Wages as a motivating factor
Founded in 1901, CLP is the major energy company in Hong Kong; it is providing a highly-reliable supply of electricity to 80% of the city’s population while also investing in the energy sector across the Asia Pacific regions (Mainland China, India, Southeast Asia, Taiwan and Australia), including power generation, transmission and distribution, and electricity and gas retail activities.
Committed to deliver high quality services CLP also requires motivated employees and human resources of high quality. Wages represent a key element in this strategy that it is trying to boost through a motivating wage structure and also wage levels above the market.
Wage practices well beyond legal requirements
While Hong Kong labor law does not set specific requirements regarding overtime work including any requirements to pay for overtime work, the law states nevertheless that if the employment contract provides payment for overtime work, the employer is legally obliged of doing so and will be subject to a fine for withholding wages.
A study by the HK Labour Department has shown that the average number of working hours in a week was 47 and that only one-half of employees in HK were compensated for their overtime hours, with only lower-skilled and lower-paid workers in labor-intensive industries being more likely to be paid for their overtime work – high skilled workers in high-value added industries being much less likely to be compensated for overtime.
CLP has put in place a clear policy of overtime payment although this is not requested by legislation. It is also currently studying how to further strengthen the coherence of this working hours policy by categories of employees.
CLP also performed well in terms of payment of wages since there were no non-compliance issue found on wage payment for CLP’s both permanent and contracted employees.
In terms of minimum wage, it was very positive that not only 100% of employees were found to have a starting wage above the minimum wage (7,121 HKD at the moment of the assessment), but that the starting wage was found to start at 1.6 times the legal minimum wage for employees with a temporary contract < 2 years, and approximately at 1.8 times for those with a temporary contract > 2 years while it exceeds the double of the legal minimum wage for permanent employees.
Payments comparing well to market rates
CLP does regular benchmarking once every two years on wages against market rates. The most recent one was conducted in February 2018. External consultants are hired to provide information on market rates, particularly for specific jobs in similar sizeable companies and for the positioning of CLP’s wage levels. While CLP policy is to pay at the median wage in the market, in reality it was found to be above, something that was confirmed by the Fair Wage assessment.
In addition to benchmarking current CLP wage levels against companies of similar size and in similar industries, CLP also tries to benchmark aggregated wage increase in the last five years with other companies.
It also has a policy of wage adjustments. Each year an average annual increase of employees’ basis wages is proposed by the top management of CLP Holdings and approved by the HR&RC after taking into both external and internal considerations. It includes the macroeconomic conditions such as Consumer Price Index, market voluntary turnover rates and pay trends. CLP also considers internal factors such as pay positioning in the market, voluntary turnover rate and company economic results.
Wages related to performance
The pay policy for the CLP Group is based on a Total Remuneration concept which comprises a base salary, annual incentives and the company contribution to retirement benefits.
CLP has a pay and grade structure which defines the minimum and maximum remuneration for each grade to reflect jobs of comparable sizes within the same grade. At the same time, individuals’ experiences and performance at work would affect their actual remuneration.
In particular CLP put in place an Annual Incentive Program (AIP) for permanent employees and contracted employees with two years and above, which are defined on the basis of two indicators – of Organizational Performance and of Individual performance that are determined by the Performance Management System (PMS). Contracted employees with less than two-years are also entitled to an individual incentive that is only determined by an individual performance rating at the end of the year.
The design of the annual incentive plan allowed the company to reward employees with annual incentive above the target level to recognize their good performance. It also represents a good additional source of income.
Towards a living wage strategy
Through a regular Employee Opinion Survey, CLP asks employees questions about rewards and recognition. The results show that in general, the employees believe they are paid well compared to wages provided by other companies, and that they are also paid enough for ensuring their family needs. This was confirmed by our Fair Wage assessment that highlighted that most employees were paid above the living wage thresholds currently existing for HK.
At the same time, CLP does not seem at the moment to have a specific policy aimed at addressing the living wage issue, something that it decided to address soon through a living wage strategy. In particular, it would be important to have CLP comparing systematically wages for all its individual employees to living wage thresholds. CLP could also envisage to carry out a survey to better identify the living costs situation of their employees, the categories and profiles (also according to their family status) of employees that are more at risk, and the type of expenditure that they have most difficulties to cover.
This could provide very useful information to further strengthen wage practices and pay systems at CLP both in their monetary and non monetary components. A number of fringe benefits or other facilities might for instance be envisaged to improve the well-being of CLP employees and their families.
A living wage strategy would thus well complement the comprehensive and ambitious wage policy that the company currently has. At the same time the current wage adjustment process could more closely involve workers’ representatives with the trade unions also being involved in this process.
More regular discussions with workers’ representatives and their involvement in the implementation and monitoring of CLP wage policy would also progressively improve social dialogue in the company, and well complement the good communication policy it has put in place.