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LCQ20: HKEAA's performance-based incentive scheme

     Following is a question by the Hon Chan Chi-chuen and a written reply by the Secretary for Education, Mr Eddie Ng Hak-kim, in the Legislative Council today (October 23):


     The Hong Kong Examinations and Assessment Authority (HKEAA) awarded a total of HK$7 million as performance-based incentives (bonuses) to 90 per cent of its staff in about half a year's time between November 2012 and April 2013.  There are comments that HKEAA has wasted public money and its request for government funding support was unreasonable. In response to the concerns of the community, HKEAA stated that the bonuses were awarded in order to retain experienced talents.  In this connection, will the Government inform this Council:

(a) whether it can give an account of the dates, reasons and amounts involved each time HKEAA awarded bonuses to its staff since 2009;

(b) whether it can explain if HKEAA has imposed a cap on the frequency and amount for awarding such bonuses; if HKEAA has, of the details; if not, the reasons for that;

(c) whether it can give an account of the annual number and ratio of HKEAA's staff turnover since 2009, as well as the posts involved;

(d) given that as HKEAA considered in 2010 that deficits would be incurred in its administration of the Hong Kong Certificate of Education Examination in 2011 and the Hong Kong Advanced Level Examination in 2013, it had requested the Government to provide it with a one-off funding support amounting to HK$90.65 million, but HKEAA subsequently recorded tens of million dollars of surpluses in 2011 and 2012, with the accumulated surpluses reaching HK$169 million, whether the authorities can explain the reasons for the substantial differences between the estimated and actual income and expenditure in the years concerned; and

(e) whether it can give an account of the ratios and priorities of HKEAA's various items of expenditure in 2011 and 2012, so as to illustrate if the award of bonuses twice within half a year at an aggregate amount of HK$7 million was an appropriate arrangement?



     My reply to the questions raised by Hon Chan Chi-chuen is as follows:

     The Hong Kong Examinations and Assessment Authority (HKEAA) was set up in 1977 under the Hong Kong Examinations and Assessment Authority Ordinance (HKEAAO) (Cap. 261).  It is an independent statutory body.  Its major function is to administer public examinations to cater for the needs of the local education system and society and assist in conducting professional and international examinations. According to Section 9 of the HKEAAO, the resources of the HKEAA consist of the fees paid by candidates sitting the public examinations or taking other examinations or assessments conducted by the HKEAA, payments received for services rendered by the HKEAA, subsidies provided by the Government to assist towards the cost of conducting public examinations, etc. The income of HKEAA is mainly derived from examination fees, followed by the sale of publications and provision of assessment services for individuals and organisations.

(a), (b) and (e)

     The financial planning of the HKEAA aims at ensuring the validity, reliability and fairness of examinations and assessment services. In 2011-2012, the total expenditure of HKEAA was about $536.7 million, of which about 44 per cent was on staff costs.  Expenses on other examination personnel and administrative and other operating expenses each took up a quarter of the total expenditure.  The remaining expenditure was on depreciation.

     The pay structure of the HKEAA has been delinked from the civil service and its pay level is determined with reference to that of the market without the provision of housing and education allowances, automatic annual salary increment, etc. In order to maintain a competitive pay structure, the HKEAA has implemented a performance-based variable component for the salary adjustment (i.e. "performance-based incentive scheme") since 2009.  Employees with outstanding performance are awarded an incentive based on the results of their performance appraisals.

     "Performance-based incentive", which is awarded once per year, is part of the remuneration and benefits structure of the HKEAA. It is paid in two installments to eligible staff. As an incentive to retain staff, the "performance-based incentive" will not be awarded to staff who resign prior to the award date of the incentive.

     The HKEAA Council, Human Resources Committee and Finance Committee review the expenditure on staff remuneration annually. Based on the overall performance and financial status of the HKEAA, the HKEAA Council makes decision on the need for salary adjustment and award of incentives, and determines the level of adjustment and the ceiling of such expenses.  The Council comprises members from the academic sector and the business sector, as well as representatives of the Government.

     The award of a "special one-off performance-based incentive" in 2012-2013 by the HKEAA was a one-off special arrangement. Due to the change of academic structure, the HKEAA had to administer the first Hong Kong Diploma of Secondary Education (HKDSE) Examination and the final Hong Kong Advanced Level Examination (HKALE) concurrently in 2012. The workload increased substantially. The increasing trend in staff turnover since 2011 which would very likely affect the operation of these two public examinations became a concern. To ensure that an adequate number of experienced staff would be available to implement the two large-scale public examinations, the HKEAA Council endorsed in principle the establishment of a "special one-off performance-based incentive" to boost staff morale.

     Upon the completion of the public examinations in 2012, the HKEAA Council, after reviewing the overall performance and financial status of the HKEAA in August, approved the award of a "special one-off performance-based incentive" to staff with satisfactory performance.  The incentive was paid in two installments in November 2012 and April 2013.

     The dates and the total amounts of "performance-based incentive" awarded between 2009-2010 and 2012-2013 are at Annex 1.

(c) The staff turnover rate of the HKEAA between 2009 and 2013 are at Annex 2.

(d) Upon the development of the new academic structure, the HKEAA conducted the last Hong Kong Certificate of Education Examination (HKCEE) and HKALE for private candidates in 2011 and 2013 respectively.  As HKEAA projected that there would be huge deficits due to the sharp decrease in the number of candidates sitting for the examinations, it applied for a grant from the Government to avoid the need for the candidates to bear high examination fees. The Finance Committee of the Legislative Council approved the creation of a commitment with the ceiling capped at $90.65 million to cover the deficit for conducting the two examinations. The grant is disbursed to HKEAA on a reimbursement basis.  

     With prudent control of cost, the total expenditure for 2011 HKCEE was less than the estimated amount, and the actual deficit incurred was about $35 million. While the financial account of 2013 HKALE is being finalized, HKEAA estimated that the deficit incurred in 2013 HKALE would be about $37.4 million, and the estimated amount of grant to be disbursed would be around $30 million after offsetting by the surplus from 2012 HKALE as agreed in the grant agreement.

     In 2011-2012, the HKEAA recorded a surplus of $63.89 million.  It was mainly due to the higher than estimated income from the professional and international examinations.

Ends/Wednesday, October 23, 2013
Issued at HKT 14:56


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