Employees' Compensation Insurance: A Hong Kong Legal Duty

At a glance

The cover required, reporting deadlines and penalties are as set out in the Employees’ Compensation Ordinance and as most recently published by the Labour Department.

”They only worked two days” — still covered

That is the most common reason given for a gap in cover.

The law sets no minimum for hours, length of service or position. If you engage someone to help move goods for two days and they work under your direction, they are your employee and they need cover.

The categories most often missed in practice:

• Part-timers and casuals — assumed to be “not proper staff”
• Employees on probation — assumed not to count until probation ends
• Short project workers — assumed to be “a one-off”
• Relatives helping out — assumed not to need “that level of formality”

The first three carry the same risk as full-time staff. The fourth is particularly dangerous: you assume a relative would never pursue a claim, but once medical costs mount, family relationships do not hold.

What actually happens without it?

Two layers.

Layer one: criminal liability. Failing to take out employees’ compensation insurance is a criminal offence, punishable by fine and imprisonment. This is not an administrative penalty; this is court.

Layer two — and usually far more expensive: you pay the compensation yourself. The obligation to compensate an injured employee does not go away. With insurance, the insurer pays; without it, you do.

Compensation for a work injury can include periodical payments (income while the injured person cannot work), medical expenses, and compensation for permanent incapacity. In a serious case, the amount is enough to close a small company.

Which is to say the decision to save on a premium has, at worst, the whole company as its price.

What to look at in the cover and the policy

A few things to watch when taking out cover:

Report the number of people and the nature of the work accurately. The policy is priced on the number and nature of employees you declare. Under-declaring headcount, or declaring clerical work where the job actually involves heavy lifting or working at height, can lead to a dispute when something happens.

The cover has to meet the statutory requirement. The Ordinance prescribes the level of employer’s liability cover, depending on the number of employees. The cheapest policy may not meet it.

Tell the insurer when headcount changes. Taking on a few more people mid-year, or a change in the nature of the work, means the policy has to be updated — not left until renewal.

The safe approach: one call every time headcount changes. The cost is a phone call; the return is peace of mind.

An employee has been injured — what has to happen now?

This is the one part where time genuinely matters.

One: look after the injured person first. Get them medical attention and think about nothing else.

Two: report to the Labour Department within the statutory period. Work injuries carry statutory reporting requirements and deadlines, and late reporting can be prosecuted. The deadline depends on the nature of the case, so check as soon as you hear.

Three: notify the insurer. As early as possible, so they can take it on.

Four: keep records. What happened, who was present, what the injured person was doing that day, the medical documents — keep all of it. It will be needed when liability is worked out.

What not to do: settle privately with the injured person and not report it. That does not make the statutory duty disappear; it adds a failure-to-report problem on top.

How this sits with your other duties as an employer

Employees’ compensation insurance is one item; alongside it sit MPF and the protections under the Employment Ordinance.

The three are administered by the insurer, the MPFA and the Labour Department respectively, and none of them will remind you about the others. So when you hire your first person, set all of it up at once and repeat the same process on every hire after that.

Two industries need particular attention: renovation and construction has its own construction industry levy and subcontractor management requirements — see setting up a renovation and construction company; and catering has its own licensing and staffing arrangements — see what to sort out before opening a restaurant.

This is not the item to save on

Most employer duties come down in the end to a balance of cost and convenience. Employees’ compensation insurance does not — the premium is small next to other operating costs, and the worst case of going without has no ceiling.

Want someone to keep on top of the filings and contributions that come with hiring? Talk to us.

This is general information and does not constitute legal or insurance advice. The cover required, reporting deadlines and penalties are as set out in the Employees’ Compensation Ordinance and as most recently published by the Labour Department; for an actual injury case, consult a professional immediately.