Employees Compensation Insurance
Like most Western countries, Hong Kong has labour laws requiring employers carry insurance to protect employees against workplace injuries. Employees Compensation Insurance (also commonly referred to as EC Insurance) is mandatory under Hong Kong Employee’s Compensation Ordinance enacted by the Labour Department.
According to this ordinance, any Hong Kong employer, whether corporation or individual, employing at least 1 person must carry Employees Compensation insurance. This insurance protects both employee and employer in the event an employee is injured or becomes ill due to work related activities. Failing to comply with this legal code can result in severe financial penalties for your business.
For business owners who do not completely understand the ordinance or have unanswered questions regarding its content or requirements, the following is a list of the most frequently asked questions about the Employee’s Compensation requirement in Hong Kong.
What Does Employees Compensation Insurance in Hong Kong Cover?
Employees Compensation Insurance in Hong Kong provides cover for any employee who becomes injured or ill as a result of job-related activities. For example, if one of the servers in your restaurant accidentally spills hot tea on themselves while bussing a table, your Employee Compensation policy would cover your liability for the waiter’s injuries including their medical bills, etc.
The minimum limit that must be purchased by a business with less than 200 employees is HK$100 million. If you have a business that employs more than 200, then you are required to purchase a minimum limit of insurance of HK$200 million. These are just minimum limits employers are required to purchase, the actual action amounts paid out to employees that are injured in the course of their duties vary based on age, severity of the injury, and numerous other factors.
Generally speaking, employers are liable for injuries their employees sustain while in the course of their employment. So it’s important to note that this cover isn’t just meant to protect employees. It also protects the employer, as the insurance company will now protect them against liability for the costs of workplace injuries or illnesses to employees.
Must I Provide Employees Compensation Insurance For Part-Time Workers Or Seasonal Workers?
Yes, the Hong Kong Ordinance specifically states that all employees must be covered. This means that there are no exception for part-time workers, seasonal workers, employed family members, contract employee, apprentice, or a local domestic helper.
Is It the Employer’s Responsibility to Report an Injury or Illness?
When an employer is made aware of a work-related injury or illness, they must file a report with the Commissioner for Labour and the insurer providing cover. The employer should also keep detailed records of the event and the compensation actions of the insurer. For detailed information, and the appropriate forms, employers should visit the Hong Kong Labour Department.
Can I Deduct My Cost Of Insurance From Employee Wages?
No. The cost of Employees Compensation Insurance must be paid fully by the employer so no deductions are allowed.
Are There Penalties For Not Having EC Insurance In Place?
Any business with at least one employee who fails to comply with the Employees Compensation ordinance has committed an offence and can be liable for a fine of up to HK$100,000 and in the worst cases: imprisonment for up to two (2) years. The employer may also be forced to pay a surcharge to the Employee’s Compensation Assistance Fund.
With stakes this high, it makes sense to make sure you’re compliant with these statutory requirements.
What if I can’t get Employees Compensation Insurance in Hong Kong?
If you’re running a business that’s classified as “High Risk”, you may not be able to get EC Insurance coverage from a regular insurer. If you’ve been denied by 3 different insurance companies or been quoted premiums over 30% the standard market rate, you would be able to get EC insurance through the Employees’ Compensation Insurance Residual Scheme Bureau.
Other Issues to Consider
Hiring/Firing
Since employees come and go, it is the business owner’s responsibility to notify the insurer of periodic changes to your roster.
Job Classifications
Employee’s Compensation rates are based on the job classification of each employee so the employer should be specific about each employee’s job tasks when completing the application for insurance.
Employees working outside of Hong Kong
Employers must list any employees that work outside of Hong Kong either temporarily or permanently.
Subcontractors
For hired subcontractors, make certain that you retain a certificate of insurance from their Employee’s Compensation insurer.
Minimum Limit for Employee Compensation Insurance
Although the minimum coverage required is HK$100 million, employers should consider buying more coverage to mitigate their risk.
Do I Need Employee Compensation Insurance In Hong Kong?
Yes. As a business owner, it is incumbent upon you to know and understand employment ordinances put forth by your government. Whenever you are in doubt, contact your insurance broker for details regarding your business and the laws or ordinances that may affect your business operation.
Speak to your Trusted Union insurance adviser to get a free no obligation quote or learn more about the EC ordinance and your employee’s compensation insurance coverage.
