Panel on Manpower (Minutes) 23 Dec 98

Legislative Council

LC Paper No. CB(2) 1360/98-99
(These minutes have been seen
by the Administration)

Ref : CB2/PL/MP/1
LegCo Panel on Manpower

Minutes of meeting held on Wednesday, 23 December 1998 at 2:30 pm in Conference Room A of the Legislative Council Building

Members present:

Hon LEE Kai-ming, JP (Chairman)
Hon LAU Chin-shek, JP (Deputy Chairman)
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Michael HO Mun-ka
Hon LEE Cheuk-yan
Dr Hon LUI Ming-wah, JP
Hon CHAN Kwok-keung
Hon CHAN Yuen-han
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Dr Hon LEONG Che-hung, JP
Hon LEUNG Yiu-chung
Hon SIN Chung-kai
Hon Andrew CHENG Kar-foo
Hon SZETO Wah

Members absent:

Hon Kenneth TING Woo-shou, JP
Hon James TIEN Pei-chun, JP
Hon Ronald ARCULLI, JP

Public Officers attending:

Item III
Mr Matthew K C CHEUNG, JP: Acting Secretary for Education and Manpower
Miss J A WILLIS, JP: Commissioner for Labour
Mr Philip K F CHOK: Deputy Secretary for Education and Manpower (Designate)
Ms Esther LEUNG: Principal Assistant Secretary for Education and Manpower
Mrs Clare SIU: Acting Assistant Commissioner for Labour
(Employment Services)
Item IV
Mr Matthew K C CHEUNG, JP: Acting Secretary for Education and Manpower
Miss J A WILLIS, JP: Commissioner for Labour
Mr Philip K F CHOK: Deputy Secretary for Education and Manpower (Designate)
Ms Esther LEUNG: Principal Assistant Secretary for Education and Manpower
Mr TSANG Kin-woo, JP: Assistant Commissioner for Labour (Labour Relations)
Mr Alan WONG: Chief Labour Officer

Clerk in attendance:

Mrs Sharon TONG: Chief Assistant Secretary (2)1

Staff in attendance:

Ms Lolita NG: Senior Assistant Secretary (2) 5

I. Confirmation of minutes of meeting held on 29 October 1998 and matters arising
(LC Paper No. CB(2) 920/98-99)

The minutes were confirmed.

Matters arisingResearch on minimum wage system(LC Paper Nos. CB(2) 919/98-99(01) and CB(2) 919/98-99(02))

2. Head (Research and Library Services Division) (H/RL) of LegCo Secretariat briefed members of the research proposal, including the scope, countries/territory to be studied and the SAR Government's position on minimum wages, as outlined in the information paper.

3. Referring to the point on social security put forward by Mr LEE Cheuk-yan, the Chairman suggested that the issue be follow up in consultation with the LegCo Panel on Welfare Services at a later stage.

4. Mr Szeto Wah suggested that reference to unemployment allowance be included in the research.

5. Dr LUI Ming-wah also suggested that reference to the economic situation and the wage levels of the countries/territories to be studied be included in the research.

II. Date of next meeting and items for discussion (LC Paper No. CB(2) 919/98-99(03))

6. The Panel agreed to discuss the following items at the next meeting on 28 January 1999 -(a) Progress of measures to create jobs and tackle unemployment;(b) Update on manpower and job creation; and(c) Right of workers to go on strike or take industrial action.

(Post-meeting note : At the request of the Administration, item (c) was deferred for discussion at the meeting on 28 January 1999.)

III. Progress of measures to create jobs and tackle unemployment
(LC Paper No. CB(2) 919/98-99(04))

7. Acting Secretary for Education and Manpower (SEM(Ag)) said that in the period between September and November 1998, the rates of unemployment and under-employment were 5.5% and 2.9% respectively. The unemployment problem was serious in certain trades, including interior decoration and maintenance, manufacturing, import and export, commercial service and transport. There was a rise in under-employment in manufacturing, interior decoration and maintenance and retail business. Having regard to the present economic situations, the rates of unemployment and under-employment would remain on the high side. Given some positive signs, such as declining interest rates, moderating inflation and stabilization of the property prices, one should not be pessimistic of the future of Hong Kong's economy. He believed that in the longer term, Hong Kong would become more competitive and dynamic. SEM(Ag) assured members that the Administration would explore all possible means to ease unemployment and help the unemployed to re-enter the labour market.

