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LCQ16: Guidelines on Wage Payment Monitoring and Reimbursement of Contractor's and Sub-contractors' MPF Contributions for their Site Personnel

Following is a question by the Dr Hon Fernando Cheung and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (December 5):

Question:

According to the Guidelines on Wage Payment Monitoring and Reimbursement of Contractor's and Sub-contractors' Contributions to the Mandatory Provident Fund for their Site Personnel (the Guidelines) formulated by the Development Bureau, the Bureau will reimburse contractors of public works projects the mandatory contributions to the Mandatory Provident Fund (MPF) paid by them and their sub-contractors for their site personnel.  I have received a complaint from a member of the public alleging that such practice favours those contractors.  In this connection, will the Government inform this Council:

(a) when and why the Development Bureau formulated the Guidelines; whether it consulted the public during the formulation of the Guidelines;

(b) as it is stipulated in paragraph 3.2.1 of the Guidelines that three categories of site personnel holding managerial/supervisory positions are exempted from providing copies of employment contracts as well as records of wage payment and MPF contributions to the Government, of the authorities' considerations or grounds for granting exemptions to such site personnel; in the absence of such information, how the authorities ensure that the contractors will not be reimbursed amounts exceeding those actually required;

(c) apart from those contractors to which the Guidelines are applicable, whether the Government at present reimburses any other private organisations their MPF contributions for their employees; if so,

(i) of the implementation date of such practice;
(ii) of the business nature and number of these employers; and
(iii) of the amount of MPF contributions reimbursed in each of the past three years and the administrative costs involved; and

(d) as some members of the public have pointed out that the practice of the Government reimbursing contractors of public works projects their MPF contributions is unfair to other employers, whether the Government will consider abolishing such practice; if it will, of the timeframe and plans; if not, the reasons for that?

Reply:

President,

We all along are very concerned with the protection of wages of site personnel.  There was a marked increase in the number of wage disputes involving public works in 2004.  The Mandatory Provident Fund Schemes Authority (MPFA) has also raised to us that a majority of complaints on arrears of MPF contributions are related to the construction industry.  In view of the above, the then Environment, Transport and Works Bureau, in collaboration with relevant government departments, the MPFA as well as related trade associations and labour unions of the construction industry set up a working group in January 2005 to draw up improvement measures for resolving problems related to arrears of wages and MPF contributions in the industry.

The working group has proposed to implement a series of measures in public works contracts to protect and control wage payment of site personnel.  They include requiring site personnel to enter into written employment contracts with their employers; making wage payment through autopay arrangements with banks; employing labour relations officers to control wage payment records and to deal with complaints about wage arrears.  Furthermore, when submitting tenders, contractors would normally include and reflect in their tender prices the MPF contributions that they would make for site personnel to be employed.  To resolve the arrears problems of MPF contributions in the industry, the working group has recommended providing a separate item in the tender documents for MPF contributions to distinguish it from other items in the tender price list.  Prior to making proper MPF contributions by relevant employers for the site personnel employed by them, contractors would not be released with the payment for relevant contributions.  The relevant protection and control measures have been introduced into some public works contracts in steps on a trial basis since December 2005, and included in all capital works contracts since July 2008.  

My reply to the four parts of the question is as follows:

(a) Since the implementation of the above-mentioned measures for controlling wage payment, we have been monitoring their operating situation.  We have also been collecting feedback from stakeholders, including project management personnel of works departments, labour relations officers and related trade associations.  Some industry stakeholders have reflected to us that they had encountered some problems in the execution of relevant contract provisions.  They have requested the Development Bureau to issue guidelines on these measures for reference of the industry.  After consulting the views of industry stakeholders, we issued the Guidelines in July this year.  The Guidelines are to provide guidance for frontline staff responsible for works projects so that the measures could be implemented effectively, smoothly and consistently in all public works projects.  We will maintain communication with industry stakeholders and frontline staff of works departments to listen to their views.

