Employees' Compensation Insurance in Hong Kong

Employees' Compensation Insurance (ECI), also known as labour insurance, is a mandatory requirement for all employers in Hong Kong under the Employees' Compensation Ordinance (Cap. 282).

It provides financial protection for employees who suffer work-related injuries, occupational diseases, or death, covering statutory benefits such as medical expenses, wage loss, permanent disability, and death benefits.

Employers must secure policies with minimum coverage limits of HK$100 million or HK$200 million per event, depending on workforce size. Non-compliance can result in severe penalties, including fines up to HK$100,000 and imprisonment.

Premiums have been rising due to increased claims, but employers can mitigate costs through safety programs and effective claims management. As of August 2025, no major legislative changes have been noted, though trends emphasize risk management in high-risk sectors and work-from-home scenarios.

Legal Framework of ECI

Introduction of Employees' Compensation Insurance

Employees' Compensation Insurance is a critical component of Hong Kong's labour protection framework, ensuring that workers injured on the job receive compensation without placing undue financial burden on employers.

Enacted under the Employees' Compensation Ordinance (ECO), this insurance covers liabilities arising from work-related accidents and occupational diseases, extending to both statutory and common law obligations. It applies universally to all employers, regardless of business size or employee contract type, promoting workplace safety and financial security.

This report examines the legal requirements, coverage details, obligations, claims processes, penalties, and current trends as of August 2025.

Legal Framework

The primary legislation governing ECI is the Employees' Compensation Ordinance (Cap. 282), which mandates that employers insure against liabilities for employee injuries arising out of and in the course of employment. Section 40 of the Ordinance requires all employers to obtain insurance policies from authorized insurers, with minimum coverage set at HK$100 million per event for employers with 200 or fewer employees, and HK$200 million for those with more than 200. Principal contractors in construction must ensure coverage extends to subcontractors, often requiring at least HK$200 million.

The Ordinance defines "injury by accident" broadly, including any personal injury sustained in the course of employment, even if not directly caused by the employer's negligence.

Occupational diseases are specified in schedules to the Ordinance, such as silicosis or noise-induced hearing loss, with compensation available if the disease manifests due to workplace exposure. Recent interpretations have extended coverage to work-from-home scenarios, provided the injury occurs during work duties, though employers should confirm policy specifics with insurers.

Coverage and Benefits

ECI policies provide comprehensive protection, reimbursing employers for payments made to injured employees. Key benefits include:

Benefit Type	Description	Maximum Limits (as of 2025)
Medical Expenses	Covers hospital, outpatient, and related treatments, including Chinese medicine.	HK$300 per day for inpatient or outpatient; HK$370 if both on the same day.
Sickness Allowance	Compensation for temporary incapacity, typically 4/5 of the employee's average daily earnings.	Payable for up to 24 months, subject to medical certification.
Permanent Incapacity	Lump-sum payment for partial or total permanent disability, calculated based on age, earnings, and degree of incapacity.	Varies; for total permanent incapacity, up to 96 months' earnings for employees under 40.
Death Benefits	Compensation to dependents, plus funeral and medical attendance expenses.	Lump sum up to 84 months' earnings, plus up to HK$35,000 for funeral costs.
Occupational Diseases	Similar to injury benefits, for listed diseases contracted in specified occupations.	Aligns with injury compensation levels.

Policies also cover common law damages, which can exceed statutory limits in cases of employer negligence. Coverage extends to all employees, including part-time and domestic workers, but excludes self-inflicted injuries or those from non-work activities.

Factors affect Premium

Employer Obligations

Employers must:

• Obtain and maintain valid ECI policies before employing any staff, updating insurers on changes in employee numbers, duties, or work locations.

• Display notices of insurance details in English and Chinese at workplaces.

• Report injuries to the Labour Department within 14 days (7 days for fatalities) using prescribed forms (e.g., Form 2).

• Keep records of payments, medical certificates, and claims for reimbursement.

• Not deduct insurance premiums from employee wages, which is punishable by fines up to HK$10,000 and six months' imprisonment.

For groups of companies, a single policy covering at least HK$200 million may suffice if all entities are included.

Factors affect Premium

Insurance Policies and Premiums

Policies are available from authorized insurers, such as those listed by the Hong Kong Federation of Insurers. Premiums are calculated based on factors like industry risk, payroll size, claims history, and safety measures, often ranging from 0.5% to over 5% of payroll in high-risk sectors like construction.

Trends show premiums rising 20-30% in recent years due to higher claim frequency and severity, with some insurers exiting the market. High-risk employers may access the Employees’ Compensation Insurance Residual Scheme (ECIRS) for coverage, though at higher rates. Strategies to curb costs include implementing safety training, early injury reporting (reducing costs by up to 35%), proactive claims management, and negotiating with insurers for deductibles or better terms.

Claims Process

Upon an injury:

1. The employer notifies the Labour Department and insurer immediately.

2. Submits Form 2 (or 2B for occupational diseases) with supporting documents like medical certificates and ID copies.

3. Pays initial compensation (e.g., sickness allowance) and seeks reimbursement from the insurer.

4. For permanent incapacity, submits assessment Forms 5 and 7.

5. Legal proceedings, if needed, must be reported to the insurer.

Early intervention and return-to-work programs can minimize costs and reserves.

