A proposed civil service pay rise of up to 7.26 per cent is “out of touch with reality” and approving it may cause a “ripple effect across the whole economy”, a leading business organisation in Hong Kong has said. The Hong Kong General Chamber of Commerce weighed in on the pay rise controversy on Thursday, saying the pay trend survey did not reflect the current economic climate and the private sector would find it hard to “match government salaries to retain staff”. “As Hong Kong businesses have had to endure strict restrictions and hardships to contain the fifth wave of the epidemic, many companies have basically not been able to do business and are still struggling to get back on their feet,” it said. “[The chamber] feels that with the economy being very fragile … to be discussing such a scale of pay increases at this time is out of touch with reality.” Unions endorse suggestion to raise civil servants’ pay by up to 7.26 per cent This year’s pay trend survey, which was released on May 18, recommended pay rises of 2.04 per cent for junior civil servants, 4.55 per cent for middle-ranking officers and 7.26 per cent for high earners. In the past, the government had also adopted a practice of increasing the salaries of lower-ranking civil servants to catch up with mid-level staff. If the move was implemented this year, junior government employees could be in line for a 4.55 per cent pay rise. But several top advisers to incumbent leader Carrie Lam Cheng Yuet-ngor had previously expressed shock over the proposed pay increment, amid the city’s dim economic outlook and the poor job market. Hong Kong’s jobless rate surged to 5.4 per cent for the three months ended April. And the city’s gross domestic products (GDP) shrank 4 per cent year on year in the first quarter under the combined effects of slower global demand, disruptions in cross-border trade and the Covid-19 pandemic. The government had also downgraded its full-year GDP forecast to between 1 per cent and 2 per cent for 2022 from the previous range of 2 per cent to 3.5 per cent. Despite the controversy, the government-appointed Pay Trend Survey Committee confirmed and endorsed the proposed salary increases. The committee’s chairman Lee Luen-fai had said the survey’s findings took into account changes in the salaries of about 130,000 employees from some 110 companies over the past year. He maintained that the proposal was “real, objective and accurately reflected the market situation.” Earlier on Thursday, two civil servants’ unions repeated their calls for the government to adopt the recommendations made by the established mechanism. Hong Kong Civil Servants General Union chairman Fung Chuen-chung said adopting the salary increases would help lift staff morale and also boost the economy. Lee Fong-chung, chairman of the Hong Kong Senior Government Officers Association, also asked authorities to follow the established practice. “Public perception is rather subjective. If the government does not follow the established mechanism, it will be a political decision. We have no control if there is political manipulation,” he said. The pay increment is currently awaiting final approval from the Executive Council, Lam’s de facto cabinet. But executive councillor Regina Ip Lau Suk-yee had said she personally objected to the extent of the pay rises, while the chamber’s representative in the legislature, Jeffrey Lam Kin-fung, also serves as a member of Exco. Top advisers to Hong Kong’s leader shocked by proposed pay rise for civil servants In the statement from the business group, it noted that Hong Kong had experienced “an outflow of talent, creating manpower shortages in many sectors”. It added that businesses, especially public bodies, NGOs and small and medium-sized enterprises (SMEs), would face strong pressure and find it hard to match government salaries. The chamber, which counts leading companies such as Swire, Jardines and HSBC among its roughly 4,000 members, asked the government to consider actual business conditions on the ground, as well as the potential ripple effect on local salaries across the board and the impact on SMEs. The Civil Service Bureau has said authorities would consider a series of factors alongside the survey’s findings when determining the proposal, including the state of the local economy, the government’s fiscal position, changes in the cost of living, pay claims made by the staff side and also morale. As a result of the Covid-19 pandemic, the salaries of about 180,000 government workers were frozen for the past two years.