Employee-Compensation-Insurance-Title

All businesses run with the help of employees. CEOs and directors have a vision for their business and an idea of how they want to grow to succeed. Employees are part of creating and executing the vision with the instructions they receive. Successful companies understand that employees are a crucial asset to a business to succeed. Especially in a business where the employees interact directly with customers, such as F&B, consultants, retail and many more. In these industries, directors believe that the customer is always right and the most critical factor to business success. This fact is correct, but a famous quote explains “Happy Employees Ensure Happy Customers”-Simon Sinek. When any business understands this quote, they are on the right path to success and increased productivity in the company. Hence it is crucial to protect and satisfy employees for the best results.

In many industries, employees can face high risks when working for the business. The employer must reduce these risks and have protocol actions if one of these risks occur. Risks can range from injuries such as an employee in an F&B business seriously burning themselves to illness from inhaling a toxic fume at a manufacturing firm or worse. Each industry has risks that an employee can face. Even a job in the office can involve injuries, such as slipping and breaking a bone in the office. The employer needs to be prepared and make sure their employees feel safe and taken care of by the firm.

These risks are why the Hong Kong government has made Employee compensation insurance mandatory for every employer. The insurance helps companies protect their employees and cover any risks that may occur during their working period.

What is Employee Compensation Insurance?

Any employee can be a victim of unfortunate accidents at work. They range from physical accidents, illness or even death. There are some industries where these accidents can be more serious such as the manufacturing and construction industry. Employee compensation insurance covers the employer’s liability if one of the employees gets injured, contracts a disease, or dies during or on the way to work.

“According to Section 40 of the Employees’ Compensation Ordinance (ECO), 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 their employees, irrespective of the length of the employment contract or working hours, full-time or part-time, permanent job or temporary employment.”

Employee compensation insurance in Hong Kong is taken very seriously by the government. Any 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 HK$100,000 and imprisonment for two years.

Employee Compensations Cover

Work InjuryWork Injuries and Occupational Diseases

Work accidents can happen at any time and anywhere. An injury is considered a ‘work injury when it occurs on the way to work or during working hours. Injuries can range from an employee slipping to an employee falling from a height and breaking bones. Another harmful accident that may be more likely to occur in a manufacturing industry is employees contracting illnesses. An illness or disease can occur when an employee interacts with harmful chemicals toxic to the human body. Therefore, an employer needs to provide their employee with the correct safety equipment or advice, depending on the role. Although regrettably, these injuries can still occur during working hours.

A realistic situation regarding work injury can be: A head chef’s working environment is a restaurant’s kitchen full of hazardous equipment and risks. While cooking, he may accidentally drop hot oil on his arm. He was suffering from 3rd-degree burns, and the manager rushed the employee to the hospital for care. The employer/business will be in charge of paying for his medical care and will have to pay 80% of his salary while on leave to recover (not including basic sick leave). The loss of an employee can cause significant financial stress on the business as they will lose money and have to hire a new chef.

Employee compensation insurance is the perfect protection for such situations, as the insurance will cover all medical costs, salary while recovering and compensation to the injured employee. Therefore, employee compensation insurance can save the business a large sum of financial loss and, more importantly, provide the employee with the financial care they need during recovery.

Permanent Disabilities and Death

As mentioned, some injuries or illnesses can result in permanent disability or, worse, death. These cases are the most tragic outcomes for the employee and employer too. No business wants any harm to their employees and tries their best to avoid any risks that could lead to this outcome. Unfortunately, they can happen even if the employer and employee are trying their best to be safe. When such situations occur at a workplace, it affects the employee, their family and the business itself.

For example, A construction worker slipped and fell to his death in Tuen Mun, Hong Kong, when working on the exterior of a building. Cases like this can happen anywhere and unexpectedly. Furthermore, the employer will be liable for this accident and will have to pay compensation to the family for their loss. In addition, the employer will have to reimburse funeral and medical attendance expenses, up to a maximum of HKD 92,670, to the family.

The table below from the employee compensation guide by the labour department shows compensation provided to each age range for employees that have died/fatal injuries.

Fatal-Injury

Figure 1

Employees can also be left permanently injured and unable to continue their duties after work accidents. According to the labour department, an employee under the age of 40 who suffers from permanent total incapacity due to the work injury will be paid 96 months of salary as compensation. The table below from the employee compensation guide by the labour department shows compensation provided to each age range for permanent injuries.

Non Fatal inury

Figure 2

Employee compensation insurance will cover the cost of compensation and other financial expenses related to the employee death or permanent injury. In addition, the insurance will make sure that the employee’s family or the injured employee’s future is protected. Additionally, help the company avoid employee claims against the business. As claims can take a long time to settle, the insurer will calculate and pay the proper estimate of costs to prevent the claim from going out of control and business damage.

Employees and employers must understand that the ECO calculates a range of injury severity in percentage. Each percentage has a certain amount of compensation( can be found on the ECO guide). For example, loss of index finger is a 14% Percentage of loss of earning capacity.

Steps to Take When Your Employee is Injured At Work

It is essential to follow the correct steps when injured at work and receive the proper compensation for an honest injury.Work Injury steps

  1. Notified about the injury: Managers and other employees may be busy and may not notice the accident. Therefore, the first step is to be informed by an employee that they have been injured. Employees should inform managers, HR, or team leaders.
  2. Medical examination: in many work injury situations, managers would rush the employee to a hospital, but the injury may not seem as serious at first. Hence it is vital to inform the employee to attend a medical examination after the accident to understand the severity of the injury.
  3. Receive a detailed report of injury: One of the most important steps is understanding the medical report and the doctor’s suggestions. At this point, the employer will file the report.
  4. Notify Labour department– employers should notify the labour department within 14 days after the incident or seven days in case of death. It is essential to inform the insurer of the employee compensation policy too.
  5. Keep a record of information– Employees and employers need to record each injury and payment settlement.
  6. Claim settlement– The claim will not be paid by insurance instantly to the employer. The claim will be settled by an insurer when the employee has recovered and is back at work. The process is to get the most accurate claim settlement, including medical care or compensation.

Why is Employee Compensation Mandatory?

Some important reasons make employee compensation insurance mandatory and at the same time beneficial to businesses. One of the main factors is that it reduces a large sum of financial loss for a firm. It can be extremely costly for a business to compensate and pay for medical injuries. A company wants to support their employee as much as possible, but it would significantly affect the business without employee compensation insurance.

employee compensation insurance-happy employeesThe main benefit and need of employee compensation insurance is the safety of the employees. As mentioned, employees are the most crucial factor in a business, and it is essential to keep them safe. In case of an injury, ensure that their job is secure after recovering and help them get back on their feet post-accident. Employees work hard to impact the business, and employee compensation allows the employer to show them that they matter.

Finally, the Employee Ordinance also helps protect the business reputation and brand image. The insurance calculates an accurate compensation to take care of the employee or their family. The settlement reduces the chances of lawsuits against the business. Things do not always go the way planned, and insurance helps support the business during these challenging situations with the correct advice.

To Learn More about Employee Compensation Insurance and get the best coverage for your employee, contact Red Asia Insurance.

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