Effect given to the recommendations of the committee and the Governing Body - Report No 338, November 2005

Case No 2253 (China - Hong Kong Special Administrative Region) - Complaint date: 10-MAR-03 - Closed

Effect given to the recommendations of the Committee and the Governing Body

1. 60. The Committee last examined this case, which concerns allegations that by enacting the Public Officers Pay Adjustment Ordinance in 2002, the Government unilaterally reduced civil service pay without proper negotiations with civil service unions and refused to settle the dispute over pay adjustment through continued dialogue or through a committee of inquiry, as provided in the 1968 Agreement between the Government and the main staff associations, at its November 2004 meeting and formulated the following recommendations [see 334th Report, approved by the Governing Body at its 290th Session, para. 320]:
   • (a) The Committee requests the Government to engage in consultations with the staff sides of the central consultative councils without delay with a view to taking the appropriate legislative measures so as to establish a collective bargaining mechanism allowing public employees who are not engaged in the administration of the State to negotiate collectively their terms and conditions of employment in accordance with Article 4 of Convention No. 98, applicable in the territory of China/Hong Kong Special Administrative Region without modifications. The Committee requests to be kept informed of developments in this respect.
   • (b) The Committee expects that the staff sides of the central consultative councils will be allowed in the future to engage in full and frank consultations with the Government over the terms and conditions of employment of public employees who are engaged in the administration of the State in accordance with Article 7 of Convention No. 151, applicable in the territory of China/Hong Kong Special Administrative Region without modifications.
   • (c) The Committee expects that the authorities will accept in the future the appointment of the committee of inquiry provided in the 1968 Agreement between the Government and the main staff associations in case of dispute over the determination of the terms and conditions of employment of public employees.
   • (d) In light of the recurrent and serious issues involved in recent cases concerning China/Hong Kong Special Administrative Region, the Committee suggests that the Government avail itself of the technical assistance of the Office so as to bring its law and practice into full conformity with freedom of association standards and principles.
2. 61. In a communication dated 13 June 2005, the Government made some observations in the first place, with regard to the comments made by the Committee in its 334th Report, paragraph 320, to the effect that “the consultations which took place during the 2002 civil service pay adjustment exercise seemed to be perfunctory” and the comments made in the 334th Report, paragraph 318, to the effect that “by not bringing this dispute before the committee of inquiry in accordance with the 1968 Agreement, the Government avoided the procedure in place for the settlement of disputes, putting a unilateral end to it, in violation of Article 8 of Convention No. 151 and Article 4 of Convention No. 98”. The Government stressed that, in the 2002 pay adjustment exercise, it had spared no effort in consulting the staff sides fully and frankly so as to settle the dispute in the most effective and equitable manner, taking into careful consideration the arrangements under the 1968 Agreement and striking a proper balance between the interests of civil servants and those of society at large.
3. 62. With regard to the staff consultation arrangements for the 2002 civil service pay adjustment exercise [334th Report, para. 314], the Government indicated that the annual civil service pay adjustment mechanism, adopted since the 1970s, functioned on the basis of an inevitably tight timetable given the need to: (i) take account of the latest pay trend data in the private sector up to 1 April of the adjustment year, which were available to the Pay Trend Survey Committee for validation only in early May of the adjustment year; and (ii) seek the necessary funding/legislative approval from the Legislative Council before its summer recess, commencing in mid-July of the adjustment year so that the pay adjustment could be implemented in a timely manner. Accordingly, it was the normal practice of the Government to make a decision on the annual civil service pay adjustment, after considering the staff sides’ pay claims and their comments on the Government’s pay offer, by around end-May to early June every year in order to allow time for the Legislative Council to consider the Government’s proposal. In respect of the 2002 civil service pay adjustment exercise, after considering the pay claims from the staff sides, the Government made a pay offer to the staff sides on 22 May 2002. It then took a decision on the 2002 pay adjustment on 28 May 2002, after taking account of the comments of the staff sides on the pay offer and other relevant factors.
