Hong Kong’s public servants will get a blanket pay rise of 2 percent, backdated to April 1, the city’s Secretary for the Civil Service Ingrid Yeung Ho Poi-yan announced on Tuesday.

Yeung told a media briefing that the adjustment adhered to the city’s statutory pay-setting mechanism and reflected a balanced decision among multiple considerations.

The wage boost is expected to carry a total price tag of HK$6 billion ($765.6 million) in public funds, according to Yeung.

Factors included the special administrative region’s economic performance over the past year, the government’s current fiscal health, fluctuation in the cost of living, net pay trend indicators, and the need to sustain morale among government employees.

Yeung described the raise as a “reasonable adjustment” that would help lift morale and an affirmation of public servants’ work over the past year, as the SAR’s economy continues to grow.

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The latest World Competitiveness Yearbook 2025 from the International Institute for Management Development, an independent top-tier business school, ranked Hong Kong second globally for “government efficiency”, she cited.

Yeung said the current administration has sought to build an active government — one that “carries out its duties diligently, confronts challenges head-on, and implements measures to revive the economy and improve people’s livelihoods”.

The announcement followed last year’s pay freeze for the bureaucracy.

This year’s annual pay trend survey recommended net pay increases for the 2026-27 fiscal year of 4.12 percent for senior-level officials, 2.64 percent for mid-level officers and 1.17 percent for the rank-and-file.

The survey’s 2024-25 edition — the most recent prior edition, as it was suspended last year — suggested net raises of 4.01 percent, 4.32 percent and 5.47 percent, respectively.

Yeung noted that several public service unions had earlier suggested raises ranging from 3 to 4.12 percent.

But she said the government opted for the flat 2 percent increase partly due to current global geopolitical uncertainties that could jolt Hong Kong’s livelihoods in the short term.

“Hong Kong’s future development still requires substantial financial commitments,” Yeung said, adding that the administration must scrutinize its finances with greater prudence.

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The 2 percent increase, she reaffirmed, was a decision made by the local authorities in keeping with a “comprehensive assessment” of the present situation.

The pay raise comes on the heels of an earlier announcement by Hong Kong Chief Executive John Lee Ka-chiu that this year would see the introduction of a department head accountability system, as well as a strengthened public servant appraisal mechanism, slated to be phased in in October.

Both initiatives were first laid out in his most recent Policy Address.

Under the revamped appraisal framework, there will be a “guided distribution of rating”, whereby public servants must be spread across a fixed spectrum of ratings when assessed — from excellent to poor — to prevent a situation where the vast majority receive a satisfactory evaluation.

The worst-performing 5 to 10 percent of public servants will have their pay progression suspended for six months, and should their improvement fall short of targets again, that freeze will be renewed for an additional six months.

Lee, speaking separately on Tuesday, reiterated that the two measures were meant to enhance governance efficiency and that they are “complementary” to each other.

He noted that they are devised to give department heads the tools to build capable teams, thus delivering high-quality public services.

“A good public service team goes hand-in-hand with a clear reward-and-penalty system,” Lee said.

“An effective approach to performance appraisal is a key part of that system,” he added. “High achievers deserve praise. Those who fall short should be told to work harder. And poor performers should not get a pay raise.”

Contact the writer at wanqing@chinadailyhk.com