Employees’ Compensation Insurance
Employees’ Compensation covers all work related injuries regardless of length of service or employment status.
In Hong Kong, the Employment Ordinance legally requires all companies to take out Employees’ Compensation Insuranceto cover their liability in the event that their staff suffers an injury or illness during the normal course of their work. Employees’ Compensation covers all work related injuries regardless of length of service or employment status: full or part time, permanent or temporary. You are considered an employer when you engage with someone to do a task and agree to pay them. Even if you are the only person working for a limited company and do not receive a salary, you are still defined as an employee and the company legally requires Employees’ Compensation.
According to section 40 of the Ordinance,“no employer shall employ any employee in any employment unless there is in force a policy of insurance to cover their liabilities both under the Ordinance and at common law for injuries at work in respect of all their employees, irrespective of the length of employment contract or working hours, full-time or part-time employment. Should there be any queries on legal liability, employers should seek professional legal advice.”
The minimum insurance cover required is HK$100 million for companies with less than 200 employees and HK$200 million for companies with more than 200 employees.
An employer who fails to comply with the Ordinance to secure an insurance cover commits an offence and is liable on conviction to a maximum fine of $100,000 and imprisonment for two years.
In short, everyone you pay wages to must be covered. The Employees’ Compensation protects the employer in the event of their workers suffering an accident while on the job.The good news is that it is fairly inexpensive and for average staff, the cost is usually less than HK$1000 per employee per year. There are no variations in policy coverage, but staff with different types of jobs might have different rates and jobs that require significant amounts of travel will have higher premiums.
If you are running a business in a “High Risk” group and have had difficulty buying Employees’ Compensation, you may be eligible for coverage provided through the Employees’ Compensation Insurance Residual Scheme Bureau. To qualify, employers must have been denied coverage by at least 3 different insurance companies, or have been quoted premiums more than 30% of the standard market rates for Employees’ Compensation.
Which employees must be covered?
- Permanent staff
- Temporary staff
- Staff working for you on a trial basis
- Staff working during their probationary period
- Hourly workers
- As-needed workers
- Seasonal workers
- Domestic helpers
The premium is based on the industry, travel status and annual salary levels of each member of your team. If you have a company with just a few staff members, you may have difficulty getting coverage for only Employees’ Compensation insurance. In these cases, since the premiums are so low, insurers prefer to bundle the coverage with other critical office-related insurance benefits and sell a package to companies.
The typical “SME Starter Package” will include Employees’ Compensation, third party or public liability, property insurance, damage to the premises and finally, dishonesty and theft by employees.The idea of these startup office packages is to provide the most popular types of coverage that young organizations typically require, in one combined product. This makes it easier for clients to learn about and purchase and also cost effective for insurance companies to sell.
Employees’ Compensation is legally required and is very straightforward and simple to put in place. Further insurance to protect employees, employers and companies and also attract staff to your business include:
- Professional Indemnity – Any client who is unhappy or unsatisfied to any degree with what they feel was promised by a professional or service organisation, can make a claim for damages. Sometimes called Errors and Omissions, Professional Indemnity insurance will pay the defense costs as well as any damages a court awards to the plaintiff.
- Medical– Illnesses can be very disruptive and frequent. Health insurance can be arranged for an individual or for the entire company tohelp staff with the cost of medical emergencies and illnesses. Most companies have at least two tiers of coverage: one for staff and onewith a higher level of benefits for senior staff. Having a good medical plan is an excellent benefit for employees.
- Business Loan Protection – Upon the death of a key staff member, partner or owner, business loans are often called in by banks. In many cases this means that the business would have to be sold in order to pay back outstanding loans. Business loan protection is a life insurance policy that pays off bank loans when a key staff member passes away so that the business can continue uninterrupted.
- Key Person Protection – Key Person is a critical illness and life insurance policy owned by the company. It will ensure that the death or extended incapacity of a key person does not cause irreparable damage to the organisation. Proceeds can be used to compensate the company for lost profits, to pay off loans, to reassure customers and other stakeholders as well as pay for recruitment and training of a replacement.
- Executive Retention – Executive retention insurance isa life insurance policy specifically designed to be used as a tool toattract and retain key staffmembers. The company paysthe premium but the staffmember owns the policy.
- Legacy Planning – A successful entrepreneur will want his or her children to be treated equitably upon his or her death. One child may have an interest inrunning the business, but others may not. Upon the death of the entrepreneurialparent, the interested child can inherit the business, while thepayout from a life insurance policy equalises the benefits received by other surviving children, or anyone else deserving.
- Business Succession Insurance – If a shareholding partner of your company dies, the ownershipof those shares transfers to the estate of the deceased – this israrely a good idea. Succession insurance is a life insurancepolicy that pays out to the surviving partners who can thenpurchase the shares back from the estate of the deceased at apreset value.
- Directors and Officers – Companies and their directors and officerscan be held responsible for anyclaims against themselves, even if the parties have noinvolvement in the incident. Directors and Officers insurance protects staff andthe company from claims madeagainst them.
There are many different insurance companies in Hong Kong that offer a wide range of policies with varying levels of cover. One company’s policy might not be suitable or adequate for your requirements. By using an independent broker, you have access to the whole of the market since they are not tied to any one insurer. Brokers are therefore able to find you the best policy for the best price that fit your needs.