4. 63. There were ample opportunities for the staff representatives to participate in the 2002 civil service pay adjustment exercise and to put forward their views which were given very careful consideration by the Government of the HKSAR in deciding on the pay reduction effective from 1 October 2002 and taken into account by the Legislative Council in approving the legislation that gave effect to the pay reduction. In particular: (i) the staff sides of the four central consultative councils participated in the 2002 civil service pay adjustment exercise from September 2001 (i.e. the year preceding the adjustment year) when the Pay Trend Survey Committee (PTSC) proceeded to review the methodology and the survey field of the Pay Trend Survey to be adopted for that pay adjustment exercise. After the PTSC had finalized the methodology and the survey field of the Pay Trend Survey in December 2002, it commissioned the Pay Survey and Research Unit (PSRU), which was established under the Standing Commission on Civil Service Salaries and Conditions of Service, to carry out the survey field work. Following the submission of the survey findings by the PSRU to the PTSC on 6 May 2002, the latter discussed and validated the findings on 13 May 2002; (ii) to enable the staff sides to take account of the net pay trend indicators in making their pay claims to the Government, the Government of the HKSAR normally invites the staff sides in end-April to early May of the adjustment year to submit their pay claims by mid-May, by which time the Pay Trend Survey results will have been validated by the PTSC. In the 2002 civil service pay adjustment exercise, the Government followed the usual procedures by inviting the staff sides on 29 April 2002 to submit their pay claims by 15 May 2002; (iii) the annual civil service pay adjustment is not a matter to be determined solely between the Government of the HKSAR as the employer and the staff sides of the central consultative councils as the employee representatives. As pointed out above, necessary funding/legislative approval has to be sought from the Legislative Council. It is also noteworthy that the participation of the staff sides in the 2002 pay adjustment exercise did not end with the Government’s decision on the pay adjustment – they continued to be involved in the deliberations of the Legislative Council on the proposal concerning the 2002 civil service pay adjustment until the Legislative Council passed the Public Officers Pay Adjustment Bill on 11 July 2002. In this connection, before the Government of the HKSAR made a decision on the 2002 civil service pay adjustment, the Legislative Council Panel on Public Service discussed the matter and invited the staff sides of the four central consultative councils as well as the four major service-wide staff unions to present their views before the Panel on 23 May 2002 (i.e. the day after the Government had made the pay offer to the staff sides); (iv) after the Government had introduced the Public Officers Pay Adjustment Bill into the Legislative Council, the Bills Committee established under the Legislative Council to scrutinize the Bill also invited the staff sides of the four central consultative councils and the four major service-wide staff unions to attend a meeting held on 18 June 2002 to make representation. The staff representatives’ views and comments were thus fully reflected to the Legislative Council which, in turn, had examined them and taken them fully into account before passing the Bill on 11 July 2002.
5. 64. The Government added that, under the established civil service pay adjustment mechanism, in reaching the decision of the 2002 civil service pay adjustment, the Government of the HKSAR had taken full account of six factors, namely, the net pay trend indicators derived from the private sector Pay Trend Survey, the state of the economy, budgetary considerations, changes in the cost of living, the staff sides’ pay claims and the civil service morale. All factors other than the staff sides’ pay claim and civil service morale pointed clearly to the direction of a civil service pay reduction. Having considered all the relevant factors, including the pay claims from the staff sides for a pay freeze, the Government had eventually decided on a fairly moderate pay reduction for 2002 ranging from 1.58 per cent to 4.42 per cent, depending on the salary bands, in line with the net pay trend indicators. Whilst recognizing the staff sides’ interests and the importance of staff morale, the Government found it difficult to accede to the staff sides’ suggestion at the expense of public interests. The proposed moderate pay reduction was supported by a majority of the Members of the Legislative Council, which passed the Public Officers Pay Adjustment Bill on 11 July 2002 to implement the pay reduction. It is noteworthy that, during the resumption of the Second Reading Debate on the Bill, some Members of the Legislative Council criticized the proposed magnitude of pay reduction as too moderate because, in their view, civil service pay level was already substantially higher than that in the private sector.
