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Bernard Chan

Improving efficiency has become a critical priority for governments worldwide, especially given rising financial pressures. In the United States, gross federal debt had surged to US$35.5 trillion by the end of last year, and servicing it accounts for 16 per cent of federal spending.
In response, the new Trump administration established the controversial Department of Government Efficiency (Doge) to reduce public spending. However, its lack of independent oversight and the concentration of power have ignited an intense debate over transparency and fairness. The fact that Doge’s “big bang” approach has alienated stakeholders also underscores the importance of fostering collaboration and a gradual implementation to ensure sustainable reform.
Hong Kong faces its own growing fiscal challenges. The freeze on civil service pay has reignited the discussion about public-sector compensation, an issue that dates back to the 1997 Asian financial crisis.
In response to pressure from the business community, the government initiated a review of the development of the civil service pay policy and system in Hong Kong. The resulting 2002 interim report and phase-one final report, to which I contributed, identified deep-rooted issues in the public-sector pay system and proposed a road map for reform.
Hong Kong’s civil service pay structure, modelled after the British system, was established to provide guaranteed security for low-paying public-sector jobs and attract talent. This formula-driven pay scale functioned during the city’s economic boom from the 1970s to the 1990s, a period when affordability was not a concern.
But, by the early 2000s, its relevance had diminished. In 2001, then-secretary for the civil service Joseph Wong Wing-ping noted a growing misalignment between civil service pay and private-sector benchmarks, and the outdated and inflexible nature of the adjustment mechanism, which no longer satisfied the demands of a modern and competitive economy.

The 2002 reports outlined clear solutions: linking pay adjustments to performance, introducing merit-based salary increases, and benchmarking public-sector salaries against private-sector standards. These recommendations included a phased, long-term strategy for modernising the system, beginning with incremental changes and ultimately transitioning to a more flexible and performance-oriented structure.
Despite widespread acknowledgement of these issues at the time, the proposed reforms were never fully implemented. Instead, Hong Kong has relied on piecemeal measures and minor adjustments, failing to address the core problem: a rigid, tenure-based pay system prioritising seniority over performance.
As a result, Hong Kong significantly lags behind global peers such as Singapore, which reformed its civil service decades ago. Linking salaries to market conditions and performance has created an efficient, accountable and sustainable civil service. This strategy has enabled Singapore to maintain fiscal discipline while cultivating a public sector that meets the demands of a modern economy.
In contrast, Hong Kong’s civil service remains bound by pay scales that include automatic annual increments which do not reflect individual performance. This misalignment between compensation and output undermines public-sector efficiency. It discourages high performers, rendering reform necessary and long overdue. Achieving meaningful change will require collaboration among all stakeholders, driven by a shared commitment to modernisation and sustainability.


Resistance to reform is understandable, and the process is inherently complex. Overcoming the challenges requires a phased, long-term approach that spans 15 to 20 years. By examining the gradual reforms implemented in Australia, Canada, New Zealand, Singapore and the UK, this strategy can achieve the desired balance between promoting innovation and ensuring stability.
For instance, linking pay rises to performance, benchmarking salaries rigorously against the private sector, and attracting top-tier talent from outside the civil service for leadership roles could lay the groundwork for deeper reforms. Such incremental steps could transform the civil service into a more efficient and adaptable institution.
Crucially, gaining buy-in from stakeholders takes time, but starting the process is essential. Like Doge’s approach, pushing through sweeping changes risks alienating stakeholders and deepening opposition.

Another critical area for reform identified in the 2002 reports was decentralising human resource management. This would enable departments to customise compensation and incentives to their specific needs, fostering flexibility, innovation and efficiency.
Unlike a rigid, one-size-fits-all pay scale, a decentralised system empowers managers to reward high performers, address underperformance and allocate resources strategically. While decentralisation presents challenges, such as ensuring fairness and consistency, these can be mitigated through strong oversight and clear guidelines.
Reform is never easy, but it is essential for establishing a sustainable and effective civil service. We must learn from missed opportunities and revisit public-sector pay system reform.
With hindsight, Hong Kong’s decision last year not to proceed with phase two of the 2002 reform plan reflects its shifting priorities. During the Asia financial crisis, pressure from the business sector prompted decisive government action. As the economy recovered and the sense of urgency diminished, the momentum for reform naturally slowed, with less focus on politically sensitive changes.
But the recommendations outlined in 2002 remain as relevant today as they were over two decades ago.


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The Hong Kong government’s headquarters in Admiralty on February 22. Photo: Edmond So

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Hong Kong’s Financial Secretary Paul Chan Mo-po holds a press conference at the government headquarters after delivering the 2025-26 budget on February 26. Photo: Elson Li

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The pay scales, which include automatic annual increments, are a misalignment between compensation and output that undermines efficiency


The pay scales, which include automatic annual increments, are a misalignment between compensation and output that undermines efficiency.


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Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Why Hong Kong must persevere with reforming civil servants’ pay

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The pay scales, which include automatic annual increments, are a misalignment between compensation and output that undermines efficiency

The pay scales, which include automatic annual increments, are a misalignment between compensation and output that undermines efficiency