Pay studies raise more questions than answers

PUBLISHED : Sunday, 06 May, 2007, 12:00am
UPDATED : Sunday, 06 May, 2007, 12:00am

The government's first full-scale review of civil service pay in 20 years has raised a discussion over the differences between it and one done for the Hong Kong General Chamber of Commerce four years ago.

The Civil Service Bureau says the main reasons for the disparity are that the raw data reflect differences in the region's economy, labour market and civil service pay in 2006 compared with 2002.

The Chamber of Commerce's chief economist says the findings of the Pay Level Survey make no sense.

The government uses the review as one tool to ensure that civil servants' pay structure is roughly comparable to that in the private sector. Once the findings of the PLS were released on April 24, the Executive Council ruled that the gap between the pay of civil servants and private sector employees was too small to warrant cutting civil service salaries.

The 2002 survey, the findings of which were released the following year, was conducted by Watson Wyatt International, the parent company of Watson Wyatt Hong Kong, for the HKGCoC. The PLS involved two consultants, Watson Wyatt Hong Kong and Hay Group, and extensive consultations with civil service unions and pay review advisory bodies.

So how can two surveys that involved the same consultancy come up with such vastly different results; and can the public trust the findings of the PLS?

This latest PLS found the pay of Hong Kong's 155,000 civil servants to be broadly in line with private sector pay - with no group of officers paid in excess of 5 per cent less or more than their private sector counterparts.

Indeed, civil servants may yet receive a pay rise this year, depending on the results - due within two months - of the Pay Trends Survey, which assesses private sector pay trends since April 1 last year.

The government's survey found that civil servants' pay ranged from HK$11,587 per month for the lowest ranks to HK$87,446 for the highest non-directorate ranks. Directorate grades were not included due to 'a lack of private sector comparators'.

The lowest ranks were paid 3 per cent more than their private sector counterparts, who received HK$11,250 per month, and the highest ranks received 5 per cent less than the HK$92,195 monthly salary paid in the private sector.

Across the whole workforce, average monthly income from main employment was HK$10,000 last year.

By comparison, the 2002 survey used a range of alternative measures of the difference between civil service and private sector pay. Looking just at the total cash earned by civil servants and their private sector counterparts, civil servants earned 17 per cent more. If cash plus benefits, excluding housing and education, was the criterion, they earned 40 per cent more.

And if you looked at the whole remuneration package, including benefits in kind, mid-point civil service pay was a staggering 225 per cent ahead of upper-middle quartile pay for the private sector.

A key explanation proffered by the Civil Service Bureau for the difference in the surveys is that they were based on pay data from years in different economic times.

'In 2002, the local economy was severely impacted by the aftermath of the Asian financial crisis,' a spokeswoman said. 'But the economy had recovered on all fronts by 2006. Based on anecdotal reports, the overall pay level in the private sector in 2006 was higher than that in 2002.

'The reverse was the case for the civil service. As a result of a series of pay reductions in 2002, 2004 and 2005, non-directorate civil service pay fell about 7.5 per cent to about 10 per cent.'

Then there are the differences in methodology. The one used in the PLS was proposed by Hay Group, the consultant in the first phase, with extensive consultation with civil service unions and pay advisory bodies before the government accepted it.

Watson Wyatt was tasked with conducting a survey of private sector pay using the agreed methodology. Then the Civil Service Bureau used the methodology to apply Watson Wyatt's findings to civil service pay levels. The framework takes the total cash compensation received by civil servants and the upper quartile of private sector pay as the criterion for comparison. Civil servants' pay must be changed only if the difference exceeds 5 per cent.

Total cash compensation includes fringe benefits paid in cash, including education, housing and travel or 'passage' allowances, but not those paid in kind such as dental and medical benefits and leave. 'The 2006 Pay Level Survey was conducted in a fair, appropriate and independent manner,' the CSB spokeswoman said. 'We have full confidence in its results as it was conducted by the phase-two consultant based on the methodology by the phase-one consultant.'

A spokeswoman for Watson Wyatt said it could not comment on the two surveys because of client confidentiality issues.

Professor Anthony Cheung Ping-leung, of City University's department of public and social administration, who is chairman of the Pay Trend Survey committee, said: 'I think there are two reasons the results could be different. We are talking about different methodology and different data.

'When Watson Wyatt did the survey for the HKGCoC, I think they relied basically on in-house data, but for this pay level survey done by the government, they had to go to 100 larger firms and collect fresh data according to the methodology.

'I would argue that the methodology now being adopted is perhaps as far as we can go in achieving a broad comparability of private and public sector jobs.'

David O'Rear, chief economist with the Hong Kong General Chamber of Commerce, said that it was not possible to directly compare the two surveys, but some businessmen were still questioning the credibility of the PLS findings.

'They are as different as apples and oranges,' he said. 'We used published data. But this study has gone and looked at exactly what is the median pay per person for every single type of job. Another difference is that we looked at pay and benefits whereas they are looking at pay plus benefits that are paid in cash.

'However, it stretches my imagination to come to a study like this, which hasn't been done for 20 years, and to find that there is absolutely nobody anywhere in the entire civil service who is more than 5 per cent off the same private sector job. It just doesn't quite sound right.'

Lau Kam-iu, vice-chairman of the Federation of Civil Service Unions, said it was fair to exclude non-cash benefits in the survey because it was impossible to establish the exact level of such benefits given by private companies. The federation had accepted the whole report even though top-level civil servants had been 'a little bit reluctant' because it meant they would forgo a pay increase this year.

Mr Lau said he'd like to see an across-the-board rise for civil servants of 'between 2 and 4 per cent this year, pending the results of the Pay Trend Survey'.