LegCo Subcommittee on MPF System

Information Note

Industry Schemes - Follow-up Issues

Purpose

The paper responds to questions raised by Members at the LegCo Subcommittee meeting on 31 January 1997 regarding the establishment of Industry Schemes, including :

  1. employment relationship of substitute workers in the catering industry (paragraphs 2 to 4);
  2. number of employees in the catering industry presently covered by retirement schemes (paragraphs 5 to 6);
  3. feasibility of establishing Industry Schemes for other industries and time frame for review (paragraphs 7 to 16); and
  4. functions of the Management Committee for the Industry Schemes (paragraphs 17 to 20).

Employment Relationship

2. Members referred to the trade practice in the catering industry under which "substitute workers" were sometimes hired by the employees themselves as their leave relief. Members have asked whether such substitute workers could be considered as employees for the purpose of participation in the Industry Schemes.

3. We have consulted the Labour Department on the question. Under the Employment Ordinance, a contract of employment is defined as "any agreement, whether in writing or oral, express or implied, whereby one person agrees to employ another and that other agrees to serve his employer as an employee and also a contract of apprenticeship." There is no definite test in deciding categorically whether such substitute workers are employees or otherwise. It depends on the terms and conditions stated in the employment contract of the employee who takes leave, the actual arrangement agreed between this employee and his employer, and the manner in which the substitute worker carries out his duties.

4. Where there is ambiguity in the employment relationship in future, the Labour Department and the MPFA will follow the existing practice in liaising with the concerned parties and consider a totality of factors to see if there is likely to be a contract of service. However, we do not foresee that this will give rise to serious implementation problems. During consultation with unions, union representatives were also aware of a small group of workers who work constantly as substitute workers or temporary workers. However, they expressed that the number of such employees was very small and they were more concerned about the large number of part-time employees in the catering industry.

ORSO Coverage in the Catering Industry

5. Members have asked the number of employees in the catering industry presently covered by retirement schemes. There are technical difficulties in compiling very detailed information through the records of Registrar of Occupational Retirement Schemes. However, we are able to gain some broad figures from a recent survey conducted by the Census and Statistics Department on "Service-based Payments Made by Employers". The results of the survey show that 15.4% of the employees within the catering industry are covered by retirement schemes, which is lower than the average number of employees covered by existing ORSO schemes (28%).

6. Analysed by the number of establishments, the survey shows that about 6.6% of the catering establishments have set up voluntary retirement schemes. This indicates that the majority of employees already covered by existing retirement schemes are employed by the larger catering establishments, while many small establishments are not yet covered.

Coverage of Industry Schemes

7. Members have requested for more information on the need and feasibility of establishing Industry Schemes for other industries, as well as the proposed time-frame for reviewing the coverage of Industry Schemes.

8. As mentioned in the previous discussion paper Industry Schemes, our major considerations in the coverage of Industry Schemes are :

  1. Mobility : to establish such schemes for those industries in need most, i.e. industries with high labour mobility, in particular those with high intra-industry mobility (i.e. where workers change jobs within the same industry) instead of high inter-industry mobility (i.e. where workers change jobs between different industries). Setting up Industry Schemes for industries with high inter-industry mobility will not reduce incidents of portability as it is extremely difficult to attract most employers employing workers in these industries to join the same scheme.
  2. Feasibility : we need to consider whether the structures of the industries are suitable for the setting up of Industry Schemes. Also, due to difficulties in delineating a certain industry and confine the eligibility criteria, we need to establish Industry Schemes for industries with some form of licensing/registration system in respective legislation or well-recognised institutions.

Need for Setting Up Industry Schemes

9. Based on the labour mobility survey conducted by the Census and Statistics Department, we find that Industry Schemes will best suit the needs of the construction and catering industries where the labour mobility rate is highest and is intra-industry in nature.

Rate of Mobility

10. Labour mobility survey shows that the construction and catering industries have the highest labour mobility among all industries. The other industries which have comparatively high labour mobility are (following the ranking) :

  1. Personal services : The "personal services" industry includes a variety of trades and professions, including repair, laundry, domestic and miscellaneous personal services like hairdressing and beauty services. Excluding persons engaged in domestic services, there is an estimated 78,000 employed persons in the "personal services" industry .
  2. Real estate : The real estate industry generally includes real estate development, property holding and resale, real estate brokerage, leasing and management, employing in total 55,000 employees. For the purpose of setting up Industry Schemes, our main focus of concern are the 17,000 individual real estate agents with generally higher labour mobility within the industry.
  3. Transport : The transport industry involves many sub-groups, including land passenger transport, land freight transport, water and air transport. For the purpose of setting up Industry Schemes, our major concerns are drivers in land passenger transport (59,600 drivers) and land freight transport (51,100 drivers) with relatively high labour mobility within the industry; and
  4. Retail : The retail industry involves the resale of new or used goods to the public through different channels (shops, department stores, mail-order houses, gasoline filling stations, retail motor vehicle dealers, consumer co-operative, street stalls, etc). Our main focus are an estimated 104,800 persons working as sales within the retail industry.

