Paper for the PLC
Panel on Public Service
Fringe Benefits of Staff in Subvented Organisations

Present Position and Policy

Government subvents the provision of social services by NGOs where this is justified on policy grounds. There are over 73 000 staff ¹ in non-Government organisations (NGO) receiving Government subventions to deliver a wide range of education, welfare and health services. Total Government recurrent expenditure on subventions in 1997-98, excluding the Hospital Authority, amounts to $32,937 million. While the current subvention system generally recognises for subvention purpose salaries to subvented staff similar or equivalent to their counterparts in the civil service, civil servants and staff in subvented organisations are remunerated on different sets of terms and conditions of employment.

2. It is Government's subvention policy that the terms and conditions of service of staff in subvented organisations should be no better than those provided by Government to comparable grades in the civil service. We do not have a policy to extend the civil service terms and conditions to staff in the subvented sector who, after all, are employees of the respective NGO, not the Government. It would not be appropriate to do a strict comparison of the levels of fringe benefits enjoyed by staff in subvented organisations and by civil servants. Members were briefed on civil service fringe benefits at the Panel meeting on 27 October 1997.

3. We accept that NGOs need to remunerate their staff at a reasonable level in order to recruit and retain the right calibre of people. Hence, appropriate retirement protection for staff and other statutory payments by employers to employees are recognised for subvention purposes.

4. We note the requests from staff of subvented organisations for improvements to their fringe benefits from time to time. As we explained to the Panel on Public Service in February 1996, where overall budgetary conditions permit and priority for resources could be justified on policy grounds, we would be prepared to consider narrowing the gap between the fringe benefits of civil servants and those for staff in the subvented sector. Thus, for example, we introduced the Mortgage Interest Subsidy Scheme (MISS) for employees in aided schools and in subvented welfare and health organisations in 1993 after careful consideration of the affordability of the proposal against our budgetary criteria and its relative priority against other claims. The Secretary for Education and Manpower reiterated the Government's position in the recent motion debate on medical benefits for teachers in aided schools on 7 January 1998.

Resource Considerations

5. One of our fundamental budgetary principles is that Government expenditure, over time, should grow no faster than the forecast trend growth of the economy. Thus, funds for new spending initiatives are clearly limited. Where spending aspirations exceed the money available, which is invariably the case, prioritisation is inevitable. In considering improvements to the level of fringe benefits of staff in the subvented sector, we need to balance the aspirations of the staff concerned against competing priorities for improvements to direct services which will benefit the community as a whole. Given the size of staff in the subvented sector, any real improvements in fringe benefits would be very expensive. Any proposal to improve the fringe benefits of subvented sector staff must be seen in its proper resource availability context.

6. In implementing the MISS, for example, we have given full consideration to its financial implications and the affordability of the proposal against our budget constraint. At the time of its introduction, the Scheme was expected to benefit at least 8 500 staff over a ten-year period, or 53% of those meeting the eligibility criteria in 1992. We therefore need to run a quota system which will be set each year having regard to the prevailing market mortgage interest rate and the funds available. After four years of implementation since September 1993, a total of 4 379 staff in the subvented sector has been admitted into the MISS. The annual quota has been fully utilised since 1994-95. Recurrent Government expenditure on the Scheme has risen from $7.7 million in 1993-94 (part-year) to a full year requirement of $72.8 million in 1996-97. The cumulative expenditure up to 1996-97 is at $176.6 million.

Ref. : S7/1/71
Finance Bureau
January 1998
[0098]

1.This excludes staff employed by the Hospital Authority.