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Doctors at public hospitals recently blew their top over pay, complaining that their pay raises have not been on par with those in the civil service, and triggering a debate over the Hospital Authority's (HA) pay adjustment system. The HA subsequently promised to use its internal resources to make up for an "extra" salary rise for senior medical staff. The row seemed to have reached a happy ending, with doctors set to get their desired pay hike and the government not having to fork out an extra penny. However, the outcome has not offered a genuine solution to the underlying problem. It's merely a typical "buy time" strategy.

The problem was sparked by a delink between the HA's salary structure and the government's pay system for civil servants. In theory, the HA does not have to follow the government's pay-adjustment policy. But since most of its funding comes from the government, coupled with the fact that some of its staff members are civil servants, the authority's pay-adjustment system has become complicated. When it comes to adjusting pay, very often the HA has to follow the government's. In general, the government makes pay adjustments annually, and civil servants in the HA automatically get their salaries adjusted accordingly, while their non-civil servant colleagues are not included. This is where the trouble begins - staff members of the same rank within an organization are getting different pay. This gives rise to a sense of inequity which, in turn, can seriously damage staff morale and harmony in the organization.

Because of this, even if the HA's pay adjustment mechanism is delinked from that of the civil service, its pay adjustments remain largely in line with those of civil servants. In fact, there have been cases in which the HA followed pay cuts meted out in the civil service. In such a situation, the demand by public hospital doctors for a pay rise is justified. It's more a matter of principle. This argument is articulated from the perspective of employees. But the government has its own clear position - there won't be any additional public funds for salary adjustments in the HA. Public funding for the HA is calculated according to established mechanisms. And since the HA's pay system has been delinked from that of the civil service, it's not appropriate for the government to provide "additional" funding to the HA for pay adjustments. This is again a matter of principle and for the sake of policy consistency. That the government stands firm on its decision does not mean it's unreasonable. It simply cannot make such a concession as there will be a huge negative impact. Such a concession would mean a failure in its current funding policy.

By taking a neutral stance, one can find both sides having their own difficulties and justifications. The core issue is that the HA has been relying too much on government funding as its main financial source. As a result, the HA and the government are always bracketed together. This limits the HA's ability to implement remuneration packages different from those of the government. With the HA's flexibility in salary adjustment being constrained, problems accumulate over time and will eventually explode when discontent reaches a critical stage. The HA seems to have settled the pay-rise controversy after it promised to use its internal resources to cover the salary hike demanded by doctors. On the surface, the government has not changed its policy, while the doctors have successfully fought for their rights. But it's highly doubtful such a practice can be sustained. Things must change at the very least - the HA needs to have diversified funding sources instead of relying mainly on the government.

Compared with other public institutions, the HA has a bigger problem of relying on a single funding source. The high proportion of government funding over its overall revenue undermines the HA's flexibility for resource allocation. For this reason, when the HA said it would deploy internal resources to cover the salary adjustment, it repeatedly emphasized that this was an exception and should not be seen as a precedent. The message is clear - it wants to manage expectations. In future, when the financial situation does not permit the HA to repeat such a concession, the concession made this time will not become a precedent.

In order to fundamentally solve the problem in the long term, we should really change the system although this is bound to hurt some vested interests. But there's a need to balance fairness and other considerations. Compensation management is an extremely sensitive issue, but visionary management should not leave the problem untouched.

(HK Edition 11/12/2015 page9)