Penalties and Non-Compliance

Failure to insure results in fines up to HK$100,000, up to two years' imprisonment, and surcharges to the Employees Compensation Assistance Fund. The Labour Department conducts inspections to enforce compliance, and courts may impose additional liabilities in disputes.

International Comparison on Premium (%of Payroll)

International Comparison

To contextualize Hong Kong's Employees' Compensation Insurance (ECI) system, this section compares its key features, benefits, products, and premiums with similar systems in Singapore, the United Kingdom, Australia, and the United States.

These countries were selected for their economic similarities, common law influences, or regional relevance. Hong Kong's system is no-fault, mandatory for all employers, and administered through private insurers, with premiums varying widely by risk. Comparisons highlight differences in mandatory scope, benefit structures, and cost burdens.

Country	Key Features	Coverage/Benefits	Products	Average Premiums (as % of payroll, approx. 2025)
Hong Kong	No-fault, mandatory for all employers under Employees' Compensation Ordinance; covers all employees including part-time/domestic; extends to work-from-home if work-related.	Medical expenses (up to HK$300/day), sickness allowance (4/5 wages, up to 24 months), permanent incapacity (lump sum up to 96 months' earnings), death benefits (up to 84 months' earnings + HK$35,000 funeral), occupational diseases.	Private insurance policies; minimum coverage HK$100-200 million per event; residual scheme for high-risk.	0.5%-5% (higher in construction); rising 20-30% recently due to claims.
Singapore	No-fault under Work Injury Compensation Act (WICA); mandatory for manual workers and non-manual earning ≤SGD 2,600/month; optional for others but recommended.	Medical expenses (up to SGD 45,000), medical leave wages (100% first 14 days, then 2/3), permanent incapacity (lump sum up to SGD 262,000), death (up to SGD 225,000), occupational diseases.	Private insurance; often bundled with foreign worker medical insurance (min. SGD 60,000 coverage); focuses on lump sums over ongoing payments.	0.1%-2% (varies by risk; lower than HK for similar industries due to capped benefits).
United Kingdom	Fault-based under Employers' Liability (Compulsory Insurance) Act 1969; mandatory for most employers; not exclusive remedy (employees can sue).	Covers legal liability for injuries/diseases; benefits include medical, lost wages, disability (via insurance claims or statutory sick pay up to £109.40/week for 28 weeks), death; rehabilitation optional.	Private insurance; minimum £5 million coverage; often bundled with public liability; social insurance contributions from employer/employee/government.	0.1%-0.5% (or £50-200/year per low-risk employee; lower costs due to integrated social security).
Australia	No-fault, state/territory-based under various acts (e.g., Workers Compensation Act 1987 in NSW); mandatory for all employers.	Medical (unlimited in some states), wage replacement (up to 100% initially, then tapered), permanent impairment (lump sum), death (lump sum + dependents' pensions), rehabilitation.	Mix of private insurers and state schemes (e.g., WorkCover); self-insurance for large firms; industry-specific rates.	1.7%-1.85% (varies by state; e.g., WA 1.732%, SA 1.85%; increasing in some states like NSW by 8%).
United States	No-fault in most states; mandatory in 49 states (varies by state laws); federal overlays for specific workers.	Medical (often unlimited), wage replacement (typically 2/3, up to state max), permanent disability (lump sum/scheduled), death (burial + dependents' benefits), rehabilitation.	Private insurance, state funds, or self-insurance; monopolistic in some states; experience-rated.	1.03% national average (varies by state/industry; e.g., $0.35-$1.83 per $100 payroll; small businesses ~$45/month).

Hong Kong's premiums are higher in high-risk sectors compared to peers, but its no-fault system and broad coverage align closely with Singapore and Australia. The UK emphasizes fault-based claims with lower premiums due to social welfare integration, while the US offers flexibility but with state variations.

Recent Developments and Trends

As of mid-2025, premiums continue to rise amid increased claims, particularly in sectors affected by post-pandemic work patterns. Work-from-home injuries are generally covered if linked to employment duties, but policies should explicitly address remote work risks. No significant amendments to the Ordinance were reported in 2025, though employers are advised to supplement ECI with group medical insurance for broader protection, as statutory medical limits may not cover high-cost treatments.

Recommendations

• Conduct regular risk assessments and safety training to lower premiums.

• Review policies annually for adequate coverage, especially for remote or overseas work.

• Engage brokers for competitive quotes and consider ECIRS if standard insurance is unavailable.

• Educate employees on reporting procedures to facilitate smooth claims.

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Conclusion

Employees' Compensation Insurance remains essential for safeguarding Hong Kong's workforce and ensuring employer compliance with legal standards. By prioritizing safety and proactive management, businesses can reduce risks and costs while fulfilling their obligations. For the latest details, consult the Labour Department or authorized insurers.

With a team of seasoned professionals, Everbright provides tailored solutions, including risk assessments, premium optimization, and claims management strategies, ensuring compliance with the Employees' Compensation Ordinance while minimizing costs. Our comprehensive approach helps businesses secure competitive insurance policies, implement effective workplace safety programs, and address emerging risks like remote work coverage. Contact Everbright today to streamline your ECI compliance and safeguard your workforce.