6. 65. The Government of the HKSAR was duty bound to implement the annual civil service pay adjustment, irrespective of whether it was an increase or a reduction, in a timely manner. For the 2002 civil service pay adjustment exercise, in view of the negative net pay trend indicators derived from the Pay Trend Survey, it was incumbent upon the Government of the HKSAR to make early preparation for the necessary legislative work in case a final decision was made to implement a pay reduction. Accordingly, the Government of the HKSAR sought the urgent preparation of a draft bill (without specifying any pay adjustment percentages) and the agreement in principle of the Chief Executive in Council on 22 May 2002 (i.e. the date when the Chief Executive in Council considered the pay offer to be made to the staff sides). Following the Executive Council’s agreement, the Government informed the staff sides of the pay offer of a pay reduction and sent them a copy of the draft bill for comment. The preparation of the draft bill served two purposes. First, it gave the staff sides a clear idea of how the pay reduction as offered would be implemented. Second, it provided a basis for consultation with the staff sides on the precise means to implement a pay reduction, if so decided, before the legislative proposal was put forward to the Legislative Council for consideration. As the draft bill presented to the staff sides did not contain any pay reduction percentages, which remained a subject for consultation with the staff sides, there was no question that the preparation of the draft bill had in any way pre-empted the discussion between the Government and the staff sides on the pay adjustment for 2002.
7. 66. With regard to the issue of the committee of inquiry [334th Report of the Committee on Freedom of Association, para. 318], the Government indicated in respect of the annual civil service pay adjustment, it was a matter of settled policy that the established pay adjustment mechanism (see paragraphs 5-9 of the Representation) should be followed in determining the size of each year’s civil service pay adjustment. For the 2002 civil service pay adjustment exercise, that adjustment mechanism had been followed in an entirely consistent manner. Hence, in accordance with the 1968 Agreement setting out the procedures and criteria for appointing a committee of inquiry, the Chief Executive of the HKSAR concluded that the 2002 civil service pay adjustment was a mater of settled policy and accordingly decided not to appoint a committee of inquiry. The Government of the HKSAR had acted in full compliance with the relevant provisions of the 1968 Agreement and had not avoided the procedures in place so as to end the dispute unilaterally.
8. 67. Procedural consideration apart, the Government did not consider it appropriate to bring the issue before the committee of inquiry. The primary reason underlying the staff sides’ request for appointing a committee of inquiry was that a pay reduction implemented by legislation was unprecedented and concern was raised as to whether such an approach was lawful. In this connection, the Government of the HKSAR pointed out that the decision to implement the 2002 civil service pay adjustment by way of legislation was to ensure smooth implementation of a settled policy. Whether the decision could have been implemented without legislation or whether the proposed legislation was constitutional were questions of law which a committee of inquiry would not be able to resolve.
9. 68. In deciding on the 2002 civil service pay adjustment, the Government of the HKSAR had followed the prevailing annual pay adjustment mechanism, which had functioned effectively for some 30 years and provided for voluntary negotiation between the Government of the HKSAR and the staff sides. The staff consultation procedures built into the civil service pay adjustment mechanism were measures appropriate to the conditions of the HKSAR adopted by the Government of the HKSAR, in compliance with Articles 7 and 8 of Convention No. 151, to promote the utilization of machinery for negotiation of the annual civil service pay adjustment between the Government and the staff sides. The mere fact that an agreement could not be reached between the Government and the staff sides over the 2002 civil service pay adjustment after this thorough consultation process should not be taken to mean that the staff consultative mechanism was not in compliance with Articles 7 and 8. Indeed, given the need for the Government of the HKSAR to be accountable for public expenditure and to take account of the overall interests of the community as a whole in dealing with civil service pay, as well as the fact that any adjustments to the civil service pay scales were subject to necessary funding/legislative scrutiny and approval by the Legislative Council, it could not be taken for granted that any agreement reached between the Government and staff representatives on the annual civil service pay adjustment must be implemented without any modification.