8. SEM(Ag) briefed members on the progress of the measures to create jobs and tackle unemployment as follows -

On job creation, there would be at least some 100 000 new jobs in the labour market from May 1998 to end-1999, largely as a result of the Government's key policy initiatives and major infrastructure or other projects, and partly because of the needs of the Civil Service. These 100 000 posts comprised 11 000 civil service posts estimated to be created up to 31 March 1999, and 89 000 other jobs in the subvented and private sectors. Of the 89 000 non-Government jobs, some 33 000 would be created by end-1998, about 31 000 during the first half of 1999 and another 25 000 during the second half of 1999;
According to the latest information on major areas of job creation, some 15 000 jobs had already been created as at mid-September 1998. Those 15 000 jobs included some 3000 civil service posts which had been filled as at early July, and around 12 000 non-Government jobs which had been created as a result of various projects and measures the Government had implemented by mid-September. Some 21 000 additional jobs in the non-Government sectors were therefore expected to be created between mid-September and end-1998;
The Government was finalising a comprehensive update on the job creation assessment, taking into account the initiatives and commitments announced in the 1998 Police Address. The update was expected to be completed in January 1999 and the Panel would be briefed on the update at the next meeting;
On advancing commencement of public works projects, 177 works contracts/consultancy agreements worth a total of $10 billion had commenced since May 1998. Some 13 100 jobs comprising 2 100 at the professional/supervisory level and 11 000 at the operative level had been created. The Administration was considering the possibility of advancing some more projects;
As regards the pilot project to allocate a particular site with an approximate area of 20 000 square metres to the south of the former Kai Tak Airport Terminal Buildings for operating a flea market on a non-profit-making basis, the Education and Manpower Bureau (EMB) issued a press release and notice in several newspapers on 1 and 2 December 1998 respectively to invite proposals from organisations interested in running the flea market. A Government Notice was also published in the Gazette on 4 December 1998. By the close of submission period on 10 December 1998, three proposals were received. EMB was examining those proposals in consultation with other relevant departments;
On implementation of the three community building projects, the Home Affairs Department had been recruiting the 3 590 Temporary Community Organisers from late November 1998 onwards in conjunction with the Labour Department. Around 3 580 applications had been received and about 940 vacancies filled so far;
LD continued to strengthen its job matching service and was able to help about 4 000 unemployed persons to secure employment each month. LD kept on providing its telephone referral and vacancy processing service for job seekers. It would set up a Telephone Employment Service Centre in North Point by end of December 1998 with a view to further strengthening the telephone referral service. To enhance operational efficiency, a Job Vacancy Processing Centre would also be set up to centralise the receipt and processing of vacancy orders, as well as the dissemination of vacancy information to Local Employment Service offices; and
On enhancing vocational training and employees retraining, all the training and retraining programmes had commenced. The Vocational Training Council (VTC) and the Employees Retraining Board (ERB) were working out strategic plans on training and retraining jointly. VTC and ERB would be restructured with a view to increasing their training quota and improving the quality and cost-effectiveness of the training courses.

9. Anticipating a higher unemployment rate in 1999, Miss CHAN Yuen-han urged the Administration to introduce additional measures for tackling the unemployment problem. In this connection, she suggested that more hawkers' areas be opened. On implementation of the three community building projects, she questioned why only 3 580 applications for the Temporary Community Organisers posts were received.

10. SEM(Ag) responded that -

substantial improvement to the prevailing unemployment situation in terms of a reduction in unemployment rate depended largely on economic recovery. The Administration would continue to adopt a positive and pragmatic attitude towards improvement of the problem;
establishment of hawkers' areas was a complicated issue which should be handled carefully. It would be difficult to stop illegal hawking after more areas were opened for such purpose. The idea was fraught with problems, e.g. management and environmental hygiene. The Administration was pursuing the idea of a flea market in Kai Tak to respond to the call from the community; and
the progress report had just reflected the present progress of the three community building projects. Continuous efforts would be made to recruit suitable candidates for the Temporary Community Organiser posts.

11. In response to Miss CHAN Yuen-han's further enquiry, SEM(Ag) said that there was no quick fix to the unemployment problem. However, the Administration would endeavour to ease unemployment.

