LegCo Paper No. CB(1)1332/96-97
(These minutes have been seen by the Administration)
Ref : CB1/HS/1/96/2

Subcommittee on Mandatory Provident Fund System

Minutes of Meeting
held on Friday, 31 January 1997, at 10:45 a.m.
in Conference Room A of the Legislative Council Building

Members present :

    Hon Ronald ARCULLI, OBE, JP (Chairman)
    Dr Hon LAW Cheung-kwok (Deputy Chairman)
    Hon CHAN Wing-chan
    Hon CHAN Yuen-han

Members absent :

    Hon James TIEN Pei-chun, OBE, JP
    Dr Hon HUANG Chen-ya, MBE
    Hon Christine LOH Kung-wai
    Hon Paul CHENG Ming-fun
    Hon SIN Chung-kai
    Hon LEE Cheuk-yan
    Hon LAW Chi-kwong
    Hon MOK Ying-fan
    Hon NGAN Kam-chuen

Public officers attending :

Mrs Pamela TAN
Director
Mandatory Provident Fund Office
Ms Maisie CHENG
Assistant Director
Scheme Operations
Ms Karen POON
Senior Manager
Contributions
Mr C K CHEUNG
Senior Manager
Special Features

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Ms Connie SZETO
Senior Assistant Secretary (1)5

I Confirmation of minutes of meeting and matters arising

(LegCo No. CB(1)660/96-97)

The minutes of the meeting held on 9 December 1996 were confirmed.

II Meeting with the Administration

Industry schemes

(LegCo No. CB(1)810/96-97(04))

Establishment of industry schemes

2. In reply to members’ enquiries on the proposed tendering arrangements for the establishment of industry schemes, the Assistant Director, Scheme Operations (AD/SO) provided the following information:

  1. the initial tenure of the successful bidder for the schemes would be ten years. The tenure was proposed with due regard to the need for a reasonable period of time for the trustee to recover operating costs and in order to obviate frequent changes in trusteeship which might disrupt operation of the schemes;
  2. the MPF Schemes Authority (MPFSA) would choose the most suitable bidder on the basis of their business plans which would detail inter-alia the cost recovery rate, investment strategy, investment options, fee levels and fee adjustment mechanism;
  3. the MPFSA would closely monitor the performance of the scheme trustee and review the situation towards the end of the tenure.

3. Addressing Miss CHAN Yuen-han’s concern about administrative costs of industry schemes, AD/SO explained that some of the costs might be offset by simpler procedures. For example, the trustee would not be required to recover default contributions and verify statements from employers. The cost structures of overseas industry schemes were not directly relevant to Hong Kong since in countries like Canada and Australia, the bulk of the administrative work of these schemes were taken up by trade unions. Nevertheless, at the request of the Chairman, the Administration would gather the necessary information and try to estimate the possible administrative cost of an industry scheme.

MPFO

Scope of the schemes and eligibility criteria

4. In reply to the Chairman, AD/SO clarified that it would not be compulsory for employers/self-employed persons of the prescribed industries to join the industry schemes as they were also at liberty to participate in the regular MPF schemes. An employer could also provide MPF coverage for certain employees but opt for an industry scheme in respect of another class of employees.

5. Members raised serious concerns about the proposal to set up only one industry scheme to cover both the construction industry and the catering industry. Dr LAW Cheung-kwok remarked that it would not be in the interest of the 440,000 - strong employees of the two industries to be covered under one industry scheme as there would be no competition among service providers for the enhancement of quality in service. The Chairman also cautioned that replacement of trustees would be difficult in the event that the performance of the sole trustee was unsatisfactory. Pointing out that the transportation industry and the retail industry also had high labour mobility, Miss CHAN Yuen-han questioned the Administration’s grounds for excluding the two industries from the proposed scheme.

6. Responding to these concerns, AD/SO and the Director of MPF Office (D/MPFO) informed members that the MPFSA would be empowered under the subsidiary legislation to prescribe the industries for which industry schemes should be set up and to determine the suitable number of schemes to be set up for these industries. The main purpose of establishing industry schemes was to reduce costs by minimizing portability transactions. If a number of schemes were available for a particular industry, the employers might not join the same scheme and transfer of schemes would be required whenever an employee changed his job within the industry.