10. 69. With regard to recommendation (a) above concerning the establishment of a collective bargaining mechanism for those public employees who are not engaged in the administration of the State, the Government indicated that, in line with its general policy to take measures appropriate to local conditions to encourage and promote negotiations between employers and employees or their respective organizations on a voluntary basis, the Government of the HKSAR had established within the civil service an elaborate staff consultative machinery which encouraged effective communication between management and staff on matters concerning the terms and conditions of employment and allowed participation of staff representatives in the determination of such matters (including making demands for and putting forward counter proposals in response to the offers made by the Government of the HKSAR). This staff consultative machinery in the civil service, which allowed for staff participation in the determination of their terms and conditions of employment effectively, provided for voluntary negotiation of terms and conditions of service. It was complemented be independent arbitration by a committee of inquiry which may be set up under certain conditions prescribed in the 1968 Agreement to consider matters on which agreement could not be reached between the Government of the HKSAR and the staff sides.
11. 70. Although there was no legislation providing for collective bargaining in the civil service, nor was such a legislative approach appropriate to the local conditions of the HKSAR, the staff consultative machinery in the civil service of the HKSAR was consistent with many of the principles underlying collective bargaining (e.g. the voluntary nature of negotiation, the principle of good faith and the objective of regulating the terms and conditions of employment by means of agreement). In accordance with the 1968 Agreement signed between the Government of the HKSAR and three main staff associations, the Government of the HKSAR undertook to discuss with the staff sides, in a spirit of good will, any matters concerning the conditions of service which affected a substantial part of the civil service as a whole, or of the members of one or more of these staff associations. The Government of the HKSAR also undertook not to make any considerable change in conditions of service of civil servants without prior consultation with the staff sides. This undertaking was consistent with the principle of good faith laid down by the Committee on Freedom of Association. Both the Government of the HKSAR and the staff sides sought to reach agreement if possible through such consultation, and undertook to be bound by any agreement reached. In the event that agreement could not be reached after full staff consultation and after exhausting other existing administrative channels, the matter might be referred to an independent committee of inquiry, subject to conditions laid down in the Agreement. The recommendations of the committee of inquiry were binding on both the official side and the staff side provided that certain conditions were met. Reinforcing the staff consultative machinery were various independent bodies which provided impartial advice to the Government of the HKSAR on matters concerning the pay and conditions of employment for the civil service. In general, these bodies took into account the views expressed by staff and management before tendering their advice to the Government of the HKSAR.
12. 71. Given the particular context of the HKSAR, the terms and conditions of employment of the civil service could not be determined solely by the executive arm of the Government of the HKSAR and the staff sides. Specifically, the executive arm of the Government of the HKSAR formulated policy proposals on matters concerning the terms and conditions of employment of the civil service, after consulting the staff sides, for consideration and decision by the Chief Executive in Council. The policy decisions of the Chief Executive in Council were subject to the scrutiny of the Legislative Council, which was vested with the powers and functions, among others, to make laws to implement the policy decisions, where necessary, and to approve public expenditure. In scrutinizing the proposals from the executive arm of the Government of the HKSAR, Members of the Legislative Council offered their independent advice on the matters under deliberation and might, where necessary and appropriate, invite the staff sides of the central consultative councils and other staff representatives to make representations to them directly, as was the case for the 2002 civil service pay adjustment exercise. The views of the staff sides were fully reflected and carefully considered by the Legislative Council before the latter passed the legislation to implement the pay reduction decision.