12. Mr LAU Chin-shek suggested that jobs in relation to safety and health be created, e.g. inspection of buildings including their ventilation systems. He also proposed that tax paid to the Government be refunded.

13. Referring to item 7 of the information paper, SEM(Ag) pointed out that the Government was working in the same direction and jobs were created in relation to private building management and fire safety. Furthermore, there was a loan for improvement of fire safety in private buildings. As for refund of tax, SEM(Ag) said that there was already a rebate of the first quarter rates paid in 1998-99.

14. Referring to Japan, Mr LEE Cheuk-yan proposed that the Administration could use its financial reserve to help solve the unemployment problem. He also commented that the Textile and Garment Industry Revitalization Committee (TGIRC)'s proposal to import labour was a discouraging move. He asked for the Administration's response to TGIRC's proposal.

15. SEM(Ag) responded that the Administration would be spending about $235 billion on infrastructure in the next five years. Of the 100 000 new jobs to be created, 60 000 related to the infrastructural projects. In this regard, the Administration was far ahead of than the Japanese Government in easing unemployment. Mr LEE Cheuk-yan said that the Japanese Government had a long-term plan to tackle the unemployment problem, using additional resources. He urged the Administration to follow suit. In this connection, he suggested that a deficit budget be introduced to stimulate the local economy.

16. Regarding imported labour, SEM(Ag) said that TGIRC had yet to finalize its proposal and the matter might be discussed in the light of TGIRC's final proposal. The Administration realised that in the present economic climate, importation of labour was a sensitive issue. In this conjunction, SEM(Ag) stressed on the Administration's stance as follows -(a) Given the principle of priority of employment to local workers, any plan in relation to imported labour should not jeopardize the job opportunity of local workers; and(b) Imported workers could only fill designated job vacancies of certain industries and they were not allowed to change jobs thereafter.

17. On manpower, Mr Andrew CHENG considered that the Administration did not have a comprehensive plan to match manpower needs of the infrastructure with the existing manpower resources. He urged the Administration to assess the job types required by the infrastructural projects. SEM(Ag) said that the Administration would keep on monitoring the infrastructural projects closely. There were some job types, such as tunnel boring machine operation, for which workers needed to be imported. Mr Andrew CHENG proposed that for job types in anticipation of imported labour, local workers be provided with earlier training so that subsequent importation of labour would not be necessary. SEM(Ag) said that tailor-made training programmes had been conducted for local workers and in some cases, imported workers helped in training of local workers to perform the jobs. The Quadrilateral Working Group on Training and Retraining for the Construction Industry (the Quadrilateral Working Group) was targeting at the aforementioned manpower problem with an aim to filling job vacancies of the infrastructural projects by local workers.

18.Mr Michael HO echoed the suggestion of Mr Andrew CHENG. He urged the Administration to provide members with information on the job types required by large-scale infrastructural projects at different stages. SEM(Ag) said that the Quadrilateral Working Group, led by EMB and comprising representatives of the Government bureaux/departments, trade associations, labour unions and relevant training institutions, was studying the job types required by the infrastructural projects and would continue to monitor the manpower needs. In this connection, the Chairman advised that the Administration should not repeat the same mistake in building the new airport whereby workers had to be imported at the last minute to solve the problem of manpower shortage. The Chairman also concurred that the Administration should provide members with the requisite information on the infrastructural projects including West Rail and new MTR projects. SEM(Ag) undertook to provide the requisite information in the first quarter of 1999.

Adm

19. Dr LUI Ming-wah asked for the most up-to-date information on job vacancies. In view of serious unemployment among young people, he proposed that a study on job vacancies be conducted by the young people.

20. SEM(Ag) said that the labour market was highly volatile. Commissioner for Labour (C for L) added that on the basis of statistics known to LD, there were 11 132 job vacancies in November 1998. LD collected the statistics on job vacancies on a monthly basis. SEM(Ag) further said that the Census and Statistics Department had been collecting relevant statistics on a quarterly basis. Although most up-to-date statistics could not be made available at the present moment, he did not envisage a need to conduct the proposed study by young people. Dr LUI Ming-wah opined that a quicker update of the statistics on job vacancies would be necessary as the statistics collected by the Census and Statistics Department only reflected the situation in the past quarter. SEM(Ag) said that the Administration needed to be cautious with the proposal because there was already an established system of collecting relevant statistics by the Census and Statistics Department and it would be precarious if data were not collected scientifically. Dr LUI Ming-wah maintained that more up-to-date information on job vacancies should be provided by the Administration.

