Who Needs Employees’ Compensation Insurance?

Employees Compensation Insurance sits alongside Third Party Car insurance as the two forms of universally required insurance in Hong Kong.

If you are driving a car on Hong Kong roads then that vehicle must be insured by, at minimum, a Third-Party Insurance policy. Likewise, if you are employing any person, to do any job, in any capacity, you must hold a valid Employees’ Compensation Insurance policy.

Car insurance is fairly obvious – you can’t register your vehicle to drive on local roads without providing proof of insurance. But when it comes to Employees’ Compensation Insurance things become slightly confusing – does everyone need EC Insurance? What about Part Time Workers? What about Self Employed Individuals?

What about a Domestic Helper?

Hong Kong Employees Compensation Insurance Requirements

Employees’ Compensation Insurance, also known as Worker’s Compensation Insurance, or simply EC Insurance, is a type of insurance required for purchase, under Hong Kong Law, for any individual or entity employing any worker to perform any job.

Under Section 40 of The Employees’ Compensation Ordinance. Chapter 282 of The Laws of Hong Kong:

“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 employees, irrespective of the length of employment contract or working hours, full-time or part-time, permanent job or temporary employment.”

In plain English this simply means that if you pay anyone money to do any job, no matter what that job may be, you must have EC Insurance. The reason for this, as stated in the law, is so that you – as an employer – are covered for your financial liability towards any workplace injuries your employees experience.

This means that, in the event a worker in your employ injures themselves in the routine course of their employment, the EC Insurance will provide appropriate compensation to that individual.

However, as will be noticed in the language of the Employees’ Compensation Ordinance, EC only applies to “employees.”

EC Insurance, Employees, and Self-Employment

Failing to obtain Employees’ Compensation Insurance in Hong Kong can lead to significant consequences – a fine of up to HK$100,000 and a prison term not exceeding two years in duration. But as the EC Insurance ordinance only applies to “employees” it could be argued that contractors and self-employed individuals are exempt from the requirement to hold this type of coverage.

And that argument would be correct. However, in practice it is a difficult and complex process to determine if an individual is exempt.

Under law, many different factors are taken into account to understand whether a person is, in fact, an employee or a self employed individual. These may include, but are not limited to, such questions as:

• Whether the individual is considered to be part of the employers’ organization
• Ownership of working equipment, materials, and tools
• Ownership of work procedures, work time, and work method
• Whether the individual can hire or fire assistants in their work
• Whether the individual has financial risk over the business

If there exists an employee-employer relationship, then it is considered a de facto state of employment – even if the individual considers (or labels) themselves as an “independent contractor” or “self-employed.” Consequently, the employer of this individual is required to purchase Employees’ Compensation Insurance, or fall afoul of Hong Kong Laws.

It is important to check your employment status; even if you have set up your own company which employs only you, it should be realized that you may be considered an “employee” under Hong Kong law and are, as such, required to satisfy your obligations with respect to local insurance requirements.

Employees’ Compensation for Domestic Helpers

One of the more common hiccups for many people with relation to Employees’ Compensation Insurance coverage in Hong Kong is in regards to their domestic helper.

Because you are employing your domestic helper to perform household work, and your relationship to your helper is one of employer/employee, any individual or family employing a domestic helper in Hong Kong is obligated to obtain Employees’ Compensation Insurance coverage.

Unfortunately, this can catch many Domestic Helper employers unaware, and consequently have them fall afoul of the law – meaning that they could be subject to legal punishment, and possibly even a fine.

Many Hong Kong domestic helper Insurance products will bundle Employees’ Compensation Insurance benefits in their coverage. However, it is important to be aware that there may be limitations with commonly encountered maid insurance products – if, for example, your helper is over the age of 65 you may be required to purchase a stand-alone employees’ compensation insurance policy, rather than being able to take out a package product.

Domestic Helper Insurance policies can run for up to two years in duration, meaning that they are able to operate concurrently with your helper’s contract of employment. In addition to the statutory Employee’s Compensation Insurance protection, a Domestic Helper insurance policy can also provide your helper with comprehensive medical insurance, as well as limited levels of personal accident protection and even life insurance coverage.

Understanding Your Employees’ Compensation Needs in Hong Kong

Understanding how to address your employee’s compensation insurance obligations in Hong Kong can be challenging, especially if you are operating a larger company with high employee turnover.

However, Employees’ Compensation protection is serious in Hong Kong, and making a misstep can land you in serious trouble. As such, it is important that you contact your insurance provider every time there is a material change in your workforce – as employees are hired to the organization, depart from the business, or even as raises are handed out, all of this needs to be communicated to the insurance provider to ensure that your coverage is in line with the legal requirements.

Fortunately the expert team at CCW Global can help.

Our independent brokers have decades of experience in assisting local residents and businesses with their insurance needs, and we work with you on a no-cost, no-obligation basis to help you find the insurance coverage that best meets your specific requirements.

So whether you’re trying to insure your business, or your domestic helper, Contact CCW Global Today.

Ask CCW – We’re Simplifying Your Insurance.