LC Paper No. CB(1) 1290/98-99(04)

Legislative Council Panel on Public Service
Employment of Non-Civil Service Contract Staff by Government Departments

Purpose

This paper briefs Members on the employment of non-civil service contract staff by government departments to meet short-term manpower needs.

Background

2.We briefed this Panel on 18 January 1999 on the introduction of non-civil service contract terms to give Heads of Department or Heads of Grade (HoDs/HoGs) the authority and discretion to employ non-civil service contract staff at non-directorate equivalent level (information paper at Annex A). The Finance Committee (FC) also held a special meeting on 16 April 1999 to discuss issues related to the hiring of non-civil service contract staff by the Social Welfare Department (information paper at Annex B)

Employment Non-Civil Service Contract Staff

3. The new arrangements provide HoDs/HoGs more autonomy on employment of non-civil service contract staff to enable them to better deploy their resources to meet their service and operational needs and to respond quickly to changes in service demand.

4.These non-civil service contract staff are distinct from civil servants in that they are not appointed to posts on the civil service establishment and are not remunerated on the civil service pay and condition package. They have no claim for posting, promotion or transfer to any civil service posts. They are usually appointed on a fixed-term contract basis, some with provision of an end-of-contract gratuity.

5.Heads of Department/Grade have the full discretion to determine the level of pay to be offered for staff to be employed on non-civil service contract terms. They may decide the level of pay having regard to the employment market and recruitment situation, subject to the pay being no more than the minimum entry salary of comparable civil service ranks. Such flexibility for individual Heads of Department/Grade is necessary so as to cater for the different circumstances for employing non-civil service contract staff in different departments.

Freeze of Recruitment into the Civil Service

6.The Financial Secretary announced in the Budget Speech on 3 March 1999 that we should freeze the growth of the civil service establishment in view of the wide-ranging reviews and reforms of the civil service management system. If exception is required for essential services, Heads of Department will have to apply to the Civil Service Bureau and Finance Bureau.

7.During the recruitment freeze, departments/grades may meet their additional or new service demands through other means that will not increase the civil service establishment, e.g. streamlining operations, hiring external services, or employing staff outside the civil service establishment on short-term contracts.

Employment of Non-Civil Service Contract Staff by Social Welfare Department

8.In 1999-2000, SWD plans to create over 300 posts to undertake a range of duties including the implementation of the Support for Self Reliance Scheme, processing an increasing number of Comprehensive Social Security Scheme (CSSA) cases and to strengthen family and child care services and medical social services. Part of such work is of an urgent nature. For example, the Support for Self Reliance Scheme will be implemented from 1 June 1999. SWD has an urgent need to recruit staff to meet operational requirements.

9.Given the imminent operational needs and the freeze of recruitment into the civil service, SWD has decided to recruit, from 1.4.1999, short-term non-civil service contract staff at market rates, taking into account the employment market and recruitment situation. This is a temporary measure in view of the recruitment freeze while ensuring that public money is used in a cost-effective manner.

10.SWD now intends to recruit 324 non-civil service contract staff in 1999-2000, the majority of them will be deployed to handle duties related to social security with a few to handle supporting roles. The Finance Committee on 7 May 1999 agreed in principle the granting of supplementary provision for SWD to employ the required staff to meet service needs.

11.SWD had already recruited 63 staff on non-civil service contract terms in April 1999 for duties related to social security. The recruitment exercises of other non-civil service contact staff are being conducted.

Civil Service Bureau
11 May 1999

Information Paper for Finance Committee's Special Meeting on 16 April 1999

Introduction

This information paper is provided at the request of Members for the purpose of a special Finance Committee (FC) meeting to be held on 16 April 1999 to discuss issues related to the Social Welfare Department's hiring of new recruits at 70% of existing starting salary of the relevant civil service rank.

2.As the request for the matter to be discussed by FC, instead of the relevant LegCo Panel, is made on grounds that such recruitment practices may have implications for financial control in the context of the approved Estimates of Expenditure, this paper addresses the service-wide issues about control over the use of approved funds. Nonetheless, the Director of Social Welfare will also attend the special FC meeting to respond to Members' specific questions about the practice in the Social Welfare Department (SWD).