21. Mr David CHU commented that the Administration was lacking alertness to crisis in tackling the unemployment problem. For immediate job creation, he suggested that 50 000 to 100 000 unemployed persons be recruited for a "Clean Hong Kong" campaign. He believed that this would also boost the consumer market. SEM(Ag) said that the Administration was not in lack of alertness to crisis in tackling the unemployment problem. He reiterated that the Administration had tried very hard and exhausted all possible means to tackle the unemployment problem. SEM(Ag) also advised that it would be difficult to implement the proposal to create jobs. In the view of the Administration, it would be necessary to address the unemployment problem with more long-term measures, such as retraining.

22. Mr LEUNG Yiu-chung echoed that the Administration was lacking alertness to crisis in tackling the unemployment problem. Given 11 000 job vacancies for 191 000 unemployed persons, he anticipated that the unemployment problem would further deteriorate after the Lunar New Year. He asked how the Administration would tackle the unemployment problem. SEM(Ag) reiterated that substantial improvement to the prevailing unemployment situation in terms of a reduction in unemployment rate would depend largely on economic recovery. The package of measures currently adopted by the Administration aimed to ease unemployment. Workers were provided with training or retraining so that they could rejoin the workforce as soon as possible and sustain their employability in the longer term. The unemployment problem would be ameliorated after the measures became effective. Responding to further question from Mr LEUNG Yiu-chung, SEM(Ag) advised that an unemployment rate of 2% to 3% for a mature economy was considered acceptable.

23. Referring to a recent study conducted by the Federation of Trade Unions (FTU), Miss CHAN Yuen-han pointed out that given a strong demand for domestic helpers in Hong Kong, the trade had a huge potential to cater for job vacancies for the unemployed. In her opinion, it would not be advisable to depend solely on ERB for retraining of the unemployed to become domestic helpers. She questioned whether the Administration would consider setting up a new body to handle the matter. SEM(Ag) said that the Administration was willing to follow up on the survey findings.

24. Referring to item 17 of the information paper, Mr CHAN Wing-chan said that the retraining-cum-job matching programmes for domestic helpers under ERB were well received by the retrainees and many of them had been placed as domestic helpers. He shared with members the findings of a survey conducted by some members, showing that there was an immense demand for domestic helpers in Hong Kong. He believed that given the untapped demand, there would be an enormous potential to create jobs in this sector. He urged the Administration to increase more resources for training of domestic helpers with a view to increasing job opportunities for the unemployed. Referring to item 14 of the information paper, he was concerned about job opportunities for the trainees who had completed the special seafarer training course.

25. The responses of SEM(Ag) were as follows -

ERB would continue stepping up its publicity on the retraining-cum-job matching programmes for domestic helpers and child-minders. Efforts were being made to solve the problem of matching domestic helpers with employers in Hong Kong East. There would be new centres in Wanchai and Shaukeiwan for retraining of domestic helpers; and
Among the 21 trainees of the special seafarer training course, four had dropped out from the course. The 17 trainees who had completed the course were being placed in jobs and they would be able to secure employment in the maritime industry.

26. Mr CHAN Kam-lam enquired about statistics in relation to illegal employment. SEM(Ag) undertook to provide a written reply on the matter. He said that the Administration was making every efforts to combat illegal employment.

Adm

27. Mr HO Sai-chu was concerned about the Administration's measures to create a good business environment in Hong Kong. SEM(Ag) said that as evident by the Chief Executive's Policy Address 1998 and the forthcoming address of the Financial Secretary, the Administration had been working towards a good business environment in Hong Kong. To achieve this, it had introduced a number of measures, including reduction of declaration charges for imports and exports, reduction of duty on diesel and rebate of rates.

28. Regarding loans to small and medium sized enterprises (SMEs), Mr Andrew CHENG commented that it would not be useful to the SMEs because just $426 million out of a commitment of $2.5 billion had been approved. He was disappointed that the review of Special Finance Scheme for SMEs was postponed to early 1999. SEM(Ag) clarified that there was not a question of postponement as the review had all along been scheduled for early 1999.

