1 Enforcing Service Contractor’s Compliance with Labour Laws Mrs. Jenny CHAN, JP Assistant Commissioner for Labour ( Rights & Benefits ) 30 June 2005

2 Outline of the Talk Protection of Employees’ Rights and Benefits Existing Machinery to Provide Protection to Employees Malpractices of Government Service Contractors

3 Outline of the Talk Government Policy Latest Announcements Enforcement of Labour Laws and Contract Management

4 Protection of Employees’ Rights and Benefits The Employment Ordinance (Cap. 57) The Employees’ Compensation Ordinance (Cap. 282)

5 The Employment Ordinance (Cap. 57) To provide for the protection of the wages of employees, to regulate general conditions of employment and for matters connected therewith

6 The Employment Ordinance (Cap. 57) Major provisions:  Payment of wages  Deduction of wages  Holidays: Statutory Holidays, Annual Leave, Rest Days  Sickness Allowance, Maternity Leave Pay  Employment protection upon dismissal

7 The Employees’ Compensation Ordinance (Cap. 282) To provide for the payment of compensation to employees who are injured in the course of their employment

8 Existing Machinery to Provide Protection to Employees  If employees are in dispute with their employers over statutory benefits under the Employment Ordinance and contractual terms:  Conciliation by Labour Relations Division, LD  Adjudication by  Minor Employment Claims Adjudication Board, LD  Labour Tribunal

9 If employers are in breach of relevant labour legislation  Prosecution  Penalty ranging from $10,000 to $200,000 plus one year imprisonment  e.g. An employer who makes illegal deduction from wages of an employee is liable to a fine of $100,000 and to imprisonment for one year

10 What happened in February 2001? On 19 February 2001, a newspaper reported that a toilet cleaner worked 14 hours a day and was paid $7 per hour, which amounted to about $3,000 a month. He was forced to sleep in the toilet block where he worked. LegCo carried a motion on 21 February 2001 on conditions of employment offered by contractors of government services.

11 Government Response Financial Secretary in LegCo (April 2001)  Another priority is to protect the interests of our labour force and to ensure that employees can give their best under reasonable conditions of service. Financial Circular No. 3/2001

12 Malpractices of Government Service Contractors Breach of labour law Failure to pay the wages committed to procuring department in the tender offer. Break down the committed monthly wages into basic wages of a disproportionately small amount and a host of adjustable allowances.

13 Malpractices of Government Service Contractors Collect fees/deposits from non-skilled workers for various operational expenses which should be borne by employers, e.g. deposit for working tools and uniform, fees for uniform cleaning, training etc. Specify high proportion of wages as housing allowance to avoid Mandatory Provident Fund contribution.

14 Government Policy On 27 March 2004, the Government announced that a tender offer should not be considered if, during the 12- month period prior to the tender closing date, the tenderer has had a total of three or more convictions under the Employment Ordinance, the Employees’ Compensation Ordinance (for convictions carrying maximum fines corresponding to Level 5 or higher) and the Immigration Ordinance (on illegal employment).

15 Government Policy A demerit point system is implemented against contractors who have breached their contractual obligations in respect of wages, working hours and signed written contracts with employees. For each breach of these contractual obligations, a default notice will be issued to the contractor concerned. Each default notice will carry one demerit point. A tender offer should not be considered if during the four most recent quarters (before the tender closing date), the tenderer has received from one or more departments a total of six demerit points.

16 Government Policy On 6 May 2004, the Government announced that government service contractor should pay their non-skilled workers monthly wages not less than the market levels.

17 Latest announcements Ag. CE announced in the Labour Day Reception on 29 April 2005 the introduction of a new standard employment contract (SEC). It’s objective is to further protect the rights and benefits of employees. All government service contracts tendered afterwards will require the use of a SEC for non- skilled workers. The SEC specifies the monthly wage, working hours, working place, method of wage payment and other employment terms.

18 Key Features of SEC 1. The workplace of a non-skilled worker should be specified. Deployment to other workplaces within the same region is only allowed under an urgent situation or on an ad hoc and limited basis.

19 Key Features of SEC 2. The monthly wages payable to a non- skilled worker should be no less than the amount committed by the contractor in the tender offer. Any allowance, under whatever title, should be paid on top of the committed wages.

20 Key Features of SEC 3. Except for termination of employment contract, all wages should be paid directly by way of autopay into individual worker’s bank account.

21 Key Features of SEC 4. Contractors should be responsible for the costs of all operational and administrative expenses, as well as the depreciation of all assets and equipment. No fee or deposit, under whatever title, should be collected from their non-skilled workers.

22 Key Features of SEC 5. Copies of the signed standard employment contract should be kept by the contractor, the worker and the relevant procuring department for reference.

23 Key Features of SEC 6. Only variation of employment terms which shall not extinguish or reduce any right, benefit or protection conferred upon the worker by the contract, and has the latter’s written agreement, is allowed. A copy of such variation should also be provided to the worker and the relevant procuring department for reference.

24 Concerted Efforts LD’s enhanced inspections to workplaces to ensure compliance with the Employment Ordinance. MPFA’s new task force to deal with serious and repetitive offenders against the Mandatory Provident Fund Schemes Ordinance. Individual procuring departments will strengthen monitoring of their service contractors to ensure that they comply with the terms of service contract. Efficiency Unit has issued Guidelines on Good Contract Management Practices.

25 Labour Department’s Enforcement Action To enforce labour legislation:  To conduct regular inspections  To investigate complaints To launch special campaigns targetting at individual procuring departments’ contractors To publicise hotline ( ) for receipt of complaints on wage offences

26 LD’s Inspection (Jan-May) No. of inspections No. of contractors No. of workers interviewed

27 Ends Thank you !