Experience Sharing on Exploitation of Non-skilled Workers Engaged by Government Service Contractors 20 October 2006 Lab

1. Experience Sharing on Exploitation of Non-skilled Workers Engaged by Government Service Contractors 20 October 2006 Labour Department

2. Outline • Malpractices of government service contractors • How to tackle contractors’ malpractices • Implementing SEC • Strengthening government’s role of monitoring contractors • Stepping up enforcement • Points to note for procuring departments • Cases for discussion • Recommendations

3. Malpractices of government service contractors (1) • Underpayment of committed monthly wages • Only part of the wages is paid by autopay and the balance, alleged to be paid in cash by the contractor, is not paid to the employee. • Requires workers to sign on blank receipts. • Employs non-skilled workers at a monthly wage rate lower than that committed in the tender offer to procuring department. • Requires workers to rebate cash to the foreman/management.

4. Malpractices of government service contractors (2) • Reduction in actual wages received by workers • Breaks down the committed monthly wages into basic wages of a disproportionately amount and a host of adjustable allowances • Collect fees/deposits from the workers for various operational expenses which should be borne by employers, e.g. deposit for working tools and uniform, fees for uniform cleaning, training, social gathering, transport etc. • Charges workers for damage to equipment at more than the statutory ceiling of $300 allowed by the Employment Ordinance.

5. Malpractices of government service contractors (3) • Evasion of statutory responsibilities • Requires workers to sign self-employed contracts. • Requires workers to take no pay leave. • Forces workers to acknowledge receipt of leave. • Deducts wages for rest days taken and fails to grant sufficient rest days and statutory holiday to workers. • Intermittent employment.

6. How to tackle contractors’ malpractices? A three-pronged approach is adopted: • Implementing SEC • Strengthening government’s role of monitoring contractors • Stepping up enforcement

7. a. Key features of SEC • Monthly wage should be no less than the committed amount • All wages should be paid by autopay • Contractors should be responsible for the cost of all operation and administrative expenses • Workplace should be specified • Copies of the SEC should be kept by the contractor, the worker and the procuring department • Only variation of employment terms which shall not extinguish or reduce any right, benefit or protection to the workers is allowed

8. Strengthening government’s role of monitoring contractors • Relevant Financial Circulars: 3/2004, 5/2004, 4/2006 • Central Enforcement Teams • Random checks and surprise interviews by staff of procuring departments

9. Stepping up enforcement • To strengthen LD’s inspections to enforce labour legislation (e.g. Employment Ordinance and Employees’ Compensation Ordinance): • To conduct regular inspections • To investigate complaints/referrals promptly • To launch special campaigns targeting at individual procuring departments’ contractors • To publicise hotline (2815 2200) for handling allegations of breaching labour legislation

10. Offences (Employment Ordinance) Maximum Penalties Failing to grant/pay rest days/statutory holidays/annual leave/ Failing to pay long service payment/severance payment Fine of $50,000 Illegal deduction of wages Fine of $100,000 and 1 year imprisonment Late payment of wages/non-payment of wages Fine of $350,000 and 3 years imprisonment Offences and Penalties

11. Offences (Employees’ Compensation Ordinance) Maximum Penalties Dismissing an injured employee during sick leave or before the issue of relevant certificate of compensation Late payment/ non-payment of periodical payments Fine of $100,000 Failing to take out a policy of insurance for employees Fine of $100,000 and 2 years imprisonment Offences and Penalties

12. Identification of offences/malpractices Inspection • Surprise visit • Interview with workers/questionnaire Office visit • Checking of : • Wage records/attendance records • Employment contracts • Verifying workers’ allegation • Asking employers to provide explanation • Communication with Procuring Department • Counter-checking records • Checking contractors’ wage commitment in the service contract

13. Points to note for Procuring Departments Tendering stage • Make clear all messages on requirements in respect of wage rates, maximum working hours, manpower arrangements and administrative sanctions

14. Beginning of service contract • Make sure that the contractors know your department’s expectations • advise contractors on how to properly fill in SEC if ambiguity arises

15. Monitoring of service contract • Increase the transparency of labour related information to ensure workers know more about their rights and benefits • Take prompt action in case irregularities are detected/reported • Monitor the contract proactively • Maintain regular dialogue with contractors’ management team and workers’ representatives, if any

16. Expiry of service contract • New service contract will be awarded to the same contractor • Whether salary and employment benefits have been reduced • New service contract will be awarded to a new contactor • Whether existing workers will be retrenched • Whether workers’ statutory entitlements will be cleared Seek advice and assistance from the Labour Relations Division of LD whenever necessary

17. Cases for discussion (1) Case 1 – Holiday offence • Non-grant of statutory holiday and rest days • Documents checked: attendance record, employment contracts, records of statutory holidays signed by workers • Contractor could not give any explanation on workers’ work during statutory holidays and rest days. Only gave an excuse that it might be due to the ignorance of the foreman. • PG, fined $28 000 (6 summonses)

18. Cases for discussion (2) Case 2 – Holiday offence • Payment in lieu of granting statutory holidays • Documents checked: attendance records, employment contracts, records of statutory holidays signed by workers, wage records, receipts of wages • From the calculations of wage, it was noted that extra payments had been paid. • Prosecution taken out • PG, fined $44 000 (22 summonses)

19. Cases for discussion (3) Case 3 – Wage offence • Habitual late payment of wages • Documents checked: wage record, employment contracts • Contractor mitigated that the delay was due to cash flow problems but failed to submit any documentary proof . • PG, fined $20 000 (4 summonses)

20. Recommendations • Know more about employees’ rights and statutory benefits under the Employment Ordinance (for details, please visit www.labour.gov.hk) • Take prompt action to rectify the situation once labour problems are detected • Maintain dialogue with the relevant stakeholders, such as contractors’ employees, their representatives, relevant trade unions, etc. • Build in a system (e.g. hotline for enquiry) for contractors’ employees to air out their grievances • Strengthen collaboration with LD, MPFA and other procuring departments to tackle labour exploitation problems

21. Q & ATHANK YOU!!