IV. Proposed amendments to the Protection of Wages on Insolvency Ordinance (PWIO)

29. The Administration tabled at the meeting an information paper entitled "Proposed amendments to the Protection of Wages on Insolvency Ordinance(PWIO)" to outline the revision of payment limits and calculation of ex-gratia payment of severance payment(SP).

(Post-meeting note : The paper was circulated to absent members vide LC Paper No. CB(2) 941/98-99(01).)

30. At the request of the Chairman, SEM(Ag) highlighted the two legislative proposals to improve the protection of employees under PWIO as follows -(a) to increase the existing limit of SP to $50,000 (from existing $36,000) plus 50% of the excess entitlement; and(b) to amend PWIO to the effect that the amount of ex-gratia payment of SP would be calculated according to an employee's wage level before wage reduction provided that his employer had given such an undertaking in writing at the time of and before implementation of the wage reduction proposal and that the wage reduction took place within the 12 months immediately before the date of termination of employment. If an employee's wage level had been reduced for more than once during the past 12 months and before implementation of each wage reduction the employer had made such an undertaking in writing, the latest undertaking should prevail for the purpose of calculating the amount of ex-gratia payment of SP. The proposal would include a transitional arrangement to provide that where prior to the commencement of the amendment, an employer had given a verbal undertaking to pay SP on the basis of an employee's wage level before wage reduction, if the employer made such undertaking in writing within two months from the commencement of the amendment bill, the written undertaking should be valid for the purpose of the proposed amendment.

31. SEM(Ag) said that the proposals addressed the concern of some LegCo Members and the public that the present trend of wage reductions would have significant implications on the amount of an employee's SP should his employer become insolvent subsequently. The Protection of Wages on Insolvency Fund Board (Board) agreed to the proposals at its special meeting held on 8 December 1998. The Labour Advisory Board (LAB) also endorsed the proposals at its meeting held on 21 December 1998.

32. Mr CHAN Wing-chan was in support of increasing the existing limit of SP to $50,000 plus 50% of the excess entitlement. Referring to cases where the wage level of an employee had been reduced for several times, he asked how an employee could be safeguarded so that the SP would be calculated on the basis of his original wage before the first wage reduction. Assistant Commissioner for Labour (AC for L) said that there would not be many cases where an employer had reduced the wages of his employees for more than once within a period of 12 months. If this happened and given a written undertaking by the employer, the ex-gratia payment of SP would be calculated in accordance with the latest undertaking.

33. Responding to Miss CHAN Yuen-han's query about the rationale, AC for L explained that although the first written undertaking by the employer carried a legal effect, the subsequent written undertaking would supersede the first one, so on and so forth. The ex-gratia payment of SP would be calculated on the basis of the latest undertaking which also had legal effect. AC for L further said that an employer who had had a verbal agreement with his employee should prepare a written undertaking within two months after the proposal came into effect.

34. Miss CHAN Yuen-han anticipated that in case an employee initiated to ask his employer to prepare an undertaking in writing to the effect that the amount of ex-gratia payment of SP would be calculated according to the wage level before wage reduction, he would most probably be dismissed. As such, there would be more unemployment and labour disputes.

35. The Chairman said that the existing labour legislation recognised a verbal agreement between an employer and an employee. However, only a written undertaking would be recognised for calculation of ex-gratia payment of SP after the proposal came into effect. He commented that the proposal would set a bad precedent.

36. C for L said that some labour unions had suggested that an undertaking made by an employer in writing would help reduce labour disputes when wage reduction became a public agenda. The Chairman opined that it would not be necessary to introduce a legislative amendment in such a way that verbal agreement between an employer and an employee would not be recognised. Furthermore, in actual circumstances, most employees in Hong Kong did not have employment terms in writing.

37. SEM(Ag) said that only employers who, before the implementation of wage reduction, had agreed or undertaken orally to pay SP on the basis of the pre-reduced wage level would be required to put such undertaking into writing.

