Employee Compensation (EC) insurance is not just another item on your business checklist—it’s a legal requirement for all registered companies in Hong Kong, including your employees. In this comprehensive guide, we will navigate the critical facets of Employee Compensation insurance, shedding light on its definition, eligibility, coverage, costs, limits, and the undeniable importance it holds for your business.
- Unveiling Employee Compensation (EC) Insurance
At its core, Employee Compensation (EC) insurance in Hong Kong acts as a protective shield for businesses, guarding them against liability in cases where employees sustain bodily injuries during their job duties. This pivotal insurance falls under the jurisdiction of the Employees’ Compensation Ordinance (ECO) Chapter 282, compelling employers to provide coverage for their employees’ work-related injuries and specified occupational diseases.
While the core structure of EC insurance policies remains consistent across companies, the flexibility for tailoring coverage through specific extensions allows you to adapt it to your unique business needs. EC insurance can be acquired as a standalone policy or as part of a comprehensive “Business Package” insurance plan, catering to the diverse requirements of your business.
- Who Qualifies for EC Insurance?
The ambit of the ECO extends to encompass all registered businesses in Hong Kong that engage individuals in tasks and compensate them for their labor. This inclusivity extends to employees across various categories, whether they are permanent, temporary, on trial, or working under hourly or seasonal contracts. Astonishingly, the ECO even covers domestic helpers and the company’s founder if they receive a salary. Additionally, the ECO applies to employees of local employers in Hong Kong, irrespective of whether they are working within or outside the city.
- A Closer Look at Coverage
Under the ECO’s protective umbrella, when an employee sustains an injury while engaged in job-related tasks, the employer is generally obligated to provide compensation. Remarkably, this obligation stands strong even when the employee’s actions may have contributed to the accident due to fault or negligence. Furthermore, employees suffering from occupational disease incapacitation are entitled to compensation. It’s worth noting that some accidents occurring beyond the workplace, such as during first aid training or while commuting during weather warnings, may still fall within the scope of the ECO.
- Navigating Costs
The cost of EC insurance hinges on several factors, including your industry, the annual salary levels of your employees, and your claims history. Premium rates can span from 0.15% to 2% of the annual salary, with specific higher rates applying to certain high-risk occupations.
- The Limit of Protection
For businesses with fewer than 200 employees, the limit of insurance protection stands at 100,000,000 HKD per event. Conversely, larger companies with more than 200 employees enjoy an extended limit of 200,000,000 HKD per event.
- The Crucial Significance
Why is EC insurance an absolute necessity? Firstly, failing to secure EC insurance can lead to severe repercussions, including a maximum fine of HKD 100,000 and imprisonment for up to 2 years. Moreover, under the ECO, employees are not required to prove the employer’s fault to claim statutory compensation for work-related accidents, making it highly probable that employers will have to compensate their employees.
While common law damages necessitate employees to prove employer negligence, the possibility of pursuing compensation for work-related accidents still exists. However, the burden of proof is considerably higher in such cases.
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