measures arising from the allowance review.

Improved civil service pay adjustment mechanism

In the light of the latest developments, we have also reviewed the way forward for our ongoing exercise to develop an improved civil service pay adjustment mechanism.

In November this year, we issued a consultation paper setting out the consultant's recommendations on the methodology of the pay level survey as well as CSB's proposal on the general approach for the application of the survey results.  The consultation period will end on 7 January 2005.

According to our published work plan, subject to a decision on the methodology of the pay level survey following the consultation period, we aim to embark on the survey field work in the first quarter of 2005.  The pay level survey seeks to ascertain the updated levels of private sector pay, on the basis of which an assessment will be made on whether civil service pay is broadly comparable to private sector pay.  This is essentially a technical, fact-finding process.  We shall press ahead with the proposed survey field work in accordance with our work plan.  As regards the application of the survey results, this would need to, where applicable, take account of the outcome of the proceedings in the Court of Final Appeal.  In the meantime, we do not have any new proposals regarding the application issue apart from those set out in the consultation paper.

Yours sincerely,

(Joseph W P Wong)
Secretary for the Civil Service