Employee’s Compensation Insurance in Hong Kong refers to the compulsory insurance coverage that all employers must obtain to cover their liabilities under the Employees’ Compensation Ordinance (ECO). This insurance ensures that if an employee is injured or falls ill due to work, the employer has an insurance policy to pay the required compensation (medical costs, lost wages, disability or death benefits) as mandated by law. It is a critical risk management tool that both protects employees and shields employers from potentially crippling injury claims.
Legal Requirement and Purpose
Under Section 40 of the Employees’ Compensation Ordinance (Cap. 282), every employer in Hong Kong is legally required to have a valid employees’ compensation insurance policy for all employees . This requirement applies no matter the employment period or hours worked – full-time, part-time, temporary, and seasonal employees all must be covered from day one of employment . The insurance covers the employer’s liability both under the statute (no-fault compensation as per ECO) and under common law (if the employee sues for negligence). The primary purpose is to guarantee that funds are available to compensate employees who suffer work-related injuries or occupational diseases, thereby providing financial protection to injured workers and their families. At the same time, it protects employers by transferring the financial burden of claims to an insurer (aside from the policy premium).
Coverage and Benefits
Employees’ Compensation Insurance policies typically cover a broad range of work-related injury and illness costs. This includes:
• Medical expenses for treatment and rehabilitation arising from a work accident or occupational disease.
• Loss of earnings compensation: if an injury causes an employee to be out of work, the insurance covers the periodical payments for temporary incapacity as required by ECO, as well as lump-sum compensation for any permanent disability or for the family in case of a fatal injury.
• Legal costs: If an employee or their family pursues a claim, the insurer covers the legal expenses of handling the compensation claim.
• Third-party liability: any civil damages the employer is liable to pay (e.g. in a negligence lawsuit by the injured employee) are generally covered within the policy limits.
In essence, the insurance ensures that employees receive the statutorily required compensation (for example, medical fees, 4/5 of their wages during sick leave, lump sums for disability or death as calculated by ECO schedules) without the employer defaulting. It is a “no-fault” coverage – employees are compensated regardless of fault, and in return, the amounts are limited to those in the ordinance.
Minimum Cover and Compliance
Hong Kong law stipulates minimum coverage amounts that an employees’ compensation insurance policy must provide. For employers with up to 200 employees, the policy must cover at least HK$100 million per event; for those with more than 200 employees, at least HK$200 million per event is required . These high coverage limits reflect the potentially large liability in worst-case scenarios (e.g. a major industrial accident). Employers cannot charge employees for any part of the insurance cost – it is strictly the employer’s expense (any attempt to deduct insurance costs from wages is illegal) .
Failure to secure this insurance is a serious offence. An employer who does not have employees’ compensation insurance in place is liable on conviction to a fine of up to HK$100,000 and imprisonment for up to 2 years . In addition, an uninsured employer may be required to pay a surcharge into the government’s Employees Compensation Assistance Fund, which helps cover unpaid claims . The government publicizes offending employers, and the consequences of non-compliance can be both financial and reputational.
In practice, employers purchase this insurance from authorized insurers annually or as part of their business insurance package. For small businesses, the cost is often based on payroll size and industry risk. It’s important for employers to update their policy if their staff numbers or job nature changes, to maintain adequate coverage . From an HR/legal standpoint, keeping a valid Employees’ Compensation Insurance policy is not just a legal necessity but a vital protection for both the workforce and the company’s financial health.