Expenditure Control under the Public Finance Ordinance

3.Government funding of services and activities is voted by the Legislative Council (LegCo) annually in accordance with the provisions of the Public Finance Ordinance (PFO). For this purpose, we prepare the annual Estimates of Expenditure in the manner as prescribed in section 5(3) of the PFO, that is, the Estimates of Expenditure shall -

1. classify expenditure under heads and subheads with the ambit of each head described;

2. in respect of each head show the estimated total expenditure, the provision sought in respect of each subhead, the establishment of posts (if any), and the limit (if any) to the commitments which may be entered into in respect of expenditure which is not annually recurrent; and

3. specify the controlling officer designated in respect of each head and subhead.

For illustration and to facilitate Members' subsequent discussion relating to SWD, a copy of the 1999-2000 Estimate of SWD (including the Controlling Officer's Report) is provided at the Enclosure.

4. In compliance with the above-mentioned PFO requirements, the total expenditure under each head of expenditure is broken down into subheads and capital account commitments. For financial control and analysis purposes, expenditure under a head of expenditure is classified as follows (again using SWD as an illustration) -

Category	Component	Subheads
Recurrent Account	Personal Emoluments	001 Salaries 002 Allowances 007 Job-related allowances
	Departmental Expenses	149 General departmental expenses
	Other Charges	Individual subheads on child care centre fee assistance, Social Security Allowance scheme, Comprehensive Social Security Assistance scheme, etc. For full details, please refer to the Enclosure.
	Subventions	Various subheads for subventions expenditure
Capital Account	Other Non-Recurrent	700 General other non-recurrent 787 Grant to the Emergency Relief Fund (block vote)

5. Section 6(3) of the PFO specifies that expenditure for the financial year arranged in accordance with the heads and subheads shall be limited by the provision in each subhead shown in the Estimates of Expenditure as approved. Under section 8 of PFO, any subsequent changes to the approved Estimates of Expenditure can only be made with the approval of FC upon a proposal of the Financial Secretary. The FC may delegate authority to the Financial Secretary (also means the Secretary for the Treasury (S for Tsy) by virtue of the General and Interpretation Ordinance Cap. 1) subject to specified conditions. At present, the S for Tsy has delegated authority to approve supplementary provision not exceeding $10 million for each subhead or in respect of each non-recurrent commitment under the General Revenue Account.

6. For financial control and analysis purposes, expenditure on salaries on civil servants is charged to Subhead 001 Salaries under Personal Emoluments (PE) whereas expenditure for employing non-civil service staff is accounted for under Departmental Expenses (DE), usually under the standard Subhead 149 General departmental expenses. For some departments with more frequent use of temporary staff, their Estimates may contain a specific DE Subhead 106 Temporary staff. In terms of financial control, PE subheads are not limited by the cash provision approved in the Estimates. Instead, the control is exercised through control over the total establishment (as explained in paragraph 7 below). In the case of DE or Other Charges (OC) subheads, the great majority are cash-limited and any excess has to be approved as a change to the Estimates under section 8 of the PFO, either by FC or under delegated authority.

Establishment Control

7. Under the arrangements for the creation of civil service posts as approved by FC and introduced on 1 April 1980, Controlling Officers are authorised to create or delete posts in non-directorate ranks provided that the net additional notional annual mid-point salary (NAMS) value of the posts created does not cause the total departmental NAMS ceiling to be exceeded. This control, in short, is referred to as the NAMS ceiling and is expressed in dollar terms. For example, in respect of SWD, its NAMS ceiling for 1999-2000 is $1,798.9 million as laid down in the introductory section to SWD's 1999-2000 Estimate. If SWD needs to exceed the NAMS ceiling in the course of the year, we have to seek approval of FC through its Establishment Subcommittee (ESC). If some posts are no longer needed, Finance Bureau (FB) will reserve the corresponding NAMS through administrative means for the purpose of controlling expenditure. There is no need for reference to FC or ESC.

Redeployment from PE to DE/OC

8. As part of resource management flexibility, a Controlling Officer may redeploy funds between his department's PE and DE subheads, subject to certain limitations and conditions. In brief, if a department wishes to engage less civil servants but use temporary staff or hire service instead, it would seek agreement from FB for redeploying funds from PE to DE. The amount will be calculated at mid-point salary of the posts concerned, exclusive of all staff oncosts. Take for instance, if a department chooses to freeze the recruitment of ten Clerical Officers throughout a financial year , it may redeploy with FB's agreement a sum of up to $2,918,400 (10 times annual mid-point salary of a Clerical Officer at $291,840) to the relevant DE subhead to pay for temporary staff or hire of service. FB will accordingly reserve the NAMS value of ten Clerical Officer posts. Any surplus from the redeployed sum may be used at the discretion of the Controlling Officers, subject to the usual subhead control. As and when the department wishes to re-instate the ten Clerical Officer posts, the provision under the DE subhead would have to be correspondingly reduced and FB will de-reserve the appropriate NAMS value involved. FB's prior agreement is normally required in these circumstances as the redeployment of $2,918,400 mentioned in the above example would have to be effected in the form of supplementary provision to the relevant DE subhead and has eventually to be approved by FB towards the latter part of the financial year as and when needed.

