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					 Experience Sharing on
Exploitation of Non-skilled
   Workers Engaged by
   Government Service
       Contractors

        20 October 2006


       Labour Department
                           1
             Outline
A. Malpractices of government service
   contractors
B. How to tackle contractors’ malpractices
     a. Implementing SEC
     b. Strengthening government’s role of
        monitoring contractors
     c. Stepping up enforcement
C. Points to note for procuring
   departments
D. Cases for discussion
E. Recommendations
                                             2
A. 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.


                                               3
A. 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.




                                                        4
A. 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.


                                             5
B. How to tackle contractors’
   malpractices?

 A three-pronged approach is adopted:
    a. Implementing SEC
    b. Strengthening government’s role
       of monitoring contractors
    c. Stepping up enforcement


                                   6
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
                                             7
b.   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




                                          8
c.   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


                                                   9
Offences and Penalties
             Offences
      (Employment Ordinance)          Maximum Penalties


   Failing to grant/pay rest        Fine of $50,000
   days/statutory holidays/annual
   leave/
   Failing to pay long service
   payment/severance payment
   Illegal deduction of wages       Fine of $100,000 and 1
                                    year imprisonment


   Late payment of wages/non-       Fine of $350,000 and 3
   payment of wages                 years imprisonment



                                                        10
Offences and Penalties

           Offences
   (Employees’ Compensation                     Maximum Penalties
          Ordinance)
 Dismissing an injured employee during sick   Fine of $100,000
 leave or before the issue of relevant
 certificate of compensation

 Late payment/ non-payment of periodical
 payments

 Failing to take out a policy of              Fine of $100,000 and 2
 insurance for employees                      years imprisonment




                                                                       11
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


                                                      12
C. 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



                                       13
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




                                         14
 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
                                      15
Expiry of service contract
  i.  New service contract will be awarded to the
      same contractor
       Whether salary and employment
         benefits have been reduced
  ii. 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

                                            16
D. 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)




                                               17
D. 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)




                                                18
D. 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)




                                             19
E. 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


                                                 20
   Q&A

THANK YOU!!




              21