labour-insurance

Statutory Insurance for Employees by their Employer

Under the Employees’ Compensation Ordinance which is enforced and administrated by Labour Department, all Hong Kong employers are liable to compensate their employees who are employed by employment contract (regardless the place of employment, the length of services, their working hours, full-time or part-time employment) for their for work injury, occupational disease, and death in the course of their employment.

In addition, the ordinance protects oversea-stationed employees who are employed by employer in Hong Kong and by oversea employers who have business in Hong Kong.

Compulsory Insurance

Therefore, local insurance companies offer insurance to target the employers’ obligation of employees’ compensation, and the ordinance also compels all employers to purchase and maintain sufficient and valid compulsory insurance for all of their current employees, to cover employer’ liabilities under the ordinance and also at the common law in the event of employees’ injuries, disease, and death in the course of  their employment.

An employer who fails to secure an insurance is liable to a maximum fine of $100,000 and imprisonment for two years.

In the event of work accident on employee occurs, Employees Compensation Assistance Fund Board makes advance payment of compensation to the affected employees, but the illegal employer will be recovered by the board and the recoverable amount on the employer is unlimited subject to the court decision.

As prescribed in the ordinance, an employer cannot make any deduction from employee’s earning in order to undertake the cost of securing the compulsory insurance to the employee.

Minimum insurance coverage

For an employer having not more than 200 employees, the minimum amount of insurance cover per event must not less than HK$100 million; For an employer with over 200 employees, that amount should not less than HK$200 million.

The minimum amount of insurance cover above is not the maximum liability that the insured employer is required to bear. Therefore, the employer must carefully assess the possible risk and consult professional advice from the insurers for an amount more than the legal minimum amount.

Compensation payment

When an insured employer becomes liable to pay any employees’ compensation incurred by the ordinance as well as common law damages to his employee under an event of employee’s claim, such sum shall be payable by his insurance underwriter. However, the insurer’s liability per event is only up to the amount insured under the policy.

Annual premium

The amount of annual premium per employee is positively reflecting the level of the job risk and employer’s business nature, here are the general understanding of the charge:

  • Clerical officer: low risk, premium is usually below 1% of annual employee’s earning (i.e. if the total wages expense of a business is $1M, an annual premium is a few thousand dollars only.)
  • Scaffolding worker: high risk, premium rate is more than 30%.
  • Restaurant worker: medium risk, frequent but minor  accidents, premium rate is 2%.

Liability for Compensation

In general, if an employee is suffered from incapacity, an injury or dies as a result of an accident arising out of and in the course of his employment, his employer is liable to pay compensation under the ordinance even if the employee might have committed acts of
faults or negligence when the accident occurred.

Injury by Accident

Under some circumstances, employer is not liable to pay compensation, when:

  • employee hurts or kills himself deliberately;
  • the injury does not result in permanent incapacity nor incapacitate the employee from earning full wages at his normal work;
  • the injury is caused by an accident directly attributable to the employee’s addiction to drug
  • the injury is caused by an accident and at the time of accident under the influence of alcohol and does not result in death or serious and permanent incapacity

Occupational Disease

Before employing an employee in a trade or industry in which an occupational disease is prone to be contracted by employees, the employer can require to employee to undergo medical examination at the cost of the employer. On the contrary, the employees refused the examination may degrade their entitlement to compensation in the future events.

For employers, if the employee has been employed by more than one employer in the same or similar occupation over a prescribed period, all the employers may be responsible for paying the compensation.

Notification of Accidents

In the event of accidents that caused employees’ work injury, the injured employees and their employer should actively notice their employers and Labour Department respectively.

Employees

An injured employee should give notice in either verbal or written form to the employer or his supervisor as soon as possible. Otherwise, failing to give immediate notice may risk the claim of employees’ compensation.

Employers

The employer is presumed to have notice of an accident if the employee’s death on the place of employment.

The employer must make notice to the Labour Department of any accident or prescribed occupational disease within 7 days to 14 days irrespective of whether the accident or occupation disease gives rise to any liability to pay compensation.

Other than reporting to the Labour Department, an employer should also notify the insurer as soon as possible, within the stipulated period and in the specified format required by the insurer, when his employee sustains a work injury.

Conclusion

Under the law, an employer who failed to buy compulsory insurance for employees is subject to  a maximum fine of $ 100,000 and imprisonment for two years. Labour Department would try to provide assistance to employers to buy the insurance if they have difficulties to do so.