13. 72. The Government added that, over the past 30 years or so, the established annual civil service pay adjustment mechanism had effectively engaged staff in discussing and determining the civil service pay adjustments, as reflected by the fact that staff were generally in agreement with such pay adjustments until the 2002 civil service pay adjustment exercise which is the subject of the present submission. In the light of the experience of the 2002 civil service pay adjustment exercise, the Government of the HKSAR had sought to further enhance the procedures for staff consultation in taking forward the 2003 civil service pay adjustment process. Well ahead of the usual timetable for staff consultation on the annual civil service pay adjustment the Government of the HKSAR had engaged the staff sides of the central consultative councils and the four major service-wide staff unions in discussions on the 2003 civil service pay adjustment since August 2002 through a dedicated working group. The discussions in the working group culminated in a consensus over the pay adjustments for the 2003 civil service pay adjustment exercise. The Government of the HKSAR was also working closely with staff on the development of an improved civil service pay adjustment mechanism to underpin the established policy of maintaining civil service pay at a level broadly comparable to that of the private sector. To this end, in April 2003, the Government of the HKSAR set up a consultative group on which the staff sides of the four central consultative councils and the four major service-wide staff unions were represented as a regular forum for intensive discussions between the management and staff representatives on a broad range of issues related to the exercise. Since its establishment, the consultative group had held 22 meetings/discussion sessions and would continue its deliberations until the improved mechanism was drawn up.
14. 73. It has been the understanding of the Government of the HKSAR that Article 4 of Convention No. 98 does not place an obligation on any ratified countries/territories to establish a collective bargaining mechanism or to adopt legislative measures for the purpose of establishing such a mechanism. The mechanism for determining the terms and conditions of employment of the civil service in the HKSAR, which comprised voluntary negotiation through an elaborate staff consultative machinery, impartial advice by independent bodies to the Government and the Legislative Council’s scrutiny of proposals from the executive arm of the Government, had been adopted in the light of the HKSAR’s particular circumstances. This well-tried and long-established mechanism operated in compliance with the spirit and principles of Article 4 of Convention No. 98.
15. 74. With regard to recommendation (b) above, the Government indicated that there was already in existence within the civil service of the HKSAR an elaborate three-level staff consultation mechanism which operated in compliance with the spirit and principles of Article 4 of Convention No. 98 and Article 7 of Convention No. 151 for consultation between management and staff on various issues of concern to civil servants. These issues included the terms and conditions of employment of public employees, regardless of whether they were engaged in the administration of the State. The Government of the HKSAR would build on the established staff consultation machinery and put in place customized procedures or forums to engage staff representatives in more intensive consultation on the terms and conditions of employment of civil servants.
16. 75. With regard to recommendation (c) above, the Government indicated that it would continue to observe the 1968 Agreement and, in the event of a dispute over the determination of terms and conditions of employment of civil servants in the future, consider appointing a committee of inquiry, where appropriate and necessary, in accordance with the relevant provisions of the 1968 Agreement.
17. 76. With regard to recommendation (d) above, the Government of the HKSAR assured the Committee on Freedom of Association that the HKSAR was fully committed to complying with freedom of association standards and principles and would continue its efforts in this respect. The Government of the HKSAR was appreciative of the offer of the International Labour Office’s technical assistance and would consider seeking such assistance as and when necessary.
18. 77. In conclusion the Government of the HKSAR had put in place effective measures appropriate to the conditions of the civil service in Hong Kong in compliance with the relevant Articles of the international labour Conventions that were applicable to the HKSAR. The existing staff consultative machinery in the civil service, which allowed for staff participation in the determination of their terms and conditions of employment effectively provided for voluntary negotiation of the terms and conditions of employment between staff and the management. The Government of the HKSAR would continue to monitor closely the operation of the staff consultative machinery within the civil service in the HKSAR and make improvements where necessary and appropriate to enhance the effectiveness of consultation with its staff on matters affecting their terms and conditions of employment.
19. 78. Finally, the Government indicated that a number of applications for judicial review of the Public Officers Pay Adjustment Ordinance which were dismissed by the Court of First Instance in June 2003 were subsequently appealed and the appeals would be heard before the Court of Final Appeal in June 2005. An update would be provided after the conclusion of the relevant judicial review proceedings.
20. 79. The Committee takes note of this information. The Committee recalls that it had requested the Government to keep it informed of developments only with regard to point (a) above, on the establishment of a collective bargaining mechanism allowing public employees who are not engaged in the administration of the State to negotiate collectively their terms and conditions of employment in accordance with Article 4 of Convention No. 98.
