What Is Employee Compensation In Hong Kong?

Imagine an employee of your Hong Kong business is diligently carrying out his responsibilities when, unfortunately, an accident occurs on the job. In such a situation, what are the steps to take, and how much employee compensation must you pay?

In today’s article, we will guide you through the essential aspects of Hong Kong’s employee compensation, from eligible cases to the amount allowed. Read more now.

The definition of employee compensation

Employee compensation refers to the financial benefits provided to employees unfortunately injured on the job or in the course of their employment. Particularly in Hong Kong, workers’ compensation is an essential aspect of workplace safety and is governed by the Employees’ Compensation Ordinance (ECO), Cap 282.

The term employee compensation in Hong Kong is used differently from the common meaning of “salary, wages, and benefits” in other countries. Hong Kong uses this definition strictly to describe compensation for work-related accidents.

This amount generally covers:

• Medical expenses;
• Rehabilitation costs;
• Loss of earnings; or
• Funeral expenses in fatal cases.

In the following section, we will explain key factors that determine eligibility for workers’ compensation to help you avoid exaggerated claims.

What are the criteria for employee compensation?

In Hong Kong, the criteria for employee compensation are as follows:

Employment relationship

The injured party must be an employee who entered into or works under a contract, a service, or an apprenticeship.

This does not include:

• Casual employees who are not associated with the employer’s trade or business;
• Individuals involved in games or recreational activities who are paid through a club;
• Part-time domestic helpers;
• Remote workers; or
• Family members of the employer

Work-related injury or illness

The injury or illness must have a clear and provable connection to the tasks performed within the scope of the job. This means that it must arise directly from the employment and occur while the employee is carrying out their job responsibilities.

Medical evidence

To determine the compensation entitlement, the employee may be required to undergo a medical examination that assesses the severity of the injury or illness.

Additionally, employees must provide supporting medical evidence, such as medical reports, diagnoses, and receipts for medical expenses, after receiving medical examination or treatment.

To ensure fair compensation and prevent any misuse of the system, it is crucial to establish clear policies and communicate transparent practices to all employees.

What must employers do when work accidents happen?

When work accidents happen, employers have a responsibility to take immediate and responsible actions to ensure the safety and well-being of the employees.

Let’s discuss the general steps involved in this process.

Step 1: Have your employee’s injury examined

Once an employee sustains an injury, they should promptly report the incident to you by submitting a Notification of Accident, regardless of the severity.

As the employer, you should make sure the employee receives proper medical examination and treatment.

Step 2: Notify the Labour Department about the incident

Once you have received the information regarding the employee’s injury, you must notify the Commissioner of the Hong Kong Labour Department promptly.

This notification should be made within 14 days of the incident (or within 7 days in case of a fatal accident) via a prescribed form:

• Form 2: Notice by employer of the death of an employee or of an accident to an employee resulting in death or incapacity lasting more than 3 days.
• Form 2B: Notice by employer of an accident to an employee resulting in incapacity
• Form 2A: Notice by employer of the death or incapacity of an employee due to occupational disease.

This notification should be sent regardless of whether any compensation is due for the accident.

Step 3: Verify the medical documents and process the compensation payment

Upon receiving the medical records and invoices, you should verify the accuracy of the information provided. Depending on the specific situation, follow-up procedures will vary:

For normal cases with no dispute

If the case is straightforward, the process usually proceeds smoothly and as follows:

Sick leave not more than 3 days and no permanent incapacity

In this case, the following payments should be made:

• Relevant medical expenses: Reimburse the employee for the incurred medical costs, capped at HK$300 for in-patient treatment.
• Periodical payment for sick leave: Provide compensation for the duration of the temporary incapacity. This payment is calculated as four-fifths of the difference between the employee’s monthly earnings at the time of the accident and their monthly earnings during the temporary incapacity.

Sick leave within 3 to 7 days and no permanent incapacity

You may directly negotiate with the employee regarding the compensation and make the payment on or before the usual payday.

In addition, you are responsible for reimbursing the relevant medical expenses outlined in the Notification of Accident document.

Permanent incapacity

The compensation amount varies based on the employee’s age range:

• Employees under the age of 40: 96 months’ earnings or the minimum amount of compensation, whichever is higher.
• Employees aged 40 to under 56: 72 months’ earnings or the minimum amount of compensation, whichever is higher.
• Employees aged 56 and above: 48 months’ earnings or the minimum amount of compensation, whichever is higher.

The minimum compensation for permanent total incapacity is as follows:

• For work injuries on or after 13 April 2023: HK$552,190
• For work injuries on any date between 15 April 2021 and 12 April 2023: HK$537,780

Other injury cases

In situations involving more severe injuries, the Labour Department will send a notification letter to the injured employee. The employee is required to seek medical care at the Occupational Medicine Unit indicated in the notification.

After the medical assessment, if permanent incapacity is likely, a further medical evaluation will be arranged. Once this process is completed, the Labour Department will issue a Certificate of Compensation Assessment (Form 5) to both you and the employee, specifying the amount of compensation.

As the employer, you must then make the payment of both the compensation and related medical fees within 21 days of the certificate’s issuance.

Fatal cases

In the unfortunate event of an employee’s death, the following payment guidelines apply:

• Employees under the age of 40: 84 months’ earnings or the minimum amount of compensation, whichever is higher.
• Employees aged 40 to under 56: 60 months’ earnings or the minimum amount of compensation, whichever is higher.
• Employees aged 56 and above: 36 months’ earnings or the minimum amount of compensation, whichever is higher.

Furthermore, the person who has paid for the deceased employee’s funeral expenses or medical attendance can seek reimbursement from the employer. The reimbursement amount is capped at HK$94,690.

Notably, the minimum compensation for death is specified below:

• For work injuries on or after 13 April 2023: HK$486,300
• For work injuries on any date between 15 April 2021 and 12 April 2023: HK$473,610

For cases in dispute

In situations where there is a dispute regarding the work injury case and internal investigations have not provided clarity, you have the option to refer the relevant information to the Employees’ Compensation Division (ECD) for advice. It is important to note that the ECD does not have the authority to make the final decision.

If you and the employee cannot reach a settlement with the assistance of the Labour Department, the case will need to be determined by the Court.

Please note that resolving cases with uncertainty or disputes can be time-consuming. For example, obtaining an additional medical report alone takes at least 2 months. Therefore, you should explore amicable settlements before resorting to legal actions.

If the dispute worsens and reaches a point where termination of contract is inevitable, make sure to consider the potential outcomes and implications.

Conclusion

In today’s article, we have looked into the crucial aspects of employee compensation in Hong Kong, from the necessary steps to the required compensation amounts.

Dealing with work-related injuries requires careful attention. As an employer, it is important to have a comprehensive understanding of employee entitlements and your obligations in handling workplace accidents.

For further details, please refer to the Cap. 282 Employees’ Compensation Ordinance by the Hong Kong government. We hope you stay informed, keep up-to-date, and ensure compliance with the law!

Or if you need further information about doing business in Hong Kong, please send us an email via service@bbcincorp.com, and our team will contact you shortly.

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