38. AC for L said that the proposal would only apply to insolvent companies which had undertaken in writing to pay SP on the basis of the wage level before wage reduction. For employers who stayed in business and remained solvent, they were contractually bound to pay SP on the basis of the wage level before wage reduction if they had given such an undertaking. A written undertaking by an employer would help avoid future disputes between the employer and his employees. For insolvent cases, it would be difficult to locate the employer and verify with him whether he had agreed to calculate SP on the basis of the wage before wage reduction.

39. Mr Andrew CHENG considered that the proposal would not be effective in safeguarding employees' interests since employers were not required to calculate SP on the basis of wages before wage reduction. He referred to a report on corporate rescue issued by the Law Reform Commission in 1996 and queried whether the Administration and LAB had considered the recommendations of the report when formulating the proposal.

40. C for L said, in her capacity as the Chairman of LAB, that LAB had examined the proposal and in view of the importance of the matter, representatives of employees undertook to consult the labour unions. LAB would have an in-depth discussion on the matter at its next meeting.

41. AC for L added that in the "Guidelines on what to do if wage reductions and retrenchments are unavoidable", an employer was encouraged to openly discuss with his employees before wage reductions and retrenchments with a view to working out a solution mutually acceptable to both parties, including calculation of SP on the basis of wages before the wage reduction. For an employer who had already had a verbal agreement with his employees over the matter, the Administration did not anticipate that he would refuse to prepare the agreement in writing after the proposal came into effect. The proposal was made when a trend of wage reductions prevailed after financial turmoil. Once a written undertaking was made by an employer and in the event that he could not honour this agreement after he became insolvent, the amount of ex-gratia payment of SP would be calculated on the basis of the wage level before wage reduction under the amended PWIO. An employee would not have a financial loss if his employer had agreed to calculate SP using the aforesaid method on each occasion of wage reductions.

42. Mr LAU Chin-shek and Mr Andrew CHENG urged the Administration to amend the Employment Ordinance in order to safeguard the interests of employees in calculation of ex-gratia payment of SP. SEM(Ag) said that the proposed amendments to PWIO aimed to promote trust between employers and employees. Employers were encouraged to have commitment when discussing wage reductions or retrenchments with their employees. The Administration could not force an employer to do so if he did not agree.

43. Referring to the information paper, Mr LEUNG Yiu-chung noted that about 94% and 98% of the applicants could recover full entitlements for arrears of wages (AW) and wages in lieu of notice (WILON) respectively in 1997. Given a total accumulation of $777 million in the Protection of Wage on Insolvency Fund, he asked for the rationale for not providing the remaining 6% and 2% of the applicants with full entitlements. He also asked for an estimate on the percentage of applicants who could get full entitlements after the limit of SP was increased to $50, 000 plus 50% of excess entitlement.

44. In response, AC for L said that the purpose of the Fund was to pay to employees ex-gratia payments in respect of AW, WILON or SP owed to them by their insolvent employers. It was not intended to shoulder all the responsibilities of an employer who became insolvent. The Administration considered it satisfactory that 94% and 98% of the applicants could recover full entitlements for AW and WILON respectively in 1997. However, in 1997, about 75% of the applicants could get their full entitled SP. The Administration considered that there was a need to increase the limit of ex-gratia payment of SP to provide better financial relief to employees whose employers had become insolvent. The Administration estimated that after the limit of SP was raised as proposed, about 84% of the applicants would be able to recover their entitlement in full.

45. Responding to a further question from Mr LEUNG Yiu-chung, AC for L explained that there was an upper limit for claim of SP. Employees of the high income group usually could not obtain their entitlements in full. Taking into account the increasing number in claims, the Board therefore agreed to raise the existing limit of SP. The Board had also agreed to review the position in mid-1999. Mr LEE Cheuk-yan hoped that further improvement would be made after the review.

46. SEM(Ag) said that the Administration would most probably move a motion to raise the limit of ex-gratia payment in respect of SP in LegCo in January 1999, with an aim to implementing the proposal before the Lunar New Year.

V. Employees Retraining Board: the way forward
(LC Paper No. CB(2) 919/98-99(05)

47. In view of time constraint, the Panel agreed to defer the agenda item to a special meeting. (Post-meeting note: A special meeting was scheduled for Thursday, 7 January 1999 at 2:30 pm.)

48. There being no other business, the meeting ended at 4:25 pm.

Legislative Council Secretariat
22 February 1999