21. 80. Nevertheless, the Committee takes due note of the information provided by the Government on improvements in the mechanism for the determination of civil service pay, in particular, the fact that the 2003 civil service pay adjustment exercise commenced well ahead of the usual timetable for staff consultation and culminated in a consensus over the pay adjustments. The Committee also takes note of the establishment of a consultative group, with the participation of the staff sides of the four central consultative councils and the four major service-wide staff unions, as a regular forum for intensive discussions with a view to developing an improved civil service pay adjustment mechanism. Finally, the Committee notes that the Government is planning to build on the established staff consultation machinery and put in place customized procedures or forums to engage staff representatives in more intensive consultation on the terms and conditions of employment of civil servants.
22. 81. With regard to the right to collective bargaining of public employees who are not engaged in the administration of the State, the Committee notes that according to the Government, an elaborate three-level mechanism is already in existence for consultation between management and staff on various issues including terms and conditions of employment of public employees, regardless of whether they are engaged in the administration of the State. The mechanism comprises voluntary negotiation through elaborate staff consultative machinery, impartial advice by independent bodies and the Legislative Council’s scrutiny of proposals. It has been adopted according to the Government, in light of HKSAR’s particular circumstances and operates in compliance with the spirit and principles of Article 4 of Convention No. 98, which does not place an obligation on governments to establish a collective bargaining mechanism or adopt legislative measures for the purpose of establishing such a mechanism.
23. 82. The Committee wishes to underscore that although nothing in Article 4 of Convention No. 98 places a duty on the Government to enforce collective bargaining by compulsory means with a given organization, as such an intervention would clearly alter the voluntary nature of collective bargaining, this does not mean that governments should abstain from any measure whatsoever aiming to establish a collective bargaining mechanism. On the contrary, the Committee has previously recalled that measures should be taken to encourage and promote the full development and utilization of machinery for voluntary negotiation between employers or employers’ organizations and workers’ organizations, with a view to the regulation of terms and conditions of employment by means of collective agreements [Digest of decisions and principles of the Freedom of Association Committee, 4th edition, 1996, para. 781]. This is required by Article 4 of Convention No. 98, which is applicable in the territory of China/Hong Kong Special Administrative Region without modifications.
24. 83. The Committee also recalls from the previous examination of this case the complainant’s suggestion that measures to promote collective bargaining could include objective procedures for determining the representative status of civil service unions taking into account that in Case No. 1942 the Committee had requested the Government to give serious consideration to the adoption of legislative provisions laying down objective procedures for determining the representative status of trade unions for collective bargaining purposes which respect freedom of association principles [334th Report, para. 312].
25. 84. With regard to public servants in particular, the Committee recalls that a distinction must be drawn between, on the one hand, public servants who by their functions are directly engaged in the administration of the State (that is, civil servants employed in government ministries and other comparable bodies), as well as officials acting as supporting elements in these activities and, on the other hand, persons employed by the Government, by public undertakings or by autonomous public institutions. Only the former category can be excluded from the scope of Convention No. 98. Consequently, all public service workers other than those engaged in the administration of the State should enjoy collective bargaining rights, and priority should be given to collective bargaining as the means to settle disputes arising in connection with the determination of terms and conditions of employment in the public service [Digest, op. cit., paras. 793 and 794]. Legislation should therefore contain specific provisions clearly and explicitly recognizing the right of organizations of public employees and officials who are not acting in the capacity of agents of the state administration to conclude collective agreements.
26. 85. The Committee once again requests the Government to examine, possibly within the framework of the recently established consultative group with the participation of the staff sides of the four central consultative councils and the four major service-wide staff unions, the possibility of establishing a collective bargaining mechanism allowing public employees who are not engaged in the administration of the State to negotiate collectively their terms and conditions of employment in accordance with Article 4 of Convention No. 98, applicable in the territory of China/Hong Kong Special Administrative Region without modifications.
27. 86. The Committee takes note of the Government’s statement that it will consider seeking technical assistance from the Office as and when necessary and reiterates that such assistance is at the Government’s disposal if it so wishes.