Employees Compensation Insurance in Hong Kong: What Employers Must Know

Hong Kong Employees Compensation Insurance Compulsory Requirements

Every employer carrying on business in Hong Kong must take out and maintain a valid employees’ compensation insurance policy under the Employees’ Compensation Ordinance (Cap. 282). The obligation is absolute. It applies regardless of the number of employees, the hours they work, or whether the employment is full-time, part-time, casual or temporary. Non-compliance carries significant penalties.

The Employees’ Compensation Ordinance (Cap. 282) establishes a no-fault liability system. An employer is liable to pay compensation to an employee who suffers a work injury or contracts an occupational disease arising out of and in the course of employment, regardless of fault. The insurance policy must cover this statutory liability.

Hong Kong EC Insurance Compulsory

Section 40 of the Employees’ Compensation Ordinance (Cap. 282) sets out the requirement. Every employer must take out a policy with an insurer authorised by the Insurance Authority to cover its liability under the Ordinance. No exemption exists for small businesses, start-ups or employers with only one employee.

The policy must cover the full amount of the employer’s potential liability under Cap. 282. This means compensation for work injuries, occupational diseases, and the costs of any proceedings. The minimum sum insured is HK$100 million per event for employers who carry on business in Hong Kong. The Labour Department recommends a higher limit for employers with larger workforces or higher-risk operations.

An employer who fails to take out or maintain the required insurance commits an offence. The maximum penalty on conviction is a fine of HK$100,000 and imprisonment for two years. The court may also order the employer to pay compensation to any employee who suffered loss as a result of the failure to insure.

Hong Kong Employer Insurance Requirements

The employer insurance requirements under Cap. 282 extend beyond purchasing a policy. The employer must ensure the policy is in force for the entire duration of each employee’s employment. If a policy lapses or is cancelled, obtain a replacement immediately.

The policy must be issued by an insurer authorised to carry on employees’ compensation insurance business in Hong Kong. The Insurance Authority maintains a list of authorised insurers and publishes it on its website. Verify the insurer’s authorisation status before purchasing a policy.

The employer must display a notice of the insurance policy in a conspicuous place at the workplace. The notice must state the name of the insurer, the policy number, the period of insurance cover and the principal place of business of the employer. The Labour Department provides a standard form of notice for this purpose.

Keep a copy of the insurance policy and the premium receipt at the principal place of business in Hong Kong. These documents must be produced for inspection on demand by a Labour Department inspector or a police officer.

Hong Kong Employees Compensation Ordinance

The Employees’ Compensation Ordinance (Cap. 282) is the primary legislation governing compensation for work-related injuries and occupational diseases in Hong Kong. The Ordinance applies to all employees engaged under a contract of employment or apprenticeship, whether the contract is for manual labour, clerical work or any other type of work.

The Ordinance provides a scale of compensation for different types of injury. Compensation is calculated as a percentage of the employee’s monthly earnings, subject to statutory minimum and maximum amounts. The scale covers permanent total incapacity, permanent partial incapacity and temporary incapacity.

For occupational diseases, the Ordinance lists specified diseases and the types of employment that give rise to them. If an employee contracts a listed disease while working in the relevant employment, the disease is deemed to have arisen out of and in the course of employment. The employer is liable to pay compensation.

The Ordinance also provides for the payment of medical expenses. These include the cost of treatment, hospitalisation and rehabilitation. The employer must pay the medical expenses up to a statutory limit, which is adjusted periodically.

Insurance Coverage and Scope of the Policy

The employees’ compensation insurance policy must cover all employees of the employer. This includes those who work outside Hong Kong if the contract of employment is made in Hong Kong. It also includes employees temporarily assigned to work outside Hong Kong, provided the period of overseas work does not exceed the limit specified in the policy.

The policy must cover the employer’s liability for compensation under Cap. 282. That liability encompasses four categories: compensation for work injuries sustained during the course of employment, compensation for occupational diseases listed in the Ordinance, medical expenses incurred as a result of a work injury or occupational disease, and legal costs and expenses incurred in defending or settling a claim.

The policy must not contain any exclusion or limitation that would reduce the cover below the minimum required by the Ordinance. Any such exclusion or limitation is void and of no effect.

Claim Procedure and Employer Obligations

When an employee suffers a work injury or contracts an occupational disease, notify the Labour Department within 14 days of the incident or diagnosis. Use the prescribed form, available from the Labour Department’s offices or website.

The employer must also pay compensation to the employee within the time limits specified in the Ordinance. If the employer fails to pay compensation when it is due, the employee may apply to the Labour Department or the District Court for an order requiring payment.

Keep a record of all work injuries and occupational diseases. The record must include the date of the incident, the nature of the injury or disease, and the amount of compensation paid. Retain these records for at least two years after the incident.

Penalties for Non-Compliance

Failure to comply with the compulsory insurance requirements under Cap. 282 carries serious consequences. The maximum penalty for an employer who fails to take out or maintain the required insurance is a fine of HK$100,000 and imprisonment for two years. The court may also order the employer to pay compensation to any employee who suffered loss as a result of the failure to insure.

Beyond the criminal penalty, the employer may be liable to pay compensation directly to the employee if the insurance policy is not in force. The employer bears the full cost of any compensation award. In cases of serious injury or death, that cost can be substantial.

The Labour Department actively enforces the compulsory insurance requirements. Inspectors may visit workplaces to check that the insurance policy is in force and that the notice of insurance is displayed. Employers who cannot produce a valid policy on request may be prosecuted.

Practical Steps for Employers

To comply with the compulsory insurance requirements, take the following steps:

1. Purchase an employees’ compensation insurance policy from an authorised insurer before employing any person
2. Ensure the policy covers all employees, including part-time, casual and temporary workers
3. Display the notice of insurance at the workplace in a conspicuous location
4. Keep a copy of the policy and premium receipt at the principal place of business
5. Renew the policy before it expires and maintain continuous cover
6. Notify the Labour Department of any work injury or occupational disease within 14 days
7. Pay compensation promptly when it is due

Review your insurance cover regularly. It must remain adequate for your workforce and operations. The Labour Department provides guidance on the compulsory insurance requirements. Contact the Department for advice if you are unsure about your obligations.