7. On the designated industries, AD/SO and D/MPFO explained that although there were over 200,000 employees in the construction industry, it was estimated that about one-third of them were currently covered by ORSO schemes and one-tenth were self-employed persons who might prefer to join regular MPF schemes. Given the uncertain clientele base and as participation would not be compulsory, there would be viability problems if several industry schemes were to operate at the initial stage. Moreover, the Administration considered it undesirable to prescribe too many industry schemes since they might draw business away from other MPF schemes. Hence, those employees who could not join industry schemes might be disadvantaged.

8. As regards the criteria for prescribing industries for the purpose of setting up an industry scheme, AD/SO advised that the Administration had studied the job mobility rates of selected industries and the feasibility of including them in an industry scheme. Based on the data provided by the Census and Statistics Department, the construction industry and the catering industry had the highest intra-industry labour mobility. Moreover, some form of licensing/registration system was in place in these two industries to facilitate delineation of membership to the scheme. On the other hand, the Administration had found that in the transportation industry, the majority of workers were employed by a few large public transport companies. AD/SO nevertheless stressed that the Administration would certainly review the scope of the industry schemes in future taking into consideration changes in the mode of operation and mobility pattern of other industries. On members’ request, the Administration would try to provide information on the scheme feasibility of other industries as well as the proposed time-frame for review and for extending such schemes to other industries.

MPFO

Special features of the industry schemes

9. Some members cautioned that an anomaly would arise whereby employees without the 60-day qualifying period of service would be covered by the industry scheme if their employers had joined such a scheme while employees with less than 60 days’ service but who were outside the prescribed industries or whose employers had only opted for MPF coverage would be deprived of any scheme coverage.

10. In response, D of MPFO stressed that it was in consideration of the special characteristics of certain industries that the 60-day eligibility criterion was waived for the industry scheme. The 60-day qualifying service would otherwise apply for MPF schemes as this had formed the basis of employer-employee relationship on which the MPFSO was founded.

11. Some members urged the Administration to take into account a growing trend in various trades/industries of engaging part-time or casual workers when formulating the way forward. In this connection, Mr CHAN Wing-chan referred to the trade practice in the catering industry under which substitute workers were sometimes hired by the employees themselves as their leave relief and asked whether such workers could be regarded as employees for the purpose of participation in an industry scheme. AD/SO agreed that this was a complicated issue and advice from the Labour Department would be sought on the status of these substitute workers.

MPFO

Role of the Management Committee

12. Members enquired about details of the proposed Management Committee to oversee industry schemes. They were particularly concerned about the capacity and authority of the government-appointed member and asked whether this member would be vested with decision making power on the operation of the scheme apart from playing a monitoring role. D/MPFO undertook to consider members’ views in drawing up the detailed proposal. In this connection, Miss CHAN Yuen-han also requested the Administration to provide information on the proposed functions and membership of the Committee.

MPFO

13. Addressing members’ concerns about employers evading their statutory duties of providing suitable scheme coverage for employees and the possibility of collusion between employers and employees in not joining a scheme, AD/SO explained the Administration’s proposed courses of action as follows:

  1. the MPF system would require mandatory participation and the penalty for non-compliance had already been stipulated in the principal Ordinance;
  2. a task force would be set up in the future MPFSA for enforcement of the MPFSO. Inspection would be made to employers on a regular basis or in response to complaint; and
  3. internal guidelines would be drawn up to facilitate the taking of appropriate enforcement actions such as the issue of warnings and prosecution.

Other concerns

14. Responding to Dr LAW Cheung-kwok’s view that the term "MPF cheques" referred to in the paper should be suitably revised to avoid confusion with cheques issued by banks, AD/SO advised that the term was used to facilitate easy understanding by members. A more appropriate term would be used in the subsidiary legislation.

15. On Mr CHAN Wing-chan’s enquiry on the number of employees in the catering trade who were presently covered by ORSO schemes, AD/SO undertook to see whether such information was available after the meeting.

MPFO

IV. Any other business

16. Members agreed that the discussion of "MPF contributions" would be deferred to the next meeting to be held on 12 February 1996. To facilitate discussion, members were requested to forward written questions on the information papers (LegCo No. CB(1)810/96-97 (01), (02) & (03)) for the Administration to respond.

(Post-meeting note : Members were invited to forward their questions vide LegCo Paper No. CB(1)803/96-97)

17. The meeting ended at 1:00 p.m.

Legislative Council Secretariat
18 April 1997

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