• The state of Hong Kong's economy;

• Changes in the cost of living;

• The government's fiscal position;

• The pay claims of the staff sides; and,

• Civil service morale.

That this year's pay offers are not the same as the net PTIs does not mean that we have "deviated" from the existing mechanism. Exco has to take into account the other five factors.

Otherwise, Exco can simply follow the net PTIs mechanically without deliberation.

The net PTIs derived from the 2015 pay trend survey, which is not deficient, as claimed by some, are indeed one important factor as they objectively reflect the change in market pay. This is why pay adjustment rates were mostly the same as the respective net PTIs.

Yet there were six special occasions on which the pay adjustment did not follow the net PTIs. Each year's pay adjustment decision is an independent one subject to the prevailing circumstances of the year.

For the "0.5 per cent addition" this year, Exco has considered the change in cost of living after noting all the relevant inflation figures, including the headline Composite Consumer Price Index in 2014-15 (4.5 per cent), which reflects the impact of consumer price changes on some 90 per cent of households in Hong Kong and the government's one-off relief measures, and noted that net PTIs of all three salary bands are lower than the headline Composite Consumer Price Index in 2014-15, which is rare.

Exco attaches great importance to staff morale, although it is not feasible to quantify its value, and has noted civil service organisations' concerns about the impact of recent work challenges on staff morale.

Indeed, the pay offers with the "0.5 per cent addition" are still broadly in line with the change in market pay, according to the results of other recent pay trend surveys. We have explained clearly to the staff that the 2015-16 pay offers are a one-off decision upon special consideration of this year's specific circumstances.