***********************************************************
Following is a question by the Hon Leung Kwok-hung and a written reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (November 15):
Question:
Regarding the problem of employers in the construction industry defaulting on employees' wages and Mandatory Provident Fund (MPF) contributions, will the Government inform this Council of:
(a) the respective numbers of complaints received in the past three years by the relevant government departments about employers in the construction industry defaulting on employees' wages, MPF contributions or both, together with the respective numbers of employers convicted consequently;
(b) the respective numbers of complaints involving public works projects received by the authorities about defaults on employees' wages and MPF contributions, since the Government implemented measures in all such projects to safeguard workers' rights and interests on May 1 this year; and
(c) any new measures to prevent employers in the construction industry from defaulting on wage payments or MPF contributions, and whether it will follow the Housing Authority's practice of adopting the On-demand Bond requirement, which was introduced last month, so that workers who are owed wages or MPF contributions by contractors or sub-contractors may recover the payments in arrears from the developers concerned directly?
Reply:
Madam President,
(a) The number of construction labour disputes recorded by the Labour Department (LD) involving more than 20 workers (these cases generally involved wage default) and prosecution actions taken against wage offences in the construction industry are set out as follows (LD does not have any breakdown by industry on labour claims involving 20 or fewer workers):
Calendar Number of Successful
Year complaints prosecution cases
received (number of summonses)
-------- ---------- ---------------------
2003 196 115
2004 141 116
2005 113 141
2006 95 208
(as at September)
Statistics on complaints related to default Mandatory Provident Funds (MPF) contributions in the construction industry received by the Mandatory Provident Funds Schemes Authority (MPFA) and the prosecution actions taken since 2003 are set out as follows:
Calendar Number of Successful
Year complaints prosecution cases
received (number of summonses)
-------- ---------- ---------------------
2003 2 042 164
2004 1 616 184
2005 1 418 155
2006 1 076 55
(as at September)
In accordance with the Mandatory Provident Fund Schemes Ordinance, the MPFA imposes a surcharge on employers who default in making MPF contributions. The surcharge received belongs to the employees and is credited into the employees' MPF accounts. Over 60% of the employers would rectify the situation after follow-ups by the MPFA. If the defaulting employers do not rectify the situation despite the MPFA's persuasion, the MPFA would institute civil actions against the employers to recover the outstanding MPF contributions. Where appropriate, the MPFA would take prosecution actions against or impose financial penalties on the defaulting employers. An employer who defaults in making MPF contributions, if convicted, is liable to a fine at level 6 ($100,000) and to imprisonment for 6 months on the first occasion; and to a fine of $200,000 and to imprisonment for 12 months on each subsequent occasion.
MPFA and LD do not have statistics on cases involving both wage and MPF contribution default at the same time. However, LD and MPFA liaise closely on the measures to tackle default on wages and MPF contributions.
(b) From May 1 to end September 2006, the LD recorded 18 labour disputes involving public works projects and more than 20 workers. MPFA does not have the statistics of the number of complaints involving public works projects.
(c) In addition to taking general enforcement actions, the MPFA liaises with the trade associations and labour groups of the construction industry regularly to step up publicity on MPF compliance and to encourage the employees to lodge complaints. The MPFA also visits construction sites to check for non-compliance. The MPFA has also stepped up its enforcement actions recently by imposing financial penalties on more defaulting employers. The amount of penalty is $5,000 or 10% of the default contribution amount, whichever is the higher. The construction industry is one of the industries covered under the MPF Industry Schemes. The Industry Schemes Committee set up under the MPFA, comprising members representing employers and employees, helps review MPFA's enforcement policies and their effectiveness from time to time.
Currently the MPF legislation requires the employers to enrol their employees in an MPF scheme and make contributions for them. It does not require any third parties to take up any MPF responsibilities. The MPFA notes that some developers in the private sector are implementing measures to ensure that the contractors and sub-contractors make MPF contributions in order to protect the workers' interests and rights.
The LD has set up an early warning system in collaboration with trade unions in the construction industry to gather intelligence on non-payment of wages. Trade unions will inform the LD whenever they are aware of any labour disputes so that the department can promptly provide conciliation service and follow up on the wage offences concerned.
The LD also actively takes out prosecution action against employers who default in payment of wages. To enhance the deterrent effect of the law on unscrupulous employers, the maximum penalty for wage offences has been substantially raised from a fine of $200,000 and imprisonment for one year to a fine of $350,000 and imprisonment for three years with effect from March 30, 2006. LD will from time to time review the effectiveness of the measures.
New monitoring measures incorporated into Government public works contracts as well as Housing department's building contracts since May 1, 2006 were as follows:
(i) installing a computerised smart card system at construction sites to keep records of workers' attendance;
(ii) requiring all on-site workers to enter into written employment contracts with their employers;
(iii) arranging for bank auto-payment in respect of wages and requiring main contractors to submit copies of wage payment records;
(iv) the employment of Labour Relations Officers (LROs) to handle complaints and to assist Labour Department in the investigation of complaints on arrears of wages;
(v) restricting subcontracting layers on specified work trades and work elements; and
(vi) requiring main contractors to be responsible for all arrears of wages in their construction sites. In cases of wage default, the Government has the right to utilise contract monies to make payment directly to the workers who are owed wages after the Labour Tribunal has awarded in favour of workers. The workers have the responsibility, however, to report the arrears of wages to the LRO within seven days after they are owed wages.
Main contractors under the public works contracts are responsible for all wage arrears of workers within the main contractor's site. This responsibility has no limitation and is higher than that imposed on the main contractor under the law. Government also has the right to utilise contract monies to pay wages held in arrears. As such, Government considers that there is no need for the on-demand bond requirement in public works contracts. Moreover, through the measures under (i) to (vi) above, any defaults in payment of wages and MPF contributions will be detected early hence there would be investigations and conciliations in the first instance. These measures could help resolve the problems associated with non-payment of wages and MPF contributions.
The new measures have been adopted in all newly tendered contracts since May 1, 2006. About 6 such contracts have commenced work recently. According to the record of Environment, Transport and Works Bureau, there have been no complaints received from these contracts in respect of non-payment of wages and MPF contributions. Government will make necessary adjustments to the measures as they are taken to full implementation in all public works contracts in the light of practical experience in order to enhance protection to construction workers. It is Government's intention to encourage private sector developers to do likewise if the above measures are proven successful upon implementation in order to completely tackle the problem with default of wages and MPF contributions in the construction industry.
Ends/Wednesday, November 15, 2006
Issued at HKT 12:34
NNNN
