Do Employers Need Employees' Compensation Insurance? What do I need to pay attention to when purchasing Employee's Compensation Insurance?

In Hong Kong, Employees’ Compensation Insurance (ECI) is an extremely important insurance policy for every employer. Whether you are the CEO of a large corporation or the founder of a small start-up company, it is your legal responsibility and a sign of respect to your employees to take out employees’ compensation insurance. To give you a better understanding of Employee’s Compensation Insurance, this article will introduce you to what it is, why you should buy it, and remind you of the important things to keep in mind when purchasing it:

Do full-time, part-time or temporary employees need Employees’ Compensation Insurance?

Employees’ Compensation Insurance, or Workers’ Compensation Insurance, is a type of insurance purchased by employers to protect their employees against injuries or illnesses that may occur during the course of their employment. This type of insurance was originally provided for under the Employees’ Compensation Ordinance in Hong Kong to ensure that employees receive adequate financial support in the event of injury or illness.

Under Section 40 of the ECO, Chapter 282 of the Laws of Hong Kong, any employer is required to take out employees’ compensation insurance for his employees. This includes full-time, part-time or temporary staff, regardless of the nature or location of their work. The insurance is a statutory obligation to protect the rights and interests of employees and to ensure that they are duly protected in the course of their employment.

What happens if an employer fails to carry workers’ compensation insurance?

Under the Employees’ Compensation Ordinance, employers who fail to procure employees’ compensation insurance for their employees may face serious legal consequences.

Firstly, failure to take out employees’ compensation insurance may result in a fine of up to HK$100,000 and imprisonment for up to two years. In addition, under section 36A of the Employees Compensation Assistance Ordinance, if an employee is injured or falls ill at work, the employer may be directly liable for the relevant medical expenses and compensation.

If an employee suffers injury or death in an accident arising out of and in the course of employment, or suffers from a statutory occupational disease, the employer will still be liable under the ECAO and at common law.

What should I pay attention to when purchasing Employees’ Compensation Insurance?

There are a number of important factors that employers need to take into account when purchasing employees’ compensation insurance:

Coverage: Employers should ensure that the insurance covers all employees, including full-time, part-time and temporary employees. In addition, coverage should include all possible work-related injuries or illnesses.

Amount of insurance: Employers should ensure that the amount of insurance is sufficient to cover possible compensation and medical expenses. Under the Employees’ Compensation Ordinance, the amount of insurance should be at least HK$2 million.

Choice of insurance company: Employers should choose a reputable and reliable insurance company. They may refer to the rating and reviews of the insurance company or seek advice from a professional insurance consultant.

Understanding of insurance terms: Employers should read and understand the terms and conditions of the insurance policy, including coverage, exclusions, compensation amount, etc. If there is any ambiguity, employers should read and understand the terms and conditions of the insurance policy carefully. If there are any unclear points, they should ask the insurance company or insurance consultant. The above information is for reference only. If you have any questions or information about tax return (personal tax return, corporate tax return, accountant tax return), we welcome you to contact our professional advisors and will provide you with a free quote and consultation service in due course.

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