(b) Since the above measures for controlling wage payment have been fully implemented in July 2008 and operational for a period of time, the Hong Kong Construction Association, the Hong Kong Federation of Electrical and Mechanical Contractors, the Hong Kong General Building Contractors Association, the Hong Kong Construction Sub-contractors Association and various contractors reflected a concern to us.  It is about the need to process personnel data including wages of their employees, through a number of procedures, when applying for releasing their payment for MPF contributions.  For example, information of MPF contributions for a subcontractor's employees must first be submitted to the contractor.  Upon consolidation by the contractor's staff, the information would then be passed to labour relations officers for vetting before it is forwarded to the engineer/architect/surveyor of the contract for certification.  The relevant trade associations have pointed out that the employment contracts and wages of their managerial/supervisory staff are sensitive business information which may become accessible to different people in the application process.  This could undermine the confidentiality of the relevant information.  Moreover, some site personnel holding managerial/supervisory positions are unwilling to disclose information of their employment contracts and wages to third parties.  Therefore, the trade associations proposed that site personnel holding managerial/supervisory positions should be exempted from providing such information.

After carefully balancing the request to exempt managerial/supervisory personnel from providing information of their employment contracts and wages information, and the little need for a full protection under the above measures for the relevant personnel, we stipulated in paragraph 3.2.1 of the Guidelines that the following three categories of managerial/supervisory personnel may apply for exemption to provide their employment contracts and wages information:

(1) administration personnel directly employed by and based in the headquarters of the Contractor, first-tier sub-contractors or design consultants employed by the Contractor;

(2) site management staff listed in the organisation chart of the Contractor as members of the Contractor's Management Team or the sole supervisor in-charge listed in the organisation chart of the first-tier sub-contractors; and

(3) other site management staff listed in the organisation chart of the Contractor or first-tier sub-contractors, or design consultants directly employed/engaged by the Contractor, and who are employed on a monthly salary basis with a monthly income exceeding $25,000.

When submitting the relevant exemption application, the managerial/supervisory personnel and contractor concerned must furnish information as listed in paragraph 3.2.3 (a) to (c) of the Guidelines, including: (1) a statement signed by the managerial/supervisory personnel to the effect that they refuse to disclose their employment contracts and information related to wage payment; (2) a declaration made by the contractor or sub-contractor to confirm that the managerial/supervisory personnel are under his direct employment; and (3) information provided by the contractor or sub-contractor showing that the site personnel in the application are holding a managerial/supervisory position.

All managerial/supervisory personnel exempted from submitting their wage payment and MPF contributions records are required to make a declaration at the end of each payment cycle to the engineer/architect/surveyor of the contract to the effect that they have received the full wage payment and the MPF contributions payable to them by their employer.  A contractor claiming for release of payment for MPF contributions paid to the exempted personnel is required to submit a declaration to the effect that he has made such contributions for the personnel concerned and with the amount specified.  Moreover, the Guidelines have also stipulated that the engineer/architect/surveyor of the contract shall conduct spot checks to verify that the amount of MPF contributions being claimed in the contractor's payment application has been calculated according to the methodology set out in the Guidelines and to confirm with the exempted personnel whether their employer has paid MPF contributions for them.

(c) The afore-mentioned arrangement involves the provision of a separate item for MPF contributions in the tender documents such that, prior to making proper MPF contributions by relevant employers for the site personnel employed by them, contractors would not be released with their payment for relevant contributions.  According to information now made available to us, the arrangement is only available to public works contractors.  The Government does not have similar arrangement with other private sector organisations in releasing the MPF contributions that they have made for their employees, as a measure for protecting employees.

(d) As mentioned above, when submitting tenders, contractors would normally include and reflect in their tender prices the MPF contributions that they would have to make for site personnel to be employed by them.  In fact, in providing a separate item for MPF contributions in the tender documents such that, prior to making proper MPF contributions by relevant employers for the site personnel employed by them, contractors would not be released with their payment for relevant contributions.  It could help prevent contractors from deliberately lowering the tender price in order to win the works contracts, and subsequently evading the obligations to make MPF contributions to site personnel upon award of the works contracts in order to cut costs.  Nevertheless, regardless of whether there is such a measure, contractors should have reflected employers' MPF contributions for site personnel in the overall tender price.  Also, contractors and sub-contractors will not be relieved from fulfilling their obligations as employers under the Mandatory Provident Fund Schemes Ordinance.  Therefore, the above-mentioned arrangement is in fact a protection measure for employees and will neither favour any contractor nor cause any unfairness to other employers.

Ends/Wednesday, December 5, 2012
Issued at HKT 15:50

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