Employee Compensation Insurance FAQ
What Is an Employer’s Legal Responsibility in Hong Kong?
Like in most Western countries, employers in Hong Kong are responsible for the wellbeing of their employees. Not only is this good business practice to improve retention, morale and productivity, it is a legal requirement.
In general, employers in Hong Kong are legally liable to employees for workplace injuries – even if it’s the employee’s own fault. For example, if a warehouse worker hurts his back moving boxes that were clearly too heavy for them, the employer is liable for their injuries – even though this injury was partly the fault of the employee exercising poor judgement. That means your business is responsible for paying for rehab, medical bills, lost wages, etc. The idea is that if employers are benefiting from the labour of their employees, they should be responsible for their health as well. An employer also likely has more money as well.
But there are exceptions to this rule. We’re not lawyers and can’t give legal advice but generally speaking, an employer isn’t liable under 3 situations:
1. An employee misuses company property. For example, if an employee uses the company’s forklifts to race around the warehouse, you would not be responsible for their injuries.
2. An employee is on a “frolic of their own”. If an employee is out making a delivery and is injured, you would be liable. But if they decide to make an unauthorized stop to pick up lunch and is injured there, you wouldn’t be liable as they were on their own time.
3. An employee delegates the task to someone else without your permission.
What Is the Employees’ Compensation Ordinance (Ec Ordinance) in Hong Kong?
The Employees’ Compensation Ordinance, sometimes called the EC Ordinance, formalizes the legal requirements of employers to protect their employees. Enacted by the Hong Kong Labour Department, it stipulates a whole bunch of things but most importantly, it requires that all employers in Hong Kong carry Employees’ Compensation insurance to ensure that businesses have the funds necessary to compensate employees for their injuries.
What Is Employees’ Compensation Insurance?
Employee’s Compensation insurance in Hong Kong is a type of liability policy that protects employers against liability arising out of employees injured on the job. If you employ people in Hong Kong, you must buy this.
If employees are injured while in the course of their duties, employers are responsible for their injuries. Depending on the type of work being done and the extent of injuries, the amounts an employer would be liable to pay could be extremely high.
To protect against the crippling financial effects of employee injuries, business owners are required to purchase Employees Compensation insurance which steps in to pay for things like medical bills, rehab, lost wages, etc.
Do I Need Employees’ Compensation Insurance?
Yes, all employers (businesses with one or more employees) in Hong Kong are required to purchase Employee’s Compensation insurance. This includes domestic workers, part-time or even seasonal workers.
What Are the Penalties for Not Carrying Employees’ Compensation Insurance?
If you don’t carry Employees’ Compensation insurance that satisfies the legal requirements of the EC Ordinance, you can face fines of up to HK$100,000 and imprisonment of up to two (2) years. This is a very serious offence and you should always ensure you have adequate employees’ compensation insurance in Hong Kong.
What Are the Minimum Requirements of the EC Ordinance?
According to the EC Ordinance in Hong Kong, employers with less than 200 employees are required to purchase a limit of insurance of at least HK$100 million. If you employ more than 200 employees, you need to purchase at least HK$200 million.
But keep in mind that this is just the minimum and may not be enough to fully compensate employees for their injuries. Employers worried about this are encouraged to purchase a bigger limit of insurance.
Are Domestic Workers, Overseas Workers, Part Time or Seasonal Workers, and Subcontractors Required to Be Insured?
Yes they are. Domestic workers like maids or nannies still count as employees and must be insured. Same goes with part-time and seasonal workers. Employees of Hong Kong-based companies working overseas as also required by the EC Ordinance to be insured as well. You also need to list all employees working outside of Hong Kong on a temporary and permanent basis.
Subcontractors are a special case. You don’t need to purchase EC insurance for them but you should ask their employer for a copy of their insurance.
Can Employers Deduct Employees’ Salaries to Pay for Employees’ Compensation Insurance?
No, the employees’ compensation ordinance expressly prohibits deducting employee salaries to pay for their insurance. To do so is a violation of the EC Ordinance and comes with penalties.
What If I Can’t Get EC Insurance?
If you run a business classified by EC insurers as “High Risk” you may not be able to get EC insurance coverage through regular insurers. The folks who drafted the EC ordinance were smart enough to account for this possibility.
If you have been denied by 3 different insurance companies or have been quoted premiums 30% over the standard market rate, you can get EC insurance through the Employees’ Compensation Insurance Residual Scheme Bureau.
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