Pattern of Mobility

11. Further analysis of the survey results shows that intra-industry mobility is the highest in the construction industry and is also very common within the catering industry. In contrast, high inter-industry mobility is very common in the other services sector (including transport, storage and communication industry, financing, insurance, real estate and business services industry and the community, social and personal services industry) as well as the retail sector.

12. Analyzed by occupation, intra-occupation mobility was most common among craft and related workers, whereas service workers and shop sales workers in the retail industry and other related industries have the highest inter-industry mobility.

Feasibility of Different Industries

13. Besides the unsuitability of the rate and pattern of mobility, there are various practical difficulties in setting up Industry Schemes for these industries.

Structure of the Industry

14. The structures of the industries are not suitable for the setting up of Industry Schemes :

  1. Personal services and retail : despite the large number of employed persons engaged in the industries, these employed persons come from all sorts of distinct trades and professions. It is practically not possible to set up Industry Schemes whereby most of the employers in these industries will join the same Schemes;
  2. Real estate : despite the size of the whole industry, the majority of the employees are managers, professionals and customer service clerks with relatively more stable mobility pattern;
  3. Transport :
    1. there are a large number of self-employed persons in the industry. 31% (18,300) of the drivers in land passenger transport and 22% (11,300) of the drivers in land freight transport are self-employed persons. This is significantly higher compared to the catering industry and construction industry where less than 10% are self-employed persons; and
    2. there are a large number of employees in the land passenger transport (27,500) employed by the major public transport companies (motor buses, tramways and railways) who are very likely to have more stable mobility pattern and are covered by retirement schemes.

Eligibility Criteria

15. There are no suitable registration/licensing system in these industries for delineating the coverage of the industries and setting the eligibility criteria for the Industry Schemes.

  1. Personal services and retail : There is no specific registration/licensing system in these industries.
  2. Real estate : There is not yet a formal licensing system in place for estate agents. The Administration is for the moment proposing to set up a licensing system of estate agents in the Estate Agents Bill which will provide some clear criteria for coverage employed persons in this industry in future.
  3. Transport : The licensing system in the transport industry cannot achieve the purpose to clearly delineate the coverage of the industry. As driver licences are issued for the purpose of proving the qualifications of drivers, there are a huge number of licences where the licence holders may not necessarily be engaged in the industry (e.g. the number of light goods vehicle licence holders is 857,000).

Review Programme

16. As the rate and pattern of labour mobility and the mode of operation of various industries may change over time, it is necessary to review, on a periodical basis, the need to extend the scope of the Industry Schemes to cover other industries. To achieve this purpose, we propose that the MPFA should make standing arrangement with the Census & Statistics Department so as to obtain statistics on the employment situation and labour mobility situation of various industries annually. The MPFA should also consult major unions on an annual basis in respect of changes of mode of operation of specific industries.

Management Committee

17. Members have requested for more information on the functions of the Management Committee for the Industry Schemes.

18. Introduction of such an institutional arrangement is to recognize the on-going need to monitor the following aspects of the Industry Schemes in a structured way :

  1. in view of the unique compliance and enforcement problems of the high mobility industries in the Industry Schemes, it is necessary for the MPFA to maintain close liaison with the scheme trustees so as to help iron out any operational problem; and
  2. as the MPFA will be responsible for selecting the suitable trustees/schemes, through tender, in setting up the Industry Schemes, it is necessary for the MPFA to ensure that the scheme trustees comply with the tender conditions at all times.

19. The main function of the Management Committee is to examine :

  1. compliance of the scheme trustees of the Industry Schemes with the selection criteria at all times. The Scheme trustees will be selected on the basis of their business plans covering a number of major areas such as cost recovery rate, scheme features, investment strategy, investment options available to members, fee levels and fee adjustment mechanism;
  2. the effectiveness of the Industry Schemes to resolve the portability problems of the employees in the prescribed industries which have high intra-industry mobility;
  3. the effectiveness of the special features of the Industry Schemes to attract participation into the Schemes and to facilitate the prescribed industries to comply with the MPF obligations; and
  4. ways to improve the special features of the Industry Schemes.

20. We propose that the Chairman and members of the Management Committee should be appointed by the Financial Secretary. To avoid the Committee becoming unwieldy, its membership size should be less than 10, including representatives of the MPFA and the trustees of the Industry Schemes.

Mandatory Provident Fund Office
Financial Services Branch
28 April 1997

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