Employment of Non-Civil Service Contract Staff

9. Earlier this year, the Civil Service Bureau (CSB) promulgated revised arrangements for departments to employ non-civil service contract staff remunerated at non-directorate equivalent level with a view to giving departments more flexibility to meet service needs where the service need is short-term or does not require keeping staff on a long-term or permanent basis. Employment of individual consultants or non-civil service staff remunerated at directorate level for a period of more than one year is subject to the approval of ESC and FC.

10. Non-civil service contract staff are not civil servants. They do not occupy posts on the establishment of departments. As non-civil servants, these contract staff will not be eligible for posting, promotion or transfer to any posts in the civil service. They are not appointed on civil service terms and conditions of service and thus are not provided with the range of fringe benefits normally provided to civil servants. There is no increment for non-civil service contract staff during the contract period but Heads of Department may decide to offer pay of adjustment according to cost of living adjustment subject to such adjustment not exceeding the rate of any applicable civil service pay adjustment.

11. Subject to certain provisions laid down by CSB, Heads of Department are given full authority and discretion to decide on the employment of non-civil service contract staff and related matters, including employment package and terms, recruitment, deployment, discipline and dismissal. Internal safeguards must be in place in departments to ensure fairness and openness in the recruitment process. As guiding principles, the employment package of non-civil service contract staff must be no less favourable than those provided for under the Employment Ordinance and the Employees' Compensation Ordinance but no more favourable than civil servants in comparable civil service ranks. Heads of Department shall determine the level of pay based on those principles, subject to the pay being no more than the minimum salary of comparable civil service ranks or ranks of comparable level of responsibilities. In so doing, Heads of Department may also give due regard to the employment market and recruitment situation.

12. The employment of non-civil service contract staff is subject to availability of funds. No additional resources will be given to departments to engage such staff. Heads of Department have to follow the rules and procedures described above in the redeployment of resources to fund the employment of temporary staff, where needed. The departments have to meet the entire cost for the employment of non-civil service contract staff within the resource available from redeployment. In other words, if a department considers it necessary to pay an end-of-contract gratuity to the non-civil service contract staff appointed in lieu of a civil servant in the comparable rank, he has to meet the total cost of the pay and gratuity from the funds released from freezing the civil service post calculated at mid-point salary.

Freeze of Recruitment to the Civil Service

13. In view of the various reforms in the civil service, notably the review on the civil service entry pay, the Financial Secretary announced in his Budget Speech on 3 March 1999 that we will institute a general freeze on hiring into the permanent civil service, including hiring to fill new posts or vacancies. As a consequence, save for cases with exceptional approval, no new intake of any outside candidate to the civil service should be made from 1 April 1999. This recruitment freeze is not intended to be a permanent measure. It is a short-term arrangement pending the review of the terms and conditions of the civil service and other changes to the civil service system. We will review the need for the freeze before the 2000-01 Estimates in the light of progress made in the Civil Service Reform.

14. Pursuant to the decision on the freeze of recruitment to the civil service, FB has advised that there will be no reduction in the resources provided to Controlling Officers in the 1999-2000 Estimates. We anticipate the need for more extensive redeployment of funds from PE to DE under the prevailing rules and regulations. So as not to pre-empt the approval of FC where the consequential supplementary provision required in 1999-2000 exceeds our delegated authority of $10 million, we have advised all Controlling Officers to assess the quantum of the virement of funds needed in 1999-2000 and to approach FB at the beginning of the financial year to obtain in-principle agreement. With the available information in hand, we may need to approach FC for approval in principle in respect of such virement of funds in some departments.

Conclusion

15. To conclude, we wish to assure Members that the employment of non-civil service contract staff is subject to central guidelines and the consequential changes to funding is governed by existing rules and regulations for the proper management of public finances.

